Exhibit 10.19
APPLETON PAPERS INC.
TERMINATION PROTECTION AGREEMENT
AGREEMENT dated as of the ____ day of ____________________,
20___, between Appleton Papers Inc. (the "Corporation") and _____________ (the
"Executive"). Unless otherwise indicated, terms used herein and defined in
Schedule A shall have the meanings assigned to them in Schedule A.
WHEREAS, the Corporation desires to continue to attract and
retain skilled and dedicated management employees, by providing post-employment
benefits in the event of certain terminations of employment; and
WHEREAS, the Corporation has employed the Executive in the
capacity of _____________________________________, upon the terms and conditions
currently reflected in Executive's personnel file or in various minutes of the
Board of Directors; and
WHEREAS, Executive has specific duties and unique talents
which are of benefit to the Corporation;
NOW, THEREFORE, it is agreed as follows:
1. Term of Agreement.
-----------------
This Agreement shall become effective as of July 1, 2001 (the
"Effective Date") and shall remain in effect from time to time
thereafter. The Corporation may terminate this Agreement by giving the
Executive at least eighteen (18) months advance written notice of
termination of the Agreement. Notwithstanding the foregoing, this
Agreement shall, if in effect on the date of a Change of Control,
remain in effect for at least two (2) years following such Change of
Control.
2. Notice of Termination of Employment.
-----------------------------------
The Executive agrees to give the Corporation at least two (2) months'
written advance notice of Executive's voluntary termination of
employment, other than for Good Reason, if such termination occurs
prior to a Change of Control.
3. Benefits Payable Upon Termination of Employment.
-----------------------------------------------
(a) General Rule. In the event that, at any time other than within two
(2) years after a Change of Control, the Corporation terminates the
employment of the Executive with the Corporation other than for
misconduct or Permanent Disability, or the Executive terminates
employment
Page 1 of 9
for Good Reason, the Executive shall receive from the Corporation,
provided the Executive executes the release described in Paragraph 3(d)
below:
(i) an annual amount, equal to the Executive's Base Salary,
payable for each of the eighteen (18) months following
termination of employment in equal installments at the times
set forth in the Corporation's payroll policy, as in effect at
the time of payment;
(ii) reimbursement of reasonable expenses incurred by the Executive
for professional outplacement services by qualified
consultants after termination of employment; and
(iii) until the earlier of (A) eighteen (18) months following the
date of termination of employment; or (B) the date on which
the Executive is employed by a new employer, medical and
dental benefits at the level provided immediately prior to the
termination of employment date. Any statutory rights of the
Executive to continued health coverage shall be governed by
the Executive's actual date of termination and not by the
expiration of the salary continuation period.
(b) Termination Within Two (2) Years After a Change of Control. In the
----------------------------------------------------------
event that within two (2) years after a Change of Control, the
Corporation terminates the employment of the Executive, other than for
misconduct or Permanent Disability, or the Executive terminates
employment for Good Reason, the Executive shall receive from the
Corporation, within two (2) business days after such termination:
(i) an amount in cash equal to the product of two (2), multiplied
by the sum of the Executive's Base Salary and Target Bonus;
(ii) an amount in cash equal to the product of (A) Executive's
Target Bonus and (B) a fraction, the numerator of which is the
number of days in the Corporation's fiscal year that occurred
prior to the Executive's termination of employment and the
denominator of which is 365, representing a partial bonus for
the year of termination, less any partial bonus related to the
same fiscal year previously paid to the Executive;
(iii) if the bonus amounts for the Corporation's fiscal year ending
prior to the Executive's termination date have not, prior to
such termination, been paid to Corporation executives
generally, an amount in cash equal to the unpaid bonuses under
the Corporation's annual executive bonus program, based on
actual Corporation performance during such fiscal year;
(iv) reimbursement of reasonable expenses incurred by the
Executive for professional outplacement services by qualified
consultants after termination of employment; and
(v) until the earlier of twenty-four (24) months following the
date of termination of employment or the date on which the
Executive is employed by a new employer,
Page 2 of 9
medical and dental benefits at the level provided immediately
prior to the Change of Control. After Executive is employed by a
new employer these benefits shall remain in effect for the term
established above, but shall become secondary to any such
benefits offered by the new employer (i.e. they will be offset by
such new employer's benefits).
(c) Termination for Misconduct.
--------------------------
Nothing in this Agreement shall be construed to prevent the Corporation
from terminating Executive's employment under this Agreement for
misconduct. Such termination shall relieve the Corporation of its
obligation to make any other payments under this Agreement, except
those that may be otherwise payable under then existing employee
benefit plans, programs and arrangements of the Corporation.
(d) Release of Claims.
-----------------
To be eligible for and receive the benefits described in subparagraphs
(a) or (b) of this Paragraph 3, Executive must, at the time of
termination of employment, irrevocably execute a Release form
prescribed by the Corporation, file it with the person, and within the
time period, the Corporation prescribes, and the Release must be
enforceable in all respects. The purpose of the Release is to release
the Corporation from all claims and liability arising out of the
employment relationship with the Corporation, including without
limitation, claims arising under the Age Discrimination in Employment
Act ("ADEA"), Title VII of the Civil Rights Act of 1964, and all other
federal, state, local or other laws, regulations or rules, whether
arising from statute or the common law, or in law or equity. The
Release shall be in a form that complies with regulations promulgated
by the Equal Employment Opportunity Commission ("EEOC").
4. Mitigation; Non-Compete.
-----------------------
(a) If the Executive's termination of employment occurs at any time other
than within two (2) years after a Change of Control:
(i) the amount of the payments under Paragraph 3(a)(i) will be
reduced by the amount of any gross compensation the Executive is
entitled to receive, whether or not deferred, during the eighteen
(18) month period following the termination, from any other
source of employment, which term, for purposes of this Agreement,
includes self-employment. Provided the Executive is not in
violation of the requirements of Paragraph 5 or this Paragraph 4,
the reduction described in the preceding sentence will not apply
during the twelve (12) month period beginning on the day
following the Executive's termination of employment hereunder. As
a condition to receiving the payments under Paragraph 3(a)(i),
the Corporation may require certification of the Executive's
employment status and the Corporation may require, in the event
of the
Page 3 of 9
Executive's other employment, proof, in a form acceptable to the
Corporation, of the Executive's rate of gross compensation from
the Executive's new employer.
(ii) the Corporation's obligation to make payments under Paragraph 3
(a) shall cease completely and immediately if, without its prior
written consent, at any time before all such payments have been
made as scheduled, the Executive shall directly or indirectly
(whether as a shareholder, owner, partner, consultant, employee,
or otherwise), engage in any of the "major businesses" in which
the corporation or its subsidiaries are engaged. A "major
business" for this purpose is any business segment of the
Corporation (e.g. carbonless copy paper, thermal paper, or other
business segments) on the date of termination of employment that
produced in the last fiscal year of the Corporation which ended
before the termination occurred, or is projected to produce in
the fiscal year in which the termination occurs or in either of
the two succeeding fiscal years after the date of termination,
more than 5% of the revenues of the Corporation. For this
purpose, the Executive shall be deemed not a shareholder of a
company that would otherwise be a competing entity if the
Executive's record and beneficial ownership of the capital stock
of such company amount to not more than one (1) percent of the
outstanding capital stock of any such company subject to the
periodic and other reporting requirements of Section 13 or
Section 15(d) of the Securities Exchange Act of 1934, as amended.
(b) If the Executive's termination of employment occurs within two (2)
years after a Change of Control, the Executive shall not be required to
mitigate damages or the amount of any payment hereunder by seeking
employment or otherwise, nor will any payments hereunder be subject to
offset or reduction in respect of any claims which the Corporation may
have against the Executive.
5. Trade Secrets.
-------------
Executive recognizes and acknowledges that the list of the
Corporation's customers, as well as other confidential information, as
it may exist from time to time, is a valuable, special, and unique
asset of the Corporation's business. The Executive will not, during or
after the term of Executive's employment, disclose any such information
or any part thereof to any person, firm, corporation, association, or
other entity for any reason or purpose whatsoever. In the event of a
breach or threatened breach by the Executive of the provisions of this
Paragraph 5, the Corporation shall be entitled to an injunction
restraining the Executive from disclosing, in whole or in part, this
information. The provisions of this Paragraph 5 are in supplement to,
and not in derogation of, any prior agreements between the Executive
and the Corporation concerning rights to inventions and/or confidential
information. The Corporation will be free to pursue any other remedies
as it may in its discretion deem to be appropriate under the
circumstances.
6. Effect on Pension, Severance and Other Benefits.
-----------------------------------------------
Page 4 of 9
Benefits payable under Paragraph 3 hereof shall not be counted towards
any pension benefits to which Executive may otherwise be entitled;
these benefits are also in lieu of, and not in addition to, any
severance or similar benefits to which the Executive may otherwise be
entitled under the terms of any policy, plan or program of the
Corporation. Unless expressly otherwise stated, this Agreement is not
intended to deprive and does not have the effect of depriving Executive
of any benefits to which the Executive may be entitled under employee
benefit, disability, insurance, deferred compensation of similar plans
or programs of the Corporation.
7. Change of Control Tax Provisions.
--------------------------------
If any payments or benefits provided to Executive under this Agreement
(the "Payments") will be subject to the tax imposed by Section 4999 of
the Code (the "Excise Tax"), the Company shall pay to Executive, at the
time the Payments are paid 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 Payments and any federal,
state and local income tax and Excise Tax on the Gross-Up Payment
itself, shall be equal to the Payments.
For purposes of determining whether any of the Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) any other
payments or benefits received by Executive in connection with a Change
of Control or Executive's termination of employment shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent auditors
and acceptable to Executive such other payments or benefits (in whole
or in part) do not constitute parachute payments, or such excess
parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered within the meaning of
Section 280G(b)(4) of the Code, (ii) the amount of the Payments which
shall be treated as subject to the Excise Tax shall be equal to the
lesser of (A) the total amount of the Payments or (B) the amount of
excess parachute payments within the meaning of Sections 280G(b)(1) and
(4) (after applying clause (i) above, and after deducting any excess
parachute payments in respect of which payments have been made), and
(iii) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
Executive shall be deemed to pay federal income taxes 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 rates of taxation in the state and locality of
Executive's residence on the date of Executive's termination of
employment, net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local taxes.
If the Excise Tax is subsequently determined to be less than the amount
taken into account hereunder, Executive shall repay to the Company, at
the time that the amount of such
Page 5 of 9
reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction. If the Excise Tax is
determined to exceed the amount taken in account hereunder (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 to Executive
(plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
8. Assignment.
----------
This Agreement shall be binding upon, inure to the benefit of and be
enforceable by the Corporation and the Executive and their respective
heirs, legal representatives, successors and assigns. If the
Corporation shall be merged into or consolidated with another entity,
the provisions of this Agreement shall be binding upon and inure to the
benefit of the entity surviving such merger or resulting from such
consolidation. The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Corporation,
by agreement in form and substance satisfactory to the Executive, to
expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Corporation would be required to
perform it if no such success had taken place. The provisions of this
Paragraph 7 shall continue to apply to each subsequent employer of the
Executive hereunder in the event of any subsequent merger,
consolidation or transfer of assets of such subsequent employer.
9. Separability Clause.
-------------------
Any provision of this Agreement which is held to be unenforceable or
invalid in any respect in any jurisdiction shall be ineffective in such
jurisdiction to the extent that it is unenforceable or invalid without
affecting the remaining provisions hereof, which shall continue in full
force and effect. The unenforceability or invalidity of a provision of
this Agreement in one jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
10. Withholding.
-----------
Notwithstanding the provisions of Paragraph 4(b) hereof, the
Corporation may, to the extent required by law, withhold applicable
federal, state and local income and other taxes from any payments due
to the Executive hereunder.
11. Applicable Law.
--------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of Wisconsin applicable to contracts made and to
be performed therein.
Page 6 of 9
12. Entire Agreement.
----------------
This instrument contains the entire agreement of the parties, and
supersedes any earlier agreement between them, relative to the matters
described herein. It may not be changed orally but only by an agreement
in writing signed by the party against whom enforcement of any waiver,
change, modification, extension, or discharge is sought.
IN WITNESS WHEREOF, the parties have executed this Agreement on the ____
day of _______________________, 20___.
APPLETON PAPERS INC.
By:____________________________
EXECUTIVE
By:____________________________
Page 7 of 9
Schedule A
CERTAIN DEFINITIONS
As used in this Agreement, and unless the context requires a
different meaning, the following terms have the meaning indicated:
"Base Salary" means the Executive's annual rate of base salary in effect on the
-----------
date on which the Executive's employment terminates, determined before any
deductions for salary deferrals under a non-qualified deferred compensation
plan, or Internal Revenue Code Sections 125 or 402(g).
"Change of Control" means: (1) the termination of the ESOP or amendment of the
-----------------
ESOP so that it ceases to be an employee stock ownership plan; (2) the ESOP
ceases to own a majority interest in the Company; (3) the sale, lease, exchange
or other transfer of all or substantially all of the assets of the Company (in
one transaction or in a series of related transactions) to a person or entity
that is not controlled by the Company; (4) the approval by the Company
shareholders of any plan or proposal to terminate the Company's business, to
liquidate or dissolve the Company or to sell substantially all the Company's
voting securities; (5) the Company merges or consolidates with any other company
and the Company is not the surviving company of such merger or consolidation; or
(6) any other event or series of events whereby ownership and effective control
of the Company is transferred or conveyed to a person or entity that is not
controlled by the Company.
"Good Reason" means:
-----------
(a) prior to a Change of Control, without the Executive's express written
consent, a reduction of 25% or more of the Executive base annual salary;
and
(b) after a Change of Control,
(1) without the Executive's express written consent,
i. A. a decrease in the Executive's positions, duties,
responsibilities or status from those in effect immediately
prior to the Change of Control; or
. B. any removal of the Executive from, or failure to re-elect the
Executive to, any of the Executive's positions immediately
prior to the Effective Date, except in connection with the
termination of the employment of the Executive for misconduct,
as a result of the death or Permanent Disability of the
Executive, or a transfer of the Executive to a comparable
position, with no decrease in salary and that does not
require relocation, and
Page 8 of 9
ii. the continuance thereof for a period of twenty (20) days after
written notice thereof from the Executive;
(2) any failure to pay Executive's base annual salary, or any reduction of
the Executive's base annual salary or the Executive's Target Bonus in
effect immediately prior to the Change of Control;
(3) without the Executive's express written consent, the relocation of the
principal place of the Executive's employment; and
(4) any breach of Paragraph 4 (relating to non-complete obligations) and
Paragraph 5 (relating to Trade Secrets).
"Notice of Disability Termination" means written notice which sets forth in
--------------------------------
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment for reason of Permanent Disability.
"Permanent Disability" means that Executive would be entitled to receive
--------------------
benefits under Title II of the Social Security Act, as amended; provided,
however, that any termination of the Executive on account of the Executive's
Permanent Disability shall be communicated by and shall not be effective without
a Notice of Disability Termination.
"Target Bonus" means that percentage of Base Salary payable for "target
------------
performance" under the Corporation's annual executive bonus program for the
Corporation's fiscal year in which the Executive's employment terminates or, if
no such percentage has been established, the year prior to such termination.
Page 9 of 9
