EMPLOYMENT SECURITY AGREEMENT
THIS EMPLOYMENT SECURITY AGREEMENT is entered into this ___ day of
July, 1998, between JEFFERSON SMURFIT CORPORATION (U.S.), a Delaware corporation
(the "Company"), and __________ (the "Executive");
WITNESSETH THAT:
WHEREAS, Executive is employed by the Company, and the Company desires
to provide protection to Executive in connection with any change in control of
the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties, for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. Payments and Benefits Upon Employment Termination After a Change in
Control. If within two (2) years after a Change in Control (all
capitalized terms as defined below) or during the Period Pending a
Change in Control, (i) Executive's employment with the Company and
its Affiliates is terminated without Cause and for a reason other
than death or Disability, or (ii) Executive voluntarily terminates
such employment with Good Reason, the Company will, within 30 days
(except as otherwise expressly provided) of Executive's Date of
Termination, make the payments and provide the benefits described
below.
(a) Cash Payment. The Company will make a lump sum cash payment
to Executive equal to two times the Executive's Annual
Compensation.
(b) Welfare Benefit Plans. With respect to each Welfare Benefit
Plan, for the period beginning on Executive's Date of
Termination and ending on the earlier of (i) two years
following Executive's Date of Termination, or (ii) the date
Executive becomes covered by a welfare benefit plan or
program maintained by an entity other than the Company or an
Affiliate that provides coverage or benefits at least equal,
in all respects, to such Welfare Benefit Plan, Executive will
continue to participate in such Welfare Benefit Plan on the
same basis and at the same cost to Executive as was the case
immediately prior to the Change in Control (or, if more
favorable to Executive, as was the case at any time
thereafter), or, if any benefit or coverage cannot be
provided under a Welfare Benefit Plan because of applicable
law or contractual provisions, the Company will provide
Executive with substantially similar benefits and coverage
for such period. The Company and Executive intend that the
continued group health benefit plan coverage period provided
under Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code") (so-called "COBRA coverage") will be
concurrent with the continued coverage period provided for in
the preceding sentence. Executive shall report to the Company
any coverage or benefits actually received by Executive.
(c) Stock Option Plans. All stock options granted under the
Jefferson Smurfit Corporation Amended and Restated 1992 Stock
Option Plan and any similar or successor stock plan or
program, will immediately become fully vested and exercisable
upon the Change in Control.
(d) Retirement Plan Benefits. In addition to the retirement
benefits to which Executive is entitled under each of the
Company's Retirement Plans, the Company shall pay Executive a
lump sum amount, in cash, equal to the excess of: (i) the
actuarial equivalent of the aggregate retirement benefit
(taking into account any early retirement subsidies
associated therewith and determined as a straight life
annuity commencing at the date (but in no event earlier than
the third anniversary of the Date of Termination) as of which
the actuarial equivalent of such annuity is greatest) that
Executive would have accrued under the terms of all
Retirement Plans (without regard to any amendment to any
Retirement Plan made subsequent to a Change in Control, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if Executive
were fully vested thereunder and had accumulated (after the
Date of Termination) twenty-four (24) additional months of
service credit thereunder and had been credited under each
Retirement Plan during such period with compensation at the
higher of (x) Executive's compensation (as defined in such
Retirement Plan) during the twelve (12) months immediately
preceding the Date of Termination or (y) Executive's
compensation (as defined in such Retirement Plan) during the
twelve (12) months immediately preceding the Change in
Control, over (ii) the actuarial equivalent of the aggregate
retirement benefit (taking into account any early retirement
subsidies associated therewith and determined as a straight
life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) that Executive had
accrued pursuant to the provisions of the Retirement Plans as
of the Date of Termination. For purposes of this Section, it
"actuarial equivalent" will be determined using the same
assumptions utilized under the Company's Salaried Employees
Retirement Plan immediately prior to the Date of Termination.
(e) Retiree Medical and Life Benefits. The Company will add two
years to the Executive's age and years of benefit service for
purposes of determining Executive's eligibility for and
benefits under the Company's retiree medical and life
insurance plan.
(f) Perquisites and Other Benefits. The Company will provide
Executive with the following executive perquisites on the
same basis on which Executive was receiving such perquisites
prior to the Change in Control: (i) reimbursement for club
dues for 24 months following Executive's Date of Termination;
and (ii) reimbursement of expenses relating to financial
planning services and tax return preparation through December
31 of the calendar year that includes the second anniversary
of Executive's Date of Termination. The Company will bear the
cost of such perquisites, at the same level in effect
immediately prior to the Change in Control. Perquisites
otherwise receivable by the Executive pursuant to this
paragraph shall be reduced to the extent comparable
perquisites are actually received by or made available to
Executive without cost during the 36 month period following
Executive's Date of Termination. Executive shall report to
the Company any such perquisites actually received by or made
available to Executive.
2. Incentive Plans. The Company will make a lump sum cash payment to
Executive within 30 days of the end of the year of a Change in Control
with respect to any incentive plan whose performance period has not
ended as of the Change in Control. The Change in Control will be
treated as the end of any performance period that has not ended as of
the Change in Control.
(a) With respect to the Management Incentive Plan or any similar
or successor plan (the "MIP"), the Company will pay to
Executive an amount determined by pro rating the financial,
strategic and performance objectives applicable to Executive
under the MIP, based on the number of days in the year prior
to the Change in Control.
(b) With respect to any long-term incentive plan maintained by
the Company (the "LTIP") the Company will pay to Executive an
amount determined by pro rating the financial, strategic
and/or performance objectives applicable to Executive under
the LTIP, based on the number of days in the performance
period prior to the Change in Control.
3. Change in Control. A "Change in Control" of the Company will be deemed
to occur as of the first day that any one or more of the following
condition is satisfied:
(a) The "beneficial ownership" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of securities representing more than 20
percent (20%) of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting
Securities") is accumulated, held or acquired by a Person
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or an affiliate thereof, any corporation owned,
directly or indirectly, by the Company's stockholders in
substantially the same proportions as their ownership of
stock of the Company); provided, however that any acquisition
from the Company or any acquisition pursuant to a transaction
that complies with clauses (i), (ii) and (iii) of paragraph
(c) of this Section will not be a Change in Control under
this paragraph (a); or
(b) Individuals who, as of the date of the Agreement, constitute
the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board will be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
(c) Consummation by the Company of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a "Business
Combination"), in each case, unless immediately following
such Business Combination: (i) more than 60% of the combined
voting power of then outstanding voting securities entitled
to vote generally in the election of directors of (x) the
corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, a corporation
that as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more subsidiaries (the "Parent
Corporation"), is represented, directly or indirectly by
Company Voting Securities outstanding immediately prior to
such Business Combination (or, if applicable, is represented
by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially
the same proportions as their ownership, immediately prior to
such Business Combination, of the Company Voting Securities,
(ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the combined voting power of
the then outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) except to the
extent that such ownership of the Company existed prior to
the Business Combination and (iii) at least a majority of the
members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving
Corporation) were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(d) Approval by the Company's stockholders of a complete
liquidation or dissolution of the Company.
However, in no event will a Change in Control be deemed to have
occurred, with respect to Executive, if Executive is part of a
purchasing group that consummates the Change in Control transaction.
Executive will be deemed "part of a purchasing group" for purposes of
the preceding sentence if Executive is an equity participant in the
purchasing company or group (except: (i) passive ownership of less
than two percent (2%) of the stock of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
that is otherwise not significant, as determined prior to the Change
in Control by a majority of the nonemployee continuing Directors).
Notwithstanding anything in this Section to the contrary, the closing
of the transaction contemplated in the Agreement and Plan of Merger
Among Jefferson Smurfit Corporation, JSC Acquisition Corporation and
Stone Container Corporation, dated as of May 10, 1998, will constitute
a Change in Control under this Agreement.
4. Other Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any entity that is a member of a
controlled group of corporations or a group of trades or
businesses under common control (each as defined in Code
Section 1563), which includes the Company.
(b) "Amount Payable Under Any Bonus Plans" shall mean the average
of the gross amounts earned by Executive for the three
complete fiscal years prior to Executive's Date of
Termination (or, if greater, in prior to the Change in
Control) under the MIP, or any similar bonus plan in which
Executive participates before or after the date of this
Agreement (but not including any amounts paid or payable
pursuant to the Jefferson Smurfit Corporation (U.S.) 1994
Long-Term Incentive Plan). For purposes of the preceding
sentence, if Executive's number of full fiscal years of
participation in the MIP prior to the Change in Control is
less than three, the amount under this paragraph shall be
calculated as the average of the gross annual amounts earned
by Executive over the number of full fiscal years of
Executive's participation in the MIP prior to the Change in
Control, or the number of full fiscal years of Executive's
participation in the MIP prior to Executive's Date of
Termination, whichever produces a higher average annual
amount.
(c) "Annual Compensation" shall mean the sum of: (i) Executive's
salary at the greater of Executive's salary rate in effect on
the date of (A) the Change in Control, or (B) Executive's
Date of Termination; and (ii) the Amount Payable Under Any
Bonus Plans in which Executive participates.
(d) "Employment Termination" shall mean the effective date of (i)
Executive's voluntary termination of employment with the
Company or any Affiliate with Good Reason; or (ii) the
termination of Executive's employment by the Company or any
Affiliate without Cause.
(e) "Cause" shall mean: (i) Executive's fraud or criminal
misconduct that materially injures the financial condition or
business reputation of the Company or any Affiliate; or (ii)
Executive's willful and continued failure to substantially
perform Executive's duties with the Company or any Affiliate
(other than any such failure resulting from Executive's
incapacity due to physical or mental injury or illness or any
such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Executive
pursuant to Section 8(a) hereof) after the Company's Board of
Directors delivers a written demand for substantial
performance to Executive, which demand specifically
identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties.
For purposes of clauses (i) and (ii) of this definition: (x)
no act, or failure to act, on Executive's part shall be
deemed "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief
that Executive's act, or failure to act, was in the best
interest of the Company; and (y) in the event of a dispute
concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the
Company establishes to the Board by clear and convincing
evidence that Cause exists.
(f) "Disability" shall be deemed the reason for the termination
by the Company of Executive's employment, if, as a result of
Executive's incapacity due to physical or mental illness,
Executive has been absent from the full-time performance of
Executive's duties with the Company for a period of six (6)
consecutive months, the Company has given Executive a Notice
of Termination for Disability, and, within thirty (30) days
after the Company gives such Notice of Termination, Executive
has not have returned to the full-time performance of
Executive's duties.
(g) "Good Reason" shall exist if, without Executive's express
written consent:
(i) Executive's assigned duties and responsibilities are
significantly diminished from the level or extent of
such duties and responsibilities prior to the Change
in Control including, without limitation, any
material diminution of the powers associated with
such position, or Executive's reporting
responsibilities, titles or offices, as in effect
immediately prior to the Change in Control, are
diminished; provided that, the Executive must
deliver written notice to the Company specifying the
diminution in assigned duties, responsibilities,
titles, or offices that Executive believes
constitutes Good Reason, and the Company or
Affiliate must fail to reverse the same or to take
all reasonable steps to that end within 30 days of
receiving such notice;
(ii) Executive's Annual Compensation is reduced below
that in effect as of the date of this Agreement (or
as of the Change in Control, if greater);
(iii) The relocation of Executive's principal place of
employment to a location more than 50 miles from
Executive's principal place of employment
immediately prior to the Change in Control or the
Company's requiring Executive to be based anywhere
other than such principal place of employment (or
permitted relocation thereof) except for required
travel on the Company's business to an extent
substantially consistent with Executive's business
travel obligations immediately prior to the Change
in Control; or
(iv) The Company fails to continue in effect any cash or
stock- based incentive or bonus plan, Retirement
Plan, welfare benefit plan, or other benefit plan,
program or arrangement, unless the aggregate value
(as computed by an independent employee benefits
consultant selected by the Company) of all such
compensation, retirement and benefit plans, programs
and arrangements provided to Executive is not
materially less than their aggregate value as of the
date of this Agreement (or as of the Change in
Control, if greater).
(h) "Period Pending a Change in Control" will be deemed to have
begun if the event set forth in any one of the following has
occurred:
(i) the Company's stockholders have approved any
transaction described in paragraph 3(c) or (d)
above;
(ii) the Company enters into an agreement, the
consummation of which would result in the occurrence
of a Change in Control;
(iii) the Company or any Person publicly announces an
intention to take or to consider taking actions
that, if consummated, would constitute a Change in
Control; or
(iv) the Board adopts a resolution to the effect that,
for purposes of this Agreement, the Period Pending a
Change in Control has begun.
Notwithstanding anything in this paragraph to the contrary, a
Period Pending a Change in Control will be deemed to have
begun as of the entering into the Agreement and Plan of
Merger Among Jefferson Smurfit Corporation, JSC Acquisition
Corporation and Stone Container Corporation, on May 10, 1998.
(i) "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.
(j) "Retirement Plan" shall mean any tax-qualified,
non-qualified, supplemental or excess benefit pension plan or
deferred compensation plan maintained by the Company and any
other plan or agreement entered into between Executive and
the Company which is designed to provide Executive with
supplemental retirement benefits.
(k) "Welfare Benefit Plan" shall mean each welfare benefit plan
maintained or contributed to by the Company or any Affiliate,
including, but not limited to a plan that provides health
(including medical and dental), life, accident or disability
benefits or insurance, or similar coverage, in which
Executive was participating at the time of the Change in
Control, whichever is applicable.
5. Limitation on Payments and Benefits. Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit
received or to be received by the Executive in connection with a
Change in Control or Executive's Employment Termination (whether
pursuant to the terms, of this Agreement or any other plan,
arrangement or agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated with the
Company or such Person) (all such payments and benefits being
hereinafter called "Total Payments") would, be an "excess parachute
payment" pursuant to Code Section 280G or any successor or substitute
provision of the Code, with the effect that Executive would be liable
for the payment of the excise tax described in Code Section 4999 or
any successor or substitute provision of the Code, or any interest or
penalties are incurred by Executive with respect to such Total
Payments (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise
Tax"), then, after taking into account any reduction in the Total
Payments provided by reason of Code Section 280G in such other plan,
arrangement or agreement, the cash payments provided in Sections 1 and
2 of this Agreement shall first be reduced, and the noncash payments
and benefits shall thereafter be reduced, to the extent necessary so
that no portion of the Total Payments is subject to the Excise Tax;
provided, however, that Executive may elect (at any time prior to the
payment of any Total Payment under this Agreement) to have the noncash
payments and benefits reduced (or eliminated) prior to any reduction
of the cash payments under this Agreement. Notwithstanding the
foregoing, no payments or benefits under this Agreement will be
reduced unless: (i) the net amount of the Total Payments, as so
reduced (and after subtracting the net amount of federal, state and
local income taxes on such reduced Total Payments) is greater than
(ii) the excess of (A) the net amount of such Total Payments, without
reduction (but after subtracting the net amount of federal, state and
local income taxes on such Total Payments), over (B) the amount of
Excise Tax to which the Executive would be subject in respect of such
unreduced Total Payments.
(a) Subject to the provisions of paragraph (b) below, all
determinations required to be made under this Section, and
the assumptions to be utilized in arriving at such
determinations, shall be made by the public accounting firm
that serves as the Company's auditors (the "Accounting
Firm"), which shall provide detailed supporting calculations
both to the Company and Executive within 15 business days of
the receipt of notice from the Company or Executive that
there have been Total Payments, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive
shall designate another nationally recognized accounting firm
to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion that failure
to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and
Executive, except as provided in paragraph (b) below.
(b) IRS Claims. As a result of the uncertainty in the application
of Code Section 280G at the time of the initial determination
by the Accounting Firm hereunder, it is possible that the
Internal Revenue Service ("IRS") or other agency will claim
that an Excise Tax, or a greater Excise Tax, is due, and thus
the Company should have made a lesser amount of Total Payment
than that determined pursuant to paragraph (a) above.
Executive shall notify the Company in writing of any claim by
the IRS or other agency that, if successful, would require
Executive to pay an Excise Tax or an additional Excise Tax.
If the IRS or other agency makes a claim that, if successful,
could require Executive to pay an Excise Tax or an additional
Excise Tax, the Company may reduce or further reduce
Executive's payments and benefits in accordance with this
Section 5.
(c) If Executive's cash payments are reduced pursuant to this
Section, and the Welfare Benefits or perquisites of Sections
1(b) or (f) that remain payable after the application of this
Section are thereafter reduced pursuant to the provisions of
Sections 1(b) or (f) because of the receipt or availability
of comparable benefits or perquisites, the Company shall, at
the time of such reduction, pay to Executive the least of:
(i) the amount of the decrease made in the cash payments
pursuant to this Section; (ii) the amount of the subsequent
reduction in the Section 1(b) or (f) benefits or perquisites;
or (iii) the maximum amount that the Company can pay to the
Executive without being, or causing any other payment to be,
nondeductible by reason of Code Section 280G.
6. Executive's Death. If Executive dies after a Change in Control and
Employment Termination, but before the complete payment of any amount
or benefit required under this Agreement, the Company will pay such
amount or, benefit to the Executive's spouse, if living, or to the
Executive's estate.
7. Mitigation and Set-Off. Executive shall not be required to mitigate
Executive's damages by seeking other employment or otherwise. The
Company's obligations under this Agreement shall not be reduced in any
way by reason of any compensation or benefits received (or foregone)
by Executive from sources other than the Company after Executive's
Employment Termination, or any amounts that might have been received
by Executive in other employment had Executive sought such other
employment. Executive's entitlement to benefits and coverage under
this Agreement shall continue after, and shall not be affected by,
Executive's obtaining other employment after the Executive's Date of
Termination, provided that any such benefit or coverage shall not be
furnished if Executive expressly waives the specific benefit or
coverage by giving written notice of waiver to the Company.
8. Termination Procedures and Compensation During Dispute.
(a) Notice of Termination. After a Change in Control, any
purported termination of Executive's employment shall be
communicated by a written "Notice of Termination" from one
party to the other in accordance with Section 18 hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice that indicates the specific provision in this
Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include 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 Company's Board of Directors
(after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard
before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
(b) Date of Termination. "Date of Termination," with respect to
any purported termination of Executive's employment after a
Change in Control, win mean (i) if Executive's employment is
terminated for Disability, thirty (30) days after the Company
gives Notice of Termination (provided that Executive has not
returned to the full-time performance of Executive's duties
during such thirty (30) day period), (ii) if Executive's
employment is terminated due to death, the date of
Executive's death, and (iii) if Executive's employment is
terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a
termination by Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
(c) Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to
this Section), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until
the earlier of (i) two years from the Notice of Termination
or (ii) the date on which the dispute is finally resolved,
either by mutual written agreement of the parties or by a
final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided, however, that
the Date of Termination will be extended by a notice of
dispute given by Executive only if such notice is given in
good faith and Executive pursues the resolution of such
dispute with reasonable diligence.
(d) Compensation During Dispute. If a purported termination
occurs following a Change in Control and the Date of
Termination is extended in accordance with paragraph (c)
above, the Company shall continue to pay Executive the fun
compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and
continue Executive as a participant in all compensation,
benefit and insurance plans in which Executive was
participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in
accordance with paragraph (c). Amounts paid under this
paragraph are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
9. Settlement of Disputes; Arbitration.
(a) All claims by Executive for payments or benefits under this
Agreement shall be directed to and determined by the
Company's Board of Directors (or such committee to which the
Board delegates authority under this Section) and shall be in
writing. Any denial by the Board (or such committee) of a
claim for benefits under this Agreement shall be delivered to
Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement
relied upon. The Board (or committee) shall afford Executive
a reasonable opportunity for a review of the decision denying
a claim and shall further allow Executive to appeal the
decision within sixty (60) days after the Board (or
committee) gives notice that it has denied Executive's claim.
(b) Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively
by arbitration in either Chicago, Illinois or St. Louis,
Missouri, as specified by Executive, in accordance with the
rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth
in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the
contrary, Executive shall be entitled to seek specific
performance of Executive's 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.
10. Legal Fees and Expenses. The Company shall pay to Executive all legal
fees and expenses incurred by Executive in disputing in good faith any
issue hereunder relating to the termination of Executive's employment,
in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Code
Section 4999 to any payment or benefit provided hereunder. The Company
shall make such payments within fifteen (15) business days after
delivery of Executive's written requests for payment accompanied by
such evidence of fees and expenses incurred as the Company reasonably
may require. The parties hereby agree that a court or arbitrator shall
have the authority to award such reimbursement, in whole or in part,
upon a finding that Executive has proceeded with substantial merit and
good faith.
11. Assignment; Successor. This Agreement may not be assigned by the
Company without the written consent of Executive but the obligations
of the Company under this Agreement shall be the binding legal
obligations of any successor to the Company by merger, consolidation
or otherwise, and in the event of any business combination or
transaction that results in the transfer of substantially all of the
assets or business of the Company, the Company will cause the
transferee to assume the obligations of the Company under this
Agreement. This Agreement may not be assigned by Executive during
Executive's life, and upon Executive's death will inure to the benefit
of Executive's heirs, legatees and legal representatives of
Executive's estate.
12. Interpretation. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Missouri, without regard to the conflict of law principles
thereof. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
13. Withholding. The Company may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy
applicable withholding requirements under any federal, state or local
law.
14. Amendment or Termination. The Company and Executive may amend this
Agreement at any time by written agreement. The Company may terminate
this Agreement by written notice given to Executive at least two years
prior to the effective date of such termination, provided that, if a
Change in Control occurs prior to the effective date such termination,
the termination of this Agreement shall not be effective and Executive
shall be entitled to the full benefits of this Agreement. Any such
amendment or termination shall be made pursuant to a resolution of the
Board.
15. Indemnification. Following Executive's Date of Termination, the
Company will: (i) indemnify and hold harmless Executive for all costs,
liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of Executive that relate to Executive's employment
with the Company, to the maximum extent permitted by law; and (ii)
continue Executive's coverage under the directors' and officers'
liability coverage maintained by the Company, as in effect from time
to time, to the same extent as other current or former senior
executive officers and directors of the Company.
16. Financing. Cash payments under this Agreement (not including any
payments made from a qualified plan) are general obligations of the
Company, and Executive shall have only an unsecured right to payment
thereof out of the general assets of the Company. Notwithstanding the
foregoing, the Company may, by agreement with one or more trustees the
Company selects, create a trust on such terms as the Company shall
determine to make payments to Executive in accordance with the terms
of this Agreement.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
18. Notices. Notices given pursuant to this Agreement shall be in writing
and shall be deemed received when personally delivered, or on the date
of written confirmation of receipt by (i) overnight carrier, (ii)
telecopy, (iii) registered or certified mail, return receipt
requested, addressee only, postage prepaid, or (iv) such other method
of delivery that provides a written confirmation of delivery. Notice
to the Company shall be directed to:
Jefferson Smurfit Corporation (U.S.)
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
The Company may change the person and/or address to whom Executive
must give notice under this Section by giving Executive written notice
of such change, in accordance with the procedures described above.
Notices to or with respect to Executive will be directed to Executive,
or the executors, personal representatives or distributees of a
deceased Executive, or the assignees of Executive, at Executive's home
address on the records of the Company.
19. Entire Agreement. This Agreement constitutes the entire understanding
of Executive and the Company with respect to the subject matter hereof
and supersedes any and all prior understandings written or oral.
20. No Waiver. No failure or delay on the part of the Company or Executive
in enforcing or exercising any right or remedy hereunder shall operate
as a waiver thereof.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute but one
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
JEFFERSON SMURFIT CORPORATION (U.S.)
By:
--------------------------- ---------------------------
Xxxxxxx X. Xxxxxx Executive
Its: President and CEO
--------------------------
Document Number: 325553.3
6-11-98/14:59PM
ADDENDUM
This Addendum dated July 21, 1998 forms a part of the Employment Security
Agreement dated July 21, 1998 between Jefferson Smurfit Corporation (U.S.) (the
"Company") and the executive whose name is set forth below (the "Executive").
The parties agree as follows:
1. This Agreement shall automatically terminate and become void and of no
further force and effect in the event that the Company, or its successors and
the Executive enter into a mutually agreeable employment agreement.
2. Except as expressly amended hereby, the Employment Security Agreement
remains unmodified and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
JEFFERSON SMURFIT CORPORATION (U.S.)
By:
--------------------------- ---------------------------
Xxxxxxx X. Xxxxxx Executive
Its: President and CEO
--------------------------
EMPLOYMENT SECURITY AGREEMENT
THIS EMPLOYMENT SECURITY AGREEMENT is entered into this ___ day of May
1998, between JEFFERSON SMURFIT CORPORATION (U.S.), a Delaware corporation (the
"Company"), and __________ (the "Executive");
WITNESSETH THAT:
WHEREAS, Executive is employed by the Company, and the Company desires
to provide protection to Executive in connection with any change in control of
the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties, for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. Payments and Benefits Upon Employment Termination After a Change in
Control. If within two (2) years after a Change in Control (all
capitalized terms as defined below) or during the Period Pending a
Change in Control, (i) Executive's employment with the Company and its
Affiliates is terminated without Cause and for a reason other than
death or Disability, or (ii) Executive voluntarily terminates such
employment with Good Reason, the Company will, within 30 days (except
as otherwise expressly provided) of Executive's Date of Termination,
make the payments and provide the benefits described below.
(a) Cash Payment. The Company will make a lump sum cash payment to
Executive equal to three times the Executive's Annual
Compensation.
(b) Welfare Benefit Plans. With respect to each Welfare Benefit
Plan, for the period beginning on Executive's Date of
Termination and ending on the earlier of (i) three years
following Executive's Date of Termination, or (ii) the date
Executive becomes covered by a welfare benefit plan or program
maintained by an entity other than the Company or an Affiliate
that provides coverage or benefits at least equal, in all
respects, to such Welfare Benefit Plan, Executive will
continue to participate in such Welfare Benefit Plan on the
same basis and at the same cost to Executive as was the case
immediately prior to the Change in Control (or, if more
favorable to Executive, as was the case at any time
thereafter), or, if any benefit or coverage cannot be provided
under a Welfare Benefit Plan because of applicable law or
contractual provisions, the Company will provide Executive
with substantially similar benefits and coverage for such
period. The Company and Executive intend that the continued
group health benefit plan coverage period provided under
Section 4980B of the Internal Revenue Code of 1986, as amended
(the "Code") (so-called "COBRA coverage") will be concurrent
with the continued coverage period provided for in the
preceding sentence. Executive shall report to the Company any
coverage or benefits actually received by Executive.
(c) Stock Option Plans. All stock options granted under the
Jefferson Smurfit Corporation Amended and Restated 1992 Stock
Option Plan and any similar or successor stock plan or
program, will immediately become fully vested and exercisable
upon the Change in Control.
(d) Retirement Plan Benefit. In addition to the retirement
benefits to which Executive is entitled under each of the
Company's Retirement Plans, the Company shall pay Executive a
lump sum amount, in cash, equal to the excess of: (i) the
actuarial equivalent of the aggregate retirement benefit
(taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing
at the date (but in no event earlier than the third
anniversary of the Date of Termination) as of which the
actuarial equivalent of such annuity is greatest) that
Executive would have accrued under the terms of all Retirement
Plans (without regard to any amendment to any Retirement Plan
made subsequent to a Change in Control, which amendment
adversely affects in any manner the computation of retirement
benefits thereunder), determined as if Executive were fully
vested thereunder and had accumulated (after the Date of
Termination) thirty-six (36) additional months of service
credit thereunder and had been credited under each Retirement
Plan during such period with compensation at the higher of (x)
Executive's compensation (as defined in such Retirement Plan)
during the twelve (12) months immediately preceding the Date
of Termination or (y) Executive's compensation (as defined in
such Retirement Plan) during the twelve (12) months
immediately preceding the Change in Control, over (ii) the
actuarial equivalent of the aggregate retirement benefit
(taking into account any early retirement subsidies associated
therewith and determined as a straight life annuity commencing
at the date (but in no event earlier than the Date of
Termination) as of which the actuarial equivalent of such
annuity is greatest) that Executive had accrued pursuant to
the provisions of the Retirement Plans as of the Date of
Termination. For purposes of this Section, "actuarial
equivalent" will be determined using the same assumptions
utilized under the Company's Salaried Employees Retirement
Plan immediately prior to the Date of Termination.
(e) Retiree Medical and Life Benefit. The Company will add three
years to the Executive's age and years of benefit service for
purposes of determining Executive's eligibility for and
benefits under the Company's retiree medical and life
insurance plan.
(f) Perquisites and Other Benefit. The Company will provide
Executive with the following executive perquisites on the same
basis on which Executive was receiving such perquisites prior
to the Change in Control: (i) reimbursement for club dues for
36 months following Executive's Date of Termination; and (ii)
reimbursement of expenses relating to financial planning
services and tax return preparation through December 31 of the
calendar year that includes the third anniversary of
Executive's Date of Termination. The Company will bear the
cost of such perquisites, at the same level in effect
immediately prior to the Change in Control. Perquisites
otherwise receivable by the Executive pursuant to this
paragraph shall be reduced to the extent comparable
perquisites are actually received by or made available to
Executive without cost during the 36 month period following
Executive's Date of Termination. Executive shall report to the
Company any such perquisites actually received by or made
available to Executive.
2. Incentive Plan. The Company will make a lump sum cash payment to
Executive within 30 days of the end of the year of a Change in Control
with respect to any incentive plan whose performance period has not
ended as of the Change in Control. The Change in Control will be
treated as the end of any performance period that has not ended as of
the Change in Control.
(a) With respect to the Management Incentive Plan or any similar
or successor plan (the "MIP"), the Company will pay to
Executive an amount determined by pro rating the financial,
strategic and performance objectives applicable to Executive
under the MIP, based on the number of days in the year prior
to the Change in Control.
(b) With respect -to- any long-term incentive plan maintained by
the Company (the "LTIP") the Company will pay to Executive an
amount determined by pro rating the financial, strategic
and/or performance objectives applicable to Executive under
the LTIP, based on the number of days in the performance
period prior to the Change in Control.
3. Change in Control. A "Change in Control" of the Company will be deemed
to occur as of the first day that any one or more of the following
condition is satisfied:
(a) The "beneficial ownership" (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of securities representing more than 20 percent (20%)
of the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the
election of directors (the "Company Voting Securities") is
accumulated, held or acquired by a Person (other than the
Company, any trustee or other fiduciary holding securities
under an employee benefit plan of the Company or an affiliate
thereof, any corporation owned, directly or indirectly, by the
Company's stockholders in substantially the same proportions
as their ownership of stock of the Company); provided, however
that any acquisition from the Company or any acquisition
pursuant to a transaction that complies with clauses (i), (ii)
and (iii) of paragraph (c) of this Section will not be a
Change in Control under this paragraph (a); or
(b) Individuals who, as of the date of the Agreement, constitute
the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board will be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or
removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
(c) Consummation by the Company of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a "Business
Combination"), in each case, unless immediately following such
Business Combination: (i) more than 60% of the combined voting
power of then outstanding voting securities entitled to vote
generally in the election of directors of (x) the corporation
resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, a corporation that as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries (the "Parent Corporation"),
is represented, directly or indirectly by Company Voting
Securities outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant
to such Business Combination), and such voting power among the
holders thereof is in substantially the same proportions as
their ownership, immediately prior to such Business
Combination, of the Company Voting Securities, (ii) no Person
(excluding any employee benefit plan (or related trust) of the
Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of the combined voting power of the then outstanding
voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) except to the extent that such
ownership of the Company existed prior to the Business
Combination and (iii) at least a majority of the members of
the board of directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the Company's stockholders of a complete
liquidation or dissolution of the Company.
However, in no event will a Change in Control be deemed to have
occurred, with respect to Executive, if Executive is part of a
purchasing group that consummates the Change in Control transaction.
Executive will be deemed "part of a purchasing group" for purposes of
the preceding sentence if Executive is an equity participant in the
purchasing company or group (except: (i) passive ownership of less than
two percent (2%) of the stock of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
that is otherwise not significant, as determined prior to the Change in
Control by a majority of the nonemployee continuing Directors).
Notwithstanding anything in this Section to the contrary, the closing
of the transaction contemplated in the Agreement and Plan of Merger
Among Jefferson Smurfit Corporation, JSC Acquisition Corporation and
Stone Container Corporation, dated as of May 10, 1998, will constitute
a Change in Control under this Agreement.
4. Other Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any entity that is a member of a
controlled group of corporations or a group of trades or
businesses under common control (each as defined in Code
Section 1563), which includes the Company.
(b) "Amount Payable Under Any Bonus Plans" shall mean the average
of the gross amounts earned by Executive for the three
complete fiscal years prior to Executive's Date of Termination
(or, if greater, in prior to the Change in Control) under the
MIP, or any similar bonus plan in which Executive participates
before or after the date of this Agreement (but not including
any amounts paid or payable pursuant to the Jefferson Smurfit
Corporation (U.S.) 1994 Long-Term Incentive Plan). For
purposes of the preceding sentence, if Executive's number of
full fiscal years of participation in the MIP prior to the
Change in Control is less than three, the amount under this
paragraph shall be calculated as the average of the gross
annual amounts earned by Executive over the number of full
fiscal years of Executive's participation in the MIP prior to
the Change in Control, or the number of full fiscal years of
Executive's participation in the MIP prior to Executive's Date
of Termination, whichever produces a higher average annual
amount.
(c) "Annual Compensation" shall mean the sum of: (i) Executive's
salary at the greater of Executive's salary rate in effect on
the date of (A) the Change in Control, or (B) Executive's Date
of Termination; and (ii) the Amount Payable Under Any Bonus
Plans in which Executive participates.
(d) "Employment Termination" shall mean the effective date of: (i)
Executive's voluntary termination of employment with the
Company or any Affiliate with Good Reason; or (ii) the
termination of Executive's employment by the Company or any
Affiliate without Cause.
(e) "Cause" shall mean: (i) Executive's fraud or criminal
misconduct that materially injures the financial condition or
business reputation of the Company or any Affiliate; or (ii)
Executive's willful and continued failure to substantially
perform Executive's duties with the Company or any Affiliate
(other than any such failure resulting from Executive's
incapacity due to physical or mental injury or illness or any
such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Executive
pursuant to Section 8(a) hereof) after the Company's Board of
Directors delivers a written demand for substantial
performance to Executive, which demand specifically identifies
the manner in which the Board believes that Executive has not
substantially performed Executive's duties. For purposes of
clauses (i) and (ii) of this definition: (x) no act, or
failure to act, on Executive's part shall be deemed "willful"
unless done, or omitted to be done, by Executive not in good
faith and without reasonable belief that Executive's act, or
failure to act, was in the best interest of the Company; and
(y) in the event of a dispute concerning the application of
this provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to the
Board by clear and convincing evidence that Cause exists.
(f) "Disability" shall be deemed the reason for the termination by
the Company of Executive's employment, if, as a result of
Executive's incapacity due to physical or mental illness,
Executive has been absent from the full-time performance of
Executive's duties with the Company for a period of six (6)
consecutive months, the Company has given Executive a Notice
of Termination for Disability, and, within thirty (30) days
after the Company gives such Notice of Termination, Executive
has not have returned to the full-time performance of
Executive's duties.
(g) "Good Reason" shall exist if, without Executive's express
written consent:
(i) Executive's assigned duties and responsibilities are
significantly diminished from the level or extent of
such duties and responsibilities prior to the Change
in Control including, without limitation, any
material diminution of the powers associated with
such position, or Executive's reporting
responsibilities, titles or offices, as in effect
immediately prior to the Change in Control, are
diminished; provided that, the Executive must deliver
written notice to the Company specifying the
diminution in assigned duties, responsibilities,
titles, or offices that Executive believes
constitutes Good Reason, and the Company or Affiliate
must fail to reverse the same or to take all
reasonable steps to that end within 30 days of
receiving such notice;
(ii) Executive's Annual Compensation is reduced below that
in effect as of the date of this Agreement (or as of
the Change in Control, if greater);
(iii) The relocation of Executive's principal place of
employment to a location more than 50 miles from
Executive's principal place of employment immediately
prior to the Change in Control or the Company's
requiring Executive to be based anywhere other than
such principal place of employment (or permitted
relocation thereof) except for required travel on the
Company's business to an extent substantially
consistent with Executive's business travel
obligations immediately prior to the Change in
Control; or
(iv) The Company fails to continue in effect any cash or
stock- based incentive or bonus plan, Retirement
Plan, welfare benefit plan, or other benefit plan,
program or arrangement, unless the aggregate value
(as computed by an independent employee benefits
consultant selected by the Company) of all such
compensation, retirement and benefit plans, programs
and arrangements provided to Executive is not
materially less than their aggregate value as of the
date of this Agreement (or as of the Change in
Control, if greater).
(h) "Period Pending a Change in Control" will be deemed to have
begun if the event set forth in any one of the following has
occurred:
(i) the Company's stockholders have approved any
transaction described in paragraph 3(c) or (d) above;
(ii) the Company enters into an agreement, the
consummation of which would result in the occurrence
of a Change in Control;
(iii) the Company or any Person publicly announces an
intention to take or to consider taking actions that,
if consummated, would constitute a Change in Control;
or
(iv) the Board adopts a resolution to the effect that, for
purposes of this Agreement, the Period Pending a
Change in Control has begun.
Notwithstanding anything in this paragraph to the contrary, a
Period Pending a Change in Control will be deemed to have
begun as of the entering into the Agreement and Plan of Merger
Among Jefferson Smurfit Corporation, JSC Acquisition
Corporation and Stone Container Corporation, on May 10, 1998.
(i) "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
(j) "Retirement Plan" shall mean any tax-qualified, non-qualified,
supplemental or excess benefit pension plan or deferred
compensation plan maintained by the Company and any other plan
or agreement entered into between Executive and the Company
which is designed to provide Executive with supplemental
retirement benefits.
(k) "Welfare Benefit Plan" shall mean each welfare benefit plan
maintained or contributed to by the Company or any Affiliate,
including, but not limited to a plan that provides health
(including medical and dental), life, accident or disability
benefits or insurance, or similar coverage, in which Executive
was participating at the time of the Change in Control,
whichever is applicable.
5. Certain Additional Payments by the Company.
(a) Gross-Up. Anything in this Agreement to the contrary
notwithstanding, in the event that any payment, benefit or
distribution by or on behalf of the Company or any Affiliate
to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any
additional payments required under this Section) (the
"Payments") is determined to be an "excess parachute payment"
pursuant to Code Section 280G or any successor or substitute
provision of the Code, with the effect that Executive is
liable for the payment of the excise tax described in Code
Section 4999 or any successor or substitute provision of the
Code (the "Excise Tax"), then the Company shall pay to
Executive an additional amount (the "Gross-Up Payment") such
that the net amount retained by Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state
and local income and employment taxes and Excise Tax on the
Gross-Up Payment, shall be equal to the Total Payments.
(b) Determination of Gross-Up. For purposes of determining whether
any of the Total Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (i) all of the Total
Payments shall be treated as "parachute payments" (within the
meaning of Code Section 280G(b)(2)) unless, in the opinion of
tax counsel ("Tax Counsel") reasonably acceptable to Executive
and selected by the accounting firm that was, immediately
prior to the Change in Control, the Company's independent
auditor (the "Auditor"), such payments or benefits (in whole
or in part) do not constitute parachute payments, including by
reason of Code Section 280G(b)(4)(A), (ii) all "excess
parachute payments" within the meaning of Code Section
280G(b)(1) shall be treated as subject to the Excise Tax
unless, in the opinion of Tax Counsel, such excess parachute
payments (in whole or in part) represent reasonable
compensation for services actually rendered (within the
meaning of Code Section 280G(b)(4)(B)) in excess of the Base
Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, and (iii) the value
of any non-cash benefits or any deferred payment or benefit
shall be determined by the Auditor in accordance with the
principles of Code Sections 280G(d)(3) and (4). For purposes
of determining the amount of the Gross-Up Payment, Executive
shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in
the state and locality of Executive's residence, or if higher,
in the state and locality of Executive's principal place of
employment, on the Date of Termination (or if there is no Date
of Termination, then the date on which the Gross-Up Payment is
calculated for purposes of this Section), net of the maximum
reduction in federal income taxes that could be obtained from
deduction of such state and local income taxes.
(c) Final Determination. In the event that the Excise Tax is
finally determined to be less than the amount taken into
account hereunder in calculating the Gross-Up Payment,
Executive shall repay to the Company, at the time that the
amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment
attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment
being repaid by Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state
or local income or employment tax deduction) plus interest on
the amount of such repayment at 120% of the rate provided in
Code Section 1274(b)(2)(B). In the event that the Excise Tax
is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot
be determined at the time of the Gross-Up Payment), the
Company shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions
payable by Executive with respect to such excess) at the time
that the amount of such excess is finally determined.
Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability
for Excise Tax with respect to the Total Payments.
6. Executive's Death. If Executive dies after a Change in Control and
Employment Termination, but before the complete payment of any amount
or benefit required under this Agreement, the Company will pay such
amount or benefit to the Executive's spouse, if living, or to the
Executive's estate.
7. Mitigation and Set-Off. Executive shall not be required to mitigate
Executive's damages by seeking other employment or otherwise. The
Company's obligations under this Agreement shall not be reduced in any
way by reason of any compensation or benefits received (or foregone) by
Executive from sources, other than the Company after Executive's
Employment Termination, or any amounts that might have been received by
Executive in other employment had Executive sought such other
employment. Executive's entitlement to benefits and coverage under this
Agreement shall continue after, and shall not be affected by,
Executive's obtaining other employment after the Executive's Date of
Termination, provided that any such benefit or coverage shall not be
furnished if Executive expressly waives the specific benefit or
coverage by giving written notice of waiver to the Company.
8. Termination Procedures and Compensation During Dispute.
(a) Notice of Termination. After a Change in Control, any
purported termination of Executive's employment shall be
communicated by a written "Notice of Termination" from one
party to the other in accordance with Section 18 hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice that indicates the specific provision in this
Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include 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 Company's Board of Directors (after
reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard
before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
(b) Date of Termination. "Date of Termination," with respect to
any purported termination of Executive's employment after a
Change in Control, will mean (i) if Executive's employment is
terminated for Disability, thirty (30) days after the Company
gives Notice of Termination (provided that Executive has not
returned to the full-time performance of Executive's duties
during such thirty (30) day period), (ii) if Executive's
employment is terminated due to death, the date of Executive's
death, and (iii) if Executive's employment is terminated for
any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the
Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a
termination by Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
(c) Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to
this Section), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until
the earlier of (i) two years from the Notice of Termination or
(ii) the date on which the dispute is finally resolved, either
by mutual written agreement of the parties or by a final
judgment, order or decree of an arbitrator or a court of
competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired and
no appeal has been perfected); provided, however, that the
Date of Termination will be extended by a notice of dispute
given by Executive only if such notice is given in good faith
and Executive pursues the resolution of such dispute with
reasonable diligence.
(d) Compensation During Dispute. If a purported termination occurs
following a Change in Control and the Date of Termination is
extended in accordance with paragraph (c) above, the Company
shall continue to pay Executive the full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue Executive
as a participant in all compensation, benefit and insurance
plans in which Executive was participating when the notice
giving rise to the dispute was given, until the Date of
Termination, as determined in accordance with paragraph (c).
Amounts paid under this paragraph are in addition to all other
amounts due under this Agreement and shall not be offset
against or reduce any other amounts due under this Agreement.
9. Settlement of Disputes; Arbitration.
(a) All claims by Executive for payments or benefits under this
Agreement shall be directed to and determined by the Company's
Board of Directors (or such committee to which the Board
delegates authority under this Section) and shall be in
writing. Any denial by the Board (or such committee) of a
claim for benefits under this Agreement shall be delivered to
Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement
relied upon. The Board (or committee) shall afford Executive a
reasonable opportunity for a review of the decision denying a
claim and shall further allow Executive to appeal the decision
within sixty (60) days after the Board (or committee) gives
notice that it has denied Executive's claim.
(b) Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by
arbitration in either Chicago, Illinois or St. Louis,
Missouri, as specified by Executive, in accordance with the
rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth in
this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the
contrary, Executive shall be entitled to seek specific
performance of Executive's 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.
10. Legal Fees and Expenses. The Company shall pay to Executive all legal
fees and expenses incurred by Executive in disputing in good faith any
issue hereunder relating to the termination of Executive's employment,
in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Code
Section 4999 to any payment or benefit provided hereunder. The Company
shall make such payments within fifteen (15) business days after
delivery of Executive's written requests for payment accompanied by
such evidence of fees and expenses incurred as the Company reasonably
may require. The parties hereby agree that a court or arbitrator shall
have the authority to award such reimbursement, in whole or in part,
upon a finding that Executive has proceeded with substantial merit and
good faith.
11. Assignment; Successors. This Agreement may not be assigned by the
Company without the written consent of Executive but the obligations of
the Company under this Agreement shall be the binding legal obligations
of any successor to the Company by merger, consolidation or otherwise,
and in the event of any business combination or transaction that
results in the transfer of substantially all of the assets or business
of the Company, the Company will cause the transferee to assume the
obligations of the Company under this Agreement. This Agreement may not
be assigned by Executive during Executive's life, and upon Executive's
death will inure to the benefit of Executive's heirs, legatees and
legal representatives of Executive's estate.
12. Interpretation. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Missouri, without regard to the conflict of law principles
thereof. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
13. Withholding. The Company may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy
applicable withholding requirements under any federal, state or local
law.
14. Amendment or Termination. The Company and Executive may amend this
Agreement at any time by written agreement. The Company may terminate
this Agreement by written notice given to Executive at least two years
prior to the effective date of such termination, provided that, if a
Change in Control occurs prior to the effective date such termination,
the termination of this Agreement shall not be effective and Executive
shall be entitled to the full benefits of this Agreement. Any such
amendment or termination shall be made pursuant to a resolution of the
Board.
15. Indemnification. Following Executive's Date of Termination, the Company
will: (i) indemnify and hold harmless Executive for all costs,
liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of Executive that relate to Executive's employment
with the Company, to the maximum extent permitted by law; and (ii)
continue Executive's coverage under the directors' and officers'
liability coverage maintained by the Company, as in effect from time to
time, to the same extent as other current or former senior executive
officers and directors of the Company.
16. Financing. Cash payments under this Agreement (not including any
payments made from a qualified plan) are general obligations of the
Company, and Executive shall have only an unsecured right to payment
thereof out of the general assets of the Company. Notwithstanding the
foregoing, the Company may, by agreement with one or more trustees the
Company selects, create a trust on such terms as the Company shall
determine to make payments to Executive in accordance with the terms of
this Agreement.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
18. Notice. Notices given pursuant to this Agreement shall be in writing
and shall be deemed received when personally delivered, or on the date
of written confirmation of receipt by (i) overnight carrier, (ii)
telecopy, (iii) registered or certified mail, return receipt requested,
addressee only, postage prepaid, or (iv) such other method of delivery
that provides a written confirmation of delivery. Notice to the Company
shall be directed to:
Jefferson Smurfit Corporation (U.S.)
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
The Company may change the person and/or address to whom Executive must
give notice under this Section by giving Executive written notice of
such change, in accordance with the procedures described above. Notices
to or with respect to Executive will be directed to Executive, or the
executors, personal representatives or distributees of a deceased
Executive, or the assignees of Executive, at Executive's home address
on the records of the Company.
19. Entire Agreement. This Agreement constitutes the entire understanding
of Executive and the Company with respect to the subject matter hereof
and supersedes any and all prior understandings written or oral.
20. No Waiver. No failure or delay on the part of the Company or Executive
in enforcing or exercising any right or remedy hereunder shall operate
as a waiver thereof.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute but one Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
JEFFERSON SMURFIT CORPORATION (U.S.)
By:_____________________________
Its: _____________________________ EXECUTIVE
EMPLOYMENT SECURITY AGREEMENT
THIS EMPLOYMENT SECURITY AGREEMENT is entered into this ___ day of May
1998, between JEFFERSON SMURFIT CORPORATION (U.S.), a Delaware corporation (the
"Company"), and __________ (the "Executive");
WITNESSETH THAT:
WHEREAS, Executive is employed by the Company, and the Company desires
to provide protection to Executive in connection with any change in control of
the Company;
NOW, THEREFORE, it is hereby agreed by and between the parties, for
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, as follows:
1. Payments and Benefits Upon Employment Termination After a Change in
Control. If within two (2) years after a Change in Control (all
capitalized terms as defined below) or during the Period Pending a
Change in Control, (i) Executive's employment with the Company and its
Affiliates is terminated without Cause and for a reason other than
death or Disability, or (ii) Executive voluntarily terminates such
employment with Good Reason, the Company will, within 30 days (except
as otherwise expressly provided) of Executive's Date of Termination,
make the payments and provide the benefits described below.
(a) Cash Payment. The Company will make a lump sum cash payment
to Executive equal to three times the Executive's Annual
Compensation.
(b) Welfare Benefit Plans. With respect to each Welfare Benefit
Plan, for the period beginning on Executive's Date of
Termination and ending on the earlier of (i) three years
following Executive's Date of Termination, or (ii) the date
Executive becomes covered by a welfare benefit plan or
program maintained by an entity other than the Company or an
Affiliate that provides coverage or benefits at least equal,
in all respects, to such Welfare Benefit Plan, Executive will
continue to participate in such Welfare Benefit Plan on the
same basis and at the same cost to Executive as was the case
immediately prior to the Change in Control (or, if more
favorable to Executive, as was the case at any time
thereafter), or, if any benefit or coverage cannot be
provided under a Welfare Benefit Plan because of applicable
law or contractual provisions, the Company will, provide
Executive with substantially similar benefits and coverage
for such period. The Company and Executive intend that the
continued group health benefit plan coverage period provided
under Section 4980B of the Internal Revenue Code of 1986, as
amended (the "Code") (so-called "COBRA coverage") will be
concurrent with the continued coverage period provided for in
the preceding sentence. Executive shall report to the Company
any coverage or benefits actually received by Executive.
(c) Stock Option Plans. All stock options granted under the
Jefferson Smurfit Corporation Amended and Restated 1992 Stock
Option Plan and any similar or successor stock plan or
program, will immediately become fully vested and exercisable
upon the Change in Control.
(d) Retirement Plan Benefit. In addition to the retirement
benefits to which Executive is entitled under each of the
Company's Retirement Plans, the Company shall pay Executive a
lump sum amount, in cash, equal to the excess of (i) the
actuarial equivalent of the aggregate retirement benefit
(taking into account any early retirement subsidies
associated therewith and determined as a straight life
annuity commencing at the date (but in no event earlier than
the third anniversary of the Date of Termination) as of which
the actuarial equivalent of such annuity is greatest) that
Executive would have accrued under the terms of all
Retirement Plans (without regard to any amendment to any
Retirement Plan made subsequent to a Change in Control, which
amendment adversely affects in any manner the computation of
retirement benefits thereunder), determined as if Executive
were fully vested thereunder and had accumulated (after the
Date of Termination) thirty-six (36) additional months of
service credit thereunder and had been credited under each
Retirement Plan during such period with compensation at the
higher of (x) Executive's compensation (as defined in such
Retirement Plan) during the twelve (12) months immediately
preceding the Date of Termination or (y) Executive's
compensation (as defined in such Retirement Plan) during the
twelve (12) months immediately preceding the Change in
Control, over (ii) the actuarial equivalent of the aggregate
retirement benefit (taking into account any early retirement
subsidies associated therewith and determined as a straight
life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial
equivalent of such annuity is greatest) that Executive had
accrued pursuant to the provisions of the Retirement Plans as
of the Date of Termination. For purposes of this Section,
"actuarial equivalent" will be determined using the same
assumptions utilized under the Company's Salaried Employees
Retirement Plan immediately prior to the Date of Termination.
(e) Retiree Medical and Life Benefits. The Company will add three
years to the Executive's age and years of benefit service for
purposes of determining Executive's eligibility for and
benefits under the Company's retiree medical and life
insurance plan.
(f) Perquisites and Other Benefits. The Company will provide
Executive with the following executive perquisites on the
same basis on which Executive was receiving such perquisites
prior to the Change in Control: (i) reimbursement for club
dues for 36 months following Executive's Date of Termination;
and (ii) reimbursement of expenses relating to financial
planning services and tax return preparation through December
31 of the calendar year that includes the third anniversary
of Executive's Date of Termination. The Company will bear the
cost of such perquisites, at the same level in effect
immediately prior to the Change in Control. Perquisites
otherwise receivable by the Executive pursuant to this
paragraph shall be reduced to the extent comparable
perquisites are actually received by or made available to
Executive without cost during the 36 month period following
Executive's Date of Termination. Executive shall report to
the Company any such perquisites actually received by or made
available to Executive.
2. Incentive Plan. The Company will make a lump sum cash payment to
Executive within 30 days of the end of the year of a Change in Control
with respect to any incentive plan whose performance period has not
ended as of the Change in Control. The Change in Control will be
treated as the end of any performance period that has not ended as of
the Change in Control.
(a) With respect to the Management Incentive Plan or any similar
or successor plan (the "MIP"), the Company will pay to
Executive an amount determined by pro rating the financial,
strategic and performance objectives applicable to Executive
under the MIP, based on the number of days in the year prior
to the Change in Control.
(b) With respect to any long-term incentive plan maintained by
the Company (the "LTIP") the Company will pay to Executive an
amount determined by pro rating the financial, strategic
and/or performance objectives applicable to Executive under
the LTIP, based on the number of days in the performance
period prior to the Change in Control.
3. Change in Control. A "Change in Control" of the Company will be deemed
to occur as of the first day that any one or more of the following
condition is satisfied:
(a) The "beneficial ownership" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of securities representing more than 20
percent (20%) of the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Company Voting
Securities") is accumulated, held or acquired by a Person
(other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or an affiliate thereof, any corporation owned,
directly or indirectly, by the Company's stockholders in
substantially the same proportions as their ownership of
stock of the Company); provided, however that any acquisition
from the Company or any acquisition pursuant to a transaction
that complies with clauses (i), (ii) and (iii) of paragraph
(c) of this Section will not be a Change in Control under
this paragraph (a); or
(b) Individuals who, as of the date of the Agreement, constitute
the Board of Directors (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board of
Directors; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or
nomination for election by the Company's stockholders, was
approved by a vote of at least a majority of the directors
then comprising the Incumbent Board will be considered as
though such individual were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election
or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a
Person other than the Board of Directors; or
(c) Consummation by the Company of a reorganization, merger or
consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a "Business
Combination"), in each case, unless immediately following
such Business Combination: (i) more than 60% of the combined
voting power of then outstanding voting securities entitled
to vote generally in the election of directors of (x) the
corporation resulting from such Business Combination (the
"Surviving Corporation"), or (y) if applicable, a corporation
that as a result of such transaction owns the Company or all
or substantially all of the Company's assets either directly
or through one or more subsidiaries (the "Parent
Corporation"), is represented, directly or indirectly by
Company Voting Securities outstanding immediately prior to
such Business Combination (or, if applicable, is represented
by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially
the same proportions as their ownership, immediately prior to
such Business Combination, of the Company Voting Securities,
(ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of the combined voting power of
the then outstanding voting securities eligible to elect
directors of the Parent Corporation (or, if there is no
Parent Corporation, the Surviving Corporation) except to the
extent that such ownership of the Company existed prior to
the Business Combination and (iii) at least a majority of the
members of the board of directors of the Parent Corporation
(or, if there is no Parent Corporation, the Surviving
Corporation) were members of the Incumbent Board at the time
of the execution of the initial agreement, or of the action
of the Board, providing for such Business Combination; or
(d) Approval by the Company's stockholders of a complete
liquidation or dissolution of the Company.
However, in no event will a Change in Control be deemed to have
occurred, with respect to Executive, if Executive is part of a
purchasing group that consummates the Change in Control transaction.
Executive will be deemed "part of a purchasing group" for purposes of
the preceding sentence if Executive is an equity participant in the
purchasing company or group (except: (i) passive ownership of less
than two percent (2%) of the stock of the purchasing company; or (ii)
ownership of equity participation in the purchasing company or group
that is otherwise not significant, as determined prior to the Change
in Control by a majority of the nonemployee continuing Directors).
Notwithstanding anything in this Section to the contrary, the closing
of the transaction contemplated in the Agreement and Plan of Merger
Among Jefferson Smurfit Corporation, JSC Acquisition Corporation and
Stone Container Corporation, dated as of May 10, 1998, will constitute
a Change in Control under this Agreement.
4. Other Definitions. For purposes of this Agreement:
(a) "Affiliate" shall mean any entity that is a member of a
controlled group of corporations or a group of trades or
businesses under common control (each as defined in Code
Section 1563), which includes the Company.
(b) "Amount Payable Under Any Bonus Plans" shall mean the average
of the gross amounts earned by Executive for the three
complete fiscal years prior to Executive's Date of
Termination (or, if greater, in prior to the Change in
Control) under the MIP, or any similar bonus plan in which
Executive participates before or after the date of this
Agreement (but not including any amounts paid or payable
pursuant to the Jefferson Smurfit Corporation (U.S.) 1994
Long-Term Incentive Plan). For purposes of the preceding
sentence, if Executive's number of full fiscal years of
participation in the MIP prior to the Change in Control is
less than three, the amount under this paragraph shall be
calculated as the average of the gross annual amounts earned
by Executive over the number of full fiscal years of
Executive's participation in the MIP prior to the Change in
Control, or the number of full fiscal years of Executive's
participation in the MIP prior to Executive's Date of
Termination, whichever produces a higher average annual
amount.
(c) "Annual Compensation" shall mean the sum of: (i) Executive's
salary at the greater of Executive's salary rate in effect on
the date of (A) the Change in Control, or (B) Executive's
Date of Termination; and (ii) the Amount Payable Under Any
Bonus Plans in which Executive participates.
(d) "Employment Termination" shall mean the effective date of:
(i) Executive's voluntary termination of employment with the
Company or any Affiliate with Good Reason; or (ii) the
termination of Executive's employment by the Company or any
Affiliate without Cause.
(e) "Cause" shall mean: (i) Executive's fraud or criminal
misconduct that materially injures the financial condition or
business reputation of the Company or any Affiliate; or (ii)
Executive's willful and continued failure to substantially
perform Executive's duties with the Company or any Affiliate
(other than any such failure resulting from Executive's
incapacity due to physical or mental injury or illness or any
such actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Executive
pursuant to Section 8(a) hereof) after the Company's Board of
Directors delivers a written demand for substantial
performance to Executive, which demand specifically
identifies the manner in which the Board believes that
Executive has not substantially performed Executive's duties.
For purposes of clauses (i) and (ii) of this definition: (x)
no act, or failure to act, on Executive's part shall be
deemed "willful" unless done, or omitted to be done, by
Executive not in good faith and without reasonable belief
that Executive's act, or failure to act, was in the best
interest of the Company; and (y) in the event of a dispute
concerning the application of this provision, no claim by the
Company that Cause exists shall be given effect unless the
Company establishes to the Board by clear and convincing
evidence that Cause exists.
(f) "Disability" shall be deemed the reason for the termination
by the Company of Executive's employment, if, as a result of
Executive's incapacity due to physical or mental illness,
Executive has been absent from the full-time performance of
Executive's duties with the Company for a period of six (6)
consecutive months, the Company has given Executive a Notice
of Termination for Disability, and, within thirty (30) days
after the Company gives such Notice of Termination, Executive
has not have returned to the full-time performance of
Executive's duties.
(g) "Good Reason" shall exist if, without Executive's express
written consent:
(i) Executive's assigned duties and responsibilities are
significantly diminished from the level or extent of
such duties and responsibilities prior to the Change
in Control including, without limitation, any
material diminution of the powers associated with
such position, or Executive's reporting
responsibilities, titles or offices, as in effect
immediately prior to the Change in Control, are
diminished; provided that, the Executive must
deliver written notice to the Company specifying the
diminution in assigned duties, responsibilities,
titles, or offices that Executive believes
constitutes Good Reason, and the Company or
Affiliate must fail to reverse the same or to take
all reasonable steps to that end within 30 days of
receiving such notice;
(ii) Executive's Annual Compensation is reduced below
that in effect as of the date of this Agreement (or
as of the Change in Control, if greater);
(iii) The relocation of Executive's principal place of
employment to a location more than 50 miles from
Executive's principal place of employment
immediately prior to the Change in Control or the
Company's requiring Executive to be based anywhere
other than such principal place of employment (or
permitted relocation thereof) except for required
travel on the Company's business to an extent
substantially consistent with Executive's business
travel obligations immediately prior to the Change
in Control; or
(iv) The Company fails to continue in effect any cash or
stock- based incentive or bonus plan, Retirement
Plan, welfare benefit plan, or other benefit plan,
program or arrangement, unless the aggregate value
(as computed by an independent employee benefits
consultant selected by the Company) of all such
compensation, retirement and benefit plans, programs
and arrangements provided to Executive is not
materially less than their aggregate value as of the
date of this Agreement (or as of the Change in
Control, if greater).
(h) "Period Pending a Change in Control" will be deemed to have
begun if the event set forth in any one of the following has
occurred:
(i) the Company's stockholders have approved any
transaction described in paragraph 3(c) or (d)
above;
(ii) the Company enters into an agreement, the
consummation of which would result in the occurrence
of a Change in Control;
(iii) the Company or any Person publicly announces an
intention to take or to consider taking actions
that, if consummated, would constitute a Change in
Control; or
(iv) the Board adopts a resolution to the effect that,
for purposes of this Agreement, the Period Pending a
Change in Control has begun.
Notwithstanding anything in this paragraph to the contrary, a
Period Pending a Change in Control will be deemed to have
begun as of the entering into the Agreement and Plan of
Merger Among Jefferson Smurfit Corporation, JSC Acquisition
Corporation and Stone Container Corporation, on May 10, 1998.
(i) "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.
(j) "Retirement Plan" shall mean any tax-qualified,
non-qualified, supplemental or excess benefit pension plan or
deferred compensation plan maintained by the Company and any
other plan or agreement entered into between Executive and
the Company which is designed to provide Executive with
supplemental retirement benefits.
(k) "Welfare Benefit Plan" shall mean each welfare benefit plan
maintained or contributed to by the Company or any Affiliate,
including, but not limited to a plan that provides health
(including medical and dental), life, accident or disability
benefits or insurance, or similar coverage, in which
Executive was participating at the time of the Change in
Control, whichever is applicable.
5. Limitation on Payments and Benefits. Notwithstanding any other
provisions of this Agreement, in the event that any payment or benefit
received or to be received by the Executive in connection with a
Change in Control or Executive's Employment Termination (whether
pursuant to the terms of this Agreement or any other plan, arrangement
or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits being hereinafter called
"Total Payments") would be an "excess parachute payment" pursuant to
Code Section 280G or any successor or substitute provision of the
Code, with the effect that Executive would be liable for the payment
of the excise tax described in Code Section 4999 or any successor or
substitute provision of the Code, or any interest or penalties are
incurred by Executive with respect to such Total Payments (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then, after taking into
account any reduction in the Total Payments provided by reason of Code
Section 280G in such other plan, arrangement or agreement, the cash
payments provided in Sections 1 and 2 of this Agreement shall first be
reduced, and the noncash payments and benefits shall thereafter be
reduced, to the extent necessary so that no portion of the Total
Payments is subject to the Excise Tax; provided, however, that
Executive may elect (at any time prior to the payment of any Total
Payment under this Agreement) to have the noncash payments and
benefits reduced (or eliminated) prior to any reduction of the cash
payments under this Agreement. Notwithstanding the foregoing, no
payments or benefits under this Agreement will be reduced unless: (i)
the net amount of the Total Payments, as so reduced (and after
subtracting the net amount of federal, state and local income taxes on
such reduced Total Payments) is greater than (ii) the excess of (A)
the net amount of such Total Payments, without reduction (but after
subtracting the net amount of federal, state and local income taxes on
such Total Payments), over (B) the amount of Excise Tax to which the
Executive would be subject in respect of such unreduced Total
Payments.
(a) Subject to the provisions of paragraph (b) below, all
determinations required to be made under this Section, and
the assumptions to be utilized in arriving at such
determinations, shall be made by the public accounting firm
that serves as the Company's auditors (the "Accounting
Firm"), which shall provide detailed supporting calculations
both to the Company and Executive within 15 business days of
the receipt of notice from the Company or Executive that
there have been Total Payments, or such earlier time as is
requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change in Control, Executive
shall designate another nationally recognized accounting firm
to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm
shall be borne solely by the Company. If the Accounting Firm
determines that no Excise Tax is payable by Executive, it
shall furnish Executive with a written opinion that failure
to report the Excise Tax on Executive's applicable federal
income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the
Accounting Firm shall be binding upon the Company and
Executive, except as provided in paragraph (b) below.
(b) IRS Claim. As a result of the uncertainty in the application
of Code Section 280G at the time of the initial determination
by the Accounting Firm hereunder, it is possible that the
Internal Revenue Service ("IRS") or other agency will claim
that an Excise Tax, or a greater Excise Tax, is due, and thus
the Company should have made a lesser amount of Total Payment
than that determined pursuant to paragraph (a) above.
Executive shall notify the Company in writing of any claim by
the IRS or other agency that, if successful, would require
Executive to pay an Excise Tax or an additional Excise Tax.
If the IRS or other agency makes a claim that, if successful,
could require Executive to pay an Excise Tax or an additional
Excise Tax, the Company may reduce or further reduce
Executive's payments and benefits in accordance with this
Section 5.
(c) If Executive's cash payments are reduced pursuant to this
Section, and the Welfare Benefits or perquisites of Sections
1(b) or (f) that remain payable after the application of this
Section are thereafter reduced pursuant to the provisions of
Sections 1(b) or (f) because of the receipt or availability
of comparable benefits or perquisites, the Company shall, at
the time of such reduction, pay to Executive the least of:
(i) the amount of the decrease made in the cash payments
pursuant to this Section; (ii) the amount of the subsequent
reduction in the Section 1(b) or (f) benefits or perquisites;
or (iii) the maximum amount that the Company can pay to the
Executive without being, or causing any other payment to be,
nondeductible by reason of Code Section 280G.
6. Executive's Death. If Executive dies after a Change in Control and
Employment Termination, but before the complete payment of any amount
or benefit required under this Agreement, the Company will pay such
amount or benefit to the Executive's spouse, if living, or to the
Executive's estate.
7. Mitigation and Set-Off. Executive shall not be required to mitigate
Executive's damages by seeking other employment or otherwise. The
Company's obligations under this Agreement shall not be reduced in any
way by reason of any compensation or benefits received (or foregone)
by Executive from sources other than the Company after Executive's
Employment Termination, or any amounts that might have been received
by Executive in other employment had Executive sought such other
employment. Executive's entitlement to benefits and coverage under
this Agreement shall continue after, and shall not be affected by,
Executive's obtaining other employment after the Executive's Date of
Termination, provided that any such benefit or coverage shall not be
furnished if Executive expressly waives the specific benefit or
coverage by giving written notice of waiver to the Company.
8. Termination Procedures and Compensation During Dispute.
(a) Notice of Termination. After a Change in Control, any
purported termination of Executive's employment shall be
communicated by a written "Notice of Termination" from one
party to the other in accordance with Section 18 hereof. For
purposes of this Agreement, a "Notice of Termination" shall
mean a notice that indicates the specific provision in this
Agreement relied upon and setting forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include 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 Company's Board of Directors
(after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to be heard
before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars
thereof in detail.
(b) Date of Termination. "Date of Termination," with respect to
any purported termination of Executive's employment after a
Change in Control, win mean (i) if Executive's employment is
terminated for Disability, thirty (30) days after the Company
gives Notice of Termination (provided that Executive has not
returned to the full-time performance of Executive's duties
during such thirty (30) day period), (ii) if Executive's
employment is terminated due to death, the date of
Executive's death, and (iii) if Executive's employment is
terminated for any other reason, the date specified in the
Notice of Termination (which, in the case of a termination by
the Company, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a
termination by Executive, shall not be less than fifteen (15)
days nor more than sixty (60) days, respectively, from the
date such Notice of Termination is given).
(c) Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior
to the Date of Termination (as determined without regard to
this Section), the party receiving such Notice of Termination
notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be extended until
the earlier of (i) two years from the Notice of Termination
or (ii) the date on which the dispute is finally resolved,
either by mutual written agreement of the parties or by a
final judgment, order or decree of an arbitrator or a court
of competent jurisdiction (which is not appealable or with
respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided, however, that
the Date of Termination will be extended by a notice of
dispute given by Executive only if such notice is given in
good faith and Executive pursues the resolution of such
dispute with reasonable diligence.
(d) Compensation During Dispute. If a purported termination
occurs following a Change in Control and the Date of
Termination is extended in accordance with paragraph (c)
above, the Company shall continue to pay Executive the full
compensation in effect when the notice giving rise to the
dispute was given (including, but not limited to, salary) and
continue Executive as a participant in all compensation,
benefit and insurance plans in which Executive was
participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in
accordance with paragraph (c). Amounts paid under this
paragraph are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other
amounts due under this Agreement.
9. Settlement of Disputes, Arbitration.
(a) All claims by Executive for payments or benefits under this
Agreement shall be directed to and determined by the
Company's Board of Directors (or such committee to which the
Board delegates authority under this Section) and shall be in
writing. Any denial by the Board (or such committee) of a
claim for benefits under this Agreement shall be delivered to
Executive in writing and shall set forth the specific reasons
for the denial and the specific provisions of this Agreement
relied upon. The Board (or committee) shall afford Executive
a reasonable opportunity for a review of the decision denying
a claim and shall further allow Executive to appeal the
decision within sixty (60) days after the Board (or
committee) gives notice that it has denied Executive's claim.
(b) Any further dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively
by arbitration in either Chicago, Illinois or St. Louis,
Missouri, as specified by Executive, in accordance with the
rules of the American Arbitration Association then in effect;
provided, however, that the evidentiary standards set forth
in this Agreement shall apply. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
Notwithstanding any provision of this Agreement to the
contrary, Executive shall be entitled to seek specific
performance of Executive's 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.
10. Legal Fees and Expenses. The Company shall pay to Executive all legal
fees and expenses incurred by Executive in disputing in good faith any
issue hereunder relating to the termination of Executive's employment,
in seeking in good faith to obtain or enforce any benefit or right
provided by this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of Code
Section 4999 to any payment or benefit provided hereunder. The Company
shall make such payments within fifteen (15) business days after
delivery of Executive's written requests for payment accompanied by
such evidence of fees and expenses incurred as the Company reasonably
may require. The parties hereby agree that a court or arbitrator shall
have the authority to award such reimbursement, in whole or in part,
upon a finding that Executive has proceeded with substantial merit and
good faith.
11. Assignment; Successors. This Agreement may not be assigned by the
Company without the written consent of Executive but the obligations
of the Company under this Agreement shall be the binding legal
obligations of any successor to the Company by merger, consolidation
or otherwise, and in the event of any business combination or
transaction that results in the transfer of substantially all of the
assets or business of the Company, the Company will cause the
transferee to assume the obligations of the Company under this
Agreement. This Agreement may not be assigned by Executive during
Executive's life, and upon Executive's death will inure to the benefit
of Executive's heirs, legatees and legal representatives of
Executive's estate.
12. Interpretation. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the
State of Missouri, without regard to the conflict of law principles
thereof. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
13. Withholding. The Company may withhold from any payment that it is
required to make under this Agreement amounts sufficient to satisfy
applicable withholding requirements under any federal, state or local
law.
14. Amendment or Termination. The Company and Executive may amend this
Agreement at any time by written agreement. The Company may terminate
this Agreement by written notice given to Executive at least two years
prior to the effective date of such termination, provided that, if a
Change in Control occurs prior to the effective date such termination,
the termination of this Agreement shall not be effective and Executive
shall be entitled to the full benefits of this Agreement. Any such
amendment or termination shall be made pursuant to a resolution of the
Board.
15. Indemnification. Following Executive's Date of Termination, the
Company will: (i) indemnify and hold harmless Executive for all costs,
liability and expenses (including reasonable attorneys' fees) for all
acts and omissions of Executive that relate to Executive's employment
with the Company, to the maximum extent permitted by law; and (ii)
continue Executive's coverage under the directors' and officers'
liability coverage maintained by the Company, as in effect from time
to time, to the same extent as other current or former senior
executive officers and directors of the Company.
16. Financing. Cash payments under this Agreement (not including any
payments made from a qualified plan) are general obligations of the
Company, and Executive shall have only an unsecured right to payment
thereof out of the general assets of the Company. Notwithstanding the
foregoing, the Company may, by agreement with one or more trustees the
Company selects, create a trust on such terms as the Company shall
determine to make payments to Executive in accordance with the terms
of this Agreement.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
18. Notice. Notices given pursuant to this Agreement shall be in writing
and shall be deemed received when personally delivered, or on the date
of written confirmation of receipt by (i) overnight carrier, (ii)
telecopy, (iii) registered or certified mail, return receipt
requested, addressee only, postage prepaid, or (iv) such other method
of delivery that provides a written confirmation of delivery. Notice
to the Company shall be directed to:
Jefferson Smurfit Corporation (U.S.)
0000 Xxxxxxxx Xxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
The Company may change the person and/or address to whom Executive
must give notice under this Section by giving Executive written notice
of such change, in accordance with the procedures described above.
Notices to or with respect to Executive will be directed to Executive,
or the executors, personal representatives or distributees of a
deceased Executive, or the assignees of Executive, at Executive's home
address on the records of the Company.
19. Entire Agreement. This Agreement constitutes the entire understanding
of Executive and the Company with respect to the subject matter hereof
and supersedes any and all prior understandings written or oral.
20. No Waiver. No failure or delay on the part of the Company or Executive
in enforcing or exercising any right or remedy hereunder shall operate
as a waiver thereof.
21. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute but one
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written above.
JEFFERSON SMURFIT CORPORATION (U.S.)
By:
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Its: EXECUTIVE
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Document Number: 323244.4
5-27-98/14:53PM
