Exhibit 10.19
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MANAGEMENT EQUITY AGREEMENT
AMONG
PACKAGING CORPORATION OF AMERICA,
XXXX X. XXXXXX
AND THE
XXXX X. XXXXXX 1999 DYNASTIC TRUST
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DATED AS OF JUNE 3, 1999
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THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR REGISTERED OR QUALIFIED UNDER STATE SECURITIES LAWS.
THE SECURITIES ARE BEING SOLD IN RELIANCE UPON EXEMPTIONS FROM SUCH REGISTRATION
AND QUALIFICATION REQUIREMENTS. THE SECURITIES CANNOT BE SOLD, TRANSFERRED,
ASSIGNED OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE RESTRICTIONS ON
TRANSFERABILITY SET FORTH IN THIS AGREEMENT AND APPLICABLE FEDERAL AND STATE
SECURITIES LAWS.
TABLE OF CONTENTS
Page
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1. PURCHASE AND SALE OF COMMON STOCK . . . . . . . . . . . . . . . . 1
2. GRANT AND EXERCISE OF OPTION . . . . . . . . . . . . . . . . . . 1
3. REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGMENTS . . . . . . . . . 3
4. REPURCHASE OPTION. . . . . . . . . . . . . . . . . . . . . . . . 4
5. RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . . . . . . . 6
6. ADDITIONAL RESTRICTIONS ON TRANSFER. . . . . . . . . . . . . . . 8
7. SALE OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . 9
8. VOTING AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . 10
9. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
10. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
11. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . 14
12. CODE SECTION 280G . . . . . . . . . . . . . . . . . . . . . . . . 15
13. PUBLIC OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . 16
Annex A . . . . . . . . . . . . 1999 Management Equity Compensation Plan
MANAGEMENT EQUITY AGREEMENT
THIS MANAGEMENT EQUITY AGREEMENT (this "AGREEMENT") is made as of
June 3, 1999, among Packaging Corporation of America, a Delaware corporation
(the "COMPANY"), Xxxx X. Xxxxxx ("EXECUTIVE") and the Xxxx X. Xxxxxx 1999
Dynastic Trust (the "TRUST"). Where the context clearly requires, Executive and
the Trust are sometimes referred to herein collectively as "EXECUTIVE."
The Company, Executive and the Trust desire to enter into an
agreement pursuant to which Executive and the Trust shall purchase, and the
Company shall sell, certain shares of the Company's Common Stock, par value $.01
per share (the "COMMON STOCK"), and the Company shall grant to Executive an
option to acquire shares of Common Stock (an "OPTION"), on the terms and subject
to the conditions set forth in this Agreement. The Common Stock and Option to
be acquired by Executive hereunder and the Common Stock to be acquired by the
Trust hereunder are being issued pursuant to the Packaging Corporation of
America 1999 Management Equity Compensation Plan, a copy of which is attached as
ANNEX A hereto (the "MANAGEMENT EQUITY PLAN"). Capitalized terms not otherwise
defined herein have the meanings set forth in PARAGRAPH 9 of this Agreement.
The parties hereto agree as follows:
1. PURCHASE AND SALE OF COMMON STOCK. Upon execution of this
Agreement, Executive and the Trust shall purchase, and the Company shall sell,
600 and 2,600 shares of Common Stock, respectively, at a price of $1,000 per
share, for an aggregate purchase price of $600,000 for Executive and $2,600,000
for the Trust. The Company shall deliver to each of Executive and the Trust a
copy of, and a receipt for, the certificate representing such shares of Common
Stock purchased by such person, and Executive and the Trust shall each deliver
to the Company a cashier's or certified check or wire transfer of funds in the
aggregate amount set forth above.
2. GRANT AND EXERCISE OF OPTION.
(a) GRANT. The Company shall grant to Executive an Option to
purchase 5,059 shares of Common Stock (the "OPTION SHARES") at a price of
$1,000 per share (the "EXERCISE PRICE"), payable upon exercise thereof as set
forth in PARAGRAPH 2(b) below. Executive's Option shall expire at the close
of business on June 1, 2009 (the "EXPIRATION DATE"), subject to earlier
expiration as provided in PARAGRAPH 2(e) below or upon termination of
Executive's employment as provided in PARAGRAPH 2(d) below. The Option is
not intended to be an "incentive stock option" within the meaning of Section
422A of the Code.
(b) EXERCISABILITY/VESTING. The Option may be exercised by
Executive only to the extent it has become vested. Subject to PARAGRAPHS 2(c)
and 2(d), Option Shares shall become vested in accordance with the following
schedule provided that Executive must continue to be employed by the Company
through the applicable date in order for any Option Shares to become vested on
any such date:
VESTING DATE: 6/3/1999 6/3/2000 6/3/2001 6/3/2002 6/3/2003 6/3/2004
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TOTAL NUMBER OF
VESTED OPTION
SHARES: 0 0 218 1,831 3,445 5,059
(c) ACCELERATION OF VESTING. Notwithstanding the provisions of
PARAGRAPH 2(b), upon the occurrence of a Sale of the Company or a Public
Offering, any portion of Executive's Option which has not previously vested
shall become vested and exercisable upon the occurrence of such event; provided
that in the case of a Sale of the Company, as a condition to such accelerated
vesting of Executive's Option, Executive shall, if requested by the purchaser of
the Company and for no additional consideration therefor, agree to continued
employment for up to 12 months following such Sale of the Company so long as
Executive's compensation package and job description immediately following such
Sale of the Company is reasonably similar with respect to remuneration, scope of
duties, responsibility and job location to Executive's compensation package and
job description immediately prior to such event.
(d) EFFECT OF TERMINATION ON VESTING. Unless otherwise determined
by the Company's Board of Directors (the "BOARD"), if Executive's employment
with the Company terminates for any reason, Executive's Option shall be vested
and fully exercisable with respect to that portion of Executive's Option that
was vested and exercisable on the date of such termination (Executive's
"TERMINATION DATE"), and any portion of Executive's Option that was not vested
and exercisable as of Executive's Termination Date shall be forfeited as of such
date. Notwithstanding anything to the contrary herein, the number of Option
Shares with respect to which Executive's Option may be exercised shall not
increase once Executive ceases to be employed by the Company.
(e) EXPIRATION. In no event shall any portion of Executive's
Option be exercisable after the Expiration Date. Upon termination of
Executive's employment with the Company, any portion of Executive's Option that
is not vested and exercisable as of Executive's Termination Date shall expire on
such date. In the case of Executive's death or permanent disability, the
portion of Executive's Option that is vested and exercisable as of the date of
such death or permanent disability shall expire 180 days from the date of
Executive's death or permanent disability, but in no event after the Expiration
Date. If Executive is terminated for Cause, then all of Executive's Option not
previously exercised (whether or not vested) shall expire on Executive's
Termination Date. If Executive resigns or is discharged other than for Cause,
the portion of Executive's Option that is vested and exercisable but has not
been previously exercised shall expire 90 days from Executive's Termination
Date, but in no event after the Expiration Date. Notwithstanding the foregoing,
in the event of a Sale of the Company, the Board may provide, in its discretion,
that the Option shall terminate if not exercised as of the closing of the Sale
of the Company or other prescribed period of time.
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(f) EXERCISE PROCEDURES. Executive may exercise all or any
portion of the Option, to the extent it has vested and is outstanding, at any
time and from time to time prior to its expiration. As a condition to any
exercise of Executive's Option, Executive shall make all investment
representations which the Company requires. Executive shall effect such
exercise by delivering (i) written notice of such exercise to the Company (to
the attention of the Company's Secretary), together with Executive's written
acknowledgment that he has read and has been afforded an opportunity to ask
questions of management of the Company regarding all financial and other
information provided to or requested by Executive regarding the Company, and
(ii) payment of an amount (the "OPTION PRICE") equal to the product of (A) the
Exercise Price MULTIPLIED BY (B) the number of Option Shares to be acquired upon
such exercise. Payment of the Option Price shall be made in cash (including
check, bank draft or money order) or, in the sole discretion of the Board, by
delivery of a promissory note (if in accordance with policies approved by the
Board).
3. REPRESENTATIONS AND WARRANTIES; ACKNOWLEDGMENTS.
(a) In connection with the purchase and sale of Executive Stock,
Executive and the Trust each represents and warrants as follows:
(i) Executive Stock being acquired pursuant to this
Agreement shall be acquired for Executive's and the Trust's own account,
respectively, and not with a view to, or the intention of, distribution
thereof in violation of the 1933 Act, or any applicable state securities
laws, and Executive Stock so acquired shall not be disposed of in
contravention of the 1933 Act or any applicable state securities laws.
(ii) Each of Executive and the trustee of the Trust,
respectively, is sophisticated in financial matters and is able to
evaluate the risks and benefits of the investment in the Executive Stock.
(iii) Each of Executive and the Trust, respectively,
acknowledges that the Executive Stock has not been registered under the
1933 Act and, therefore, cannot be sold unless subsequently registered
under the 1933 Act or an exemption from such registration is available.
(iv) Each of Executive and the trustee of the Trust,
respectively, has had an opportunity to ask questions of and receive
answers concerning the terms and conditions of the offering of Executive
Stock and has been advised of certain risks associated with the purchase
of Executive Stock and has had full access to such other requested
information concerning the Company. Each of Executive and the trustee of
the Trust, respectively, has reviewed, or has had an opportunity to
review, the following documents: (A) the Company's Certificate of
Incorporation and By-laws, and any amendment or restatement thereto;
(B) the Offering Memorandum, dated as of March 30, 1999, relating to the
issuance of the Company's 9 5/8% senior subordinated notes due 2009 and
12 3/8% senior exchangeable
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preferred stock due 2010 and describing the transactions contemplated by
and related to the Contribution Agreement, dated January 25, 1999, among
PCA Holdings LLC ("PCA HOLDINGS"), Tenneco Packaging Inc. (each an
"INVESTOR" and collectively, the "INVESTORS") and the Company; (C) the
Company's pro forma balance sheet and statement of income, each dated as of
December 31, 1998; and (D) the Management Equity Plan.
(v) This Agreement constitutes the legal, valid and binding
obligation of each of Executive and the Trust, enforceable in accordance
with its terms, and the execution, delivery and performance of this
Agreement do not and will not conflict with, violate or cause a breach of
any agreement, contract or instrument to which Executive or the Trust is a
party or any judgment, order or decree to which Executive or the Trust is
subject.
(b) As an inducement to the Company to issue Executive Stock
hereunder to Executive and the Trust, and as a condition thereto, each of
Executive and the Trust acknowledges and agrees that:
(i) neither the issuance of the Executive Stock hereunder to
Executive or the Trust, nor any provision contained herein, shall entitle
Executive to remain in the employment of the Company or its Subsidiaries
or affect the right of the Company to terminate Executive's employment at
any time; and
(ii) the Company shall have no duty or obligation to disclose
to Executive or the Trust, and Executive and the Trust shall have no right
to be advised of, any material information regarding the Company and its
Subsidiaries at any time prior to, upon or in connection with the
repurchase of Executive Stock upon the termination of Executive's
employment with the Company and its Subsidiaries, the transfer of
Executive Stock pursuant to PARAGRAPHS 4, 5 or 7 hereto, the exercise of
an Option granted hereunder or as otherwise provided hereunder.
4. REPURCHASE OPTION.
(a) In the event Executive ceases to be employed by the Company or
its Subsidiaries for any reason (Executive's "TERMINATION"), all of the
Executive Stock held by Executive, the Trust or one or more of Executive's or
the Trust's transferees shall be subject to repurchase by the Company and the
Investors pursuant to the terms and conditions set forth in this PARAGRAPH 4
(the "REPURCHASE OPTION").
(b) In the case of any Termination other than a termination of
Executive's employment for Cause, the purchase price for each share of
Executive Stock shall be the Fair Market Value for such share. In the event of
Executive's termination for Cause, the purchase price for each share of
Executive Stock shall be the lower of (i) the Fair Market Value of such share
and (ii) the Original Cost for such share.
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(c) The Company may elect to purchase all or any portion of
Executive's and/or the Trust's Executive Stock by delivering written notice
(the "REPURCHASE NOTICE") to the holder or holders of Executive Stock within 90
days after Executive's Termination (180 days in the case of Executive's
Termination upon death or disability). The Repurchase Notice shall set forth
the number of shares of Executive Stock to be purchased from each holder, the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction. The number of shares to be repurchased by the
Company shall first be satisfied to the extent possible from the shares of
Executive Stock held by Executive and/or the Trust, as applicable, at the time
of delivery of the Repurchase Notice. If the number of shares of Executive
Stock then held by Executive and/or the Trust, as applicable, is less than the
total number of shares of Executive Stock the Company has elected to purchase,
the Company shall purchase the remaining shares elected to be purchased from the
other holder(s) of Executive Stock under this Agreement, pro rata according to
the number of shares of Executive Stock held by such other holder(s) at the time
of delivery of such Repurchase Notice (determined as close as practicable to the
nearest whole shares).
(d) If for any reason following Executive's Termination, the
Company does not elect to purchase all of the Executive Stock pursuant to the
Repurchase Option, the Investors shall be entitled to exercise the Repurchase
Option for the shares of Executive Stock the Company has not elected to purchase
in accordance with PARAGRAPH 4(c) (the "AVAILABLE SHARES"). As soon as
practicable after the Company has determined that there will be Available
Shares, but in any event within 45 days after Executive's Termination, the
Company shall give written notice (the "REPURCHASE OPTION NOTICE") to the
Investors setting forth the number of Available Shares and the aggregate
purchase price therefor. The Investors may elect to purchase any or all of the
Available Shares by giving written notice to the Company within 30 days after
the Repurchase Option Notice has been given by the Company. If the Investors
elect to purchase an aggregate number of shares greater than the number of
Available Shares, the Available Shares shall be allocated among the Investors
based upon the number of shares of Executive Stock requested to be purchased by
each Investor according to the then outstanding ownership interest in the
Company pro rata. As soon as practicable, and in any event within ten days
after the expiration of the 30-day period set forth above, the Company shall
notify each holder of Executive Stock as to the number of shares being purchased
from such holder hereunder by the Investors (the "SUPPLEMENTAL REPURCHASE
NOTICE"). At the time the Company delivers the Supplemental Repurchase Notice
to the holder(s) of Executive Stock, the Company shall also deliver written
notice to each Investor setting forth the number of shares such Investor is
entitled to purchase, the aggregate purchase price and the time and place of the
closing of the transaction.
(e) The closing of the purchase and sale of the Executive Stock
pursuant to the Repurchase Option shall take place on the date designated by the
Company in the Repurchase Notice or Supplemental Repurchase Notice (as the case
may be), which date shall not be more than 60 days nor less than five days after
the delivery of the later of either such notice to be delivered. The Company
and/or the Investors shall pay for the Executive Stock to be purchased pursuant
to the
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Xxxxxxxxxx Option by delivery of a check or wire transfer of funds in the
aggregate amount of the purchase price for such shares. In addition, the
Company may pay the purchase price for shares owned by Executive (but not for
shares owned by the Trust) by offsetting any bona fide debts owed by Executive
to the Company or guaranteed by the Company on behalf of Executive and any
payments received by Executive hereunder shall be applied first to repayment of
any obligations of Executive (or his affiliates or family members) to the
Company or for which the Company may be responsible. The purchasers of
Executive Stock hereunder shall be entitled to receive customary representations
and warranties from the sellers regarding such sale of shares (including
representations and warranties regarding good title to such shares, free and
clear of any liens or encumbrances) and to require all sellers' signatures be
guaranteed by a national bank or reputable securities broker.
(f) The right of the Company and the Investors to repurchase
Executive Stock pursuant to this PARAGRAPH 4 shall terminate upon the first to
occur of (i) a Sale of the Company or (ii) a Public Offering.
(g) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
applicable restrictions contained in the Delaware General Corporation Law and in
the Company's and its Subsidiaries' debt and equity financing agreements. If
any such restrictions prohibit the repurchase of Executive Stock hereunder which
the Company is otherwise entitled or required to make, the time periods provided
in this PARAGRAPH 4 shall be suspended, and the Company may make such
repurchases as soon as it is permitted to do so.
(h) Executive shall repay to the Company his $1 million signing
bonus in the event Executive voluntarily terminates his employment with the
Company prior to the first to occur of (i) a Public Offering, (ii) Sale of the
Company or (iii) June 3, 2001.
5. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE STOCK. Neither Executive nor the Trust
shall sell, transfer, assign, pledge or otherwise dispose of (whether with or
without consideration and whether voluntarily or involuntarily or by operation
of law) (a "TRANSFER") any interest in any shares of Executive Stock, except
pursuant to the provisions of PARAGRAPH 4 hereof, this PARAGRAPH 5 or in
connection with a Sale of the Company, unless otherwise agreed to by the
Company.
(b) CERTAIN PERMITTED TRANSFERS. The restrictions contained in
this PARAGRAPH 5 shall not apply with respect to transfers of shares of
Executive Stock (i) pursuant to applicable laws of descent and distribution or
(ii) among Executive's family group; provided that such restrictions shall
continue to be applicable to shares of Executive Stock after any such transfer
and the transferees of such Executive Stock shall have agreed in writing to be
bound by the provisions of this Agreement. Executive's "FAMILY GROUP" means
Executive's spouse and descendants (whether
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natural or adopted) (and if no such person is living, then "family group" shall
include the descendants of Executive's parents and his spouse's parents) and any
trust solely for the benefit of Executive and/or Executive's spouse and/or
descendants (and if no such person is living, then "family group" shall include
the descendants of Executive's parents and his spouse's parents).
(c) PARTICIPATION RIGHTS. At least 30 days prior to any sale by
PCA Holdings of Common Stock (other than a Public Sale or any Transfer to any of
its members or affiliates or their members, partners, shareholders or
affiliates), PCA Holdings shall deliver written notice (the "SALE NOTICE") to
Executive and the Trust specifying in reasonable detail the identity of the
prospective transferee(s), the number of shares to be sold and the terms and
conditions of the proposed Transfer. Executive and the Trust may elect to
participate in the contemplated Transfer at the same price per share and on the
same terms by delivering written notice to PCA Holdings within 30 days after
delivery of the Sale Notice. If Executive and/or Trust has elected to
participate in such Transfer, each of PCA Holdings and Executive and/or the
Trust shall be entitled to sell in the contemplated Transfer, at the same price
and on the same terms, a number of shares of Common Stock equal to the product
of (i) the quotient determined by dividing (A) the percentage of shares of
Common Stock owned by Executive or the Trust, as the case may be, by (B) the
aggregate percentage of shares of Common Stock collectively owned by PCA
Holdings, the Trust and all existing and former employees of the Company
(including Executive) participating in such Transfer and (ii) the aggregate
number of shares of Common Stock to be sold in the contemplated Transfer.
FOR EXAMPLE, if the Sale Notice contemplated a sale of
100 shares of Common Stock, and if PCA Holdings at such
time owns 40% of all shares of Common Stock and if
Executive elects to participate and he owns 2% of all
shares of Common Stock and if other employees of the
Company owning an aggregate of 10% of Common Stock elect
to participate in the contemplated sale, PCA Holdings
would be entitled to sell 76.9 shares (40% DIVIDED BY
52% x 100 shares), Executive would be entitled to sell
3.9 shares (2% DIVIDED BY 52% x 100 shares) and the
other employees would be entitled to sell 19.2 shares in
the aggregate (10% DIVIDED BY 52% x 100 shares).
Each person transferring shares of Common Stock pursuant to this
PARAGRAPH 5(c) shall pay its pro rata share (based on the number of shares of
Common Stock to be sold) of the expenses incurred by the persons transferring
shares in connection with such Transfer and shall be obligated to join in any
indemnification or other obligations that PCA Holdings agrees to provide in
connection with such Transfer (other than any such obligations that relate
specifically to a another person such as indemnification with respect to
representations and warranties given by such other person regarding such other
person's title to and ownership of shares of Common Stock).
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(d) TERMINATION OF RESTRICTIONS.
(i) The restrictions on Transfer of shares of
Executive Stock set forth in this PARAGRAPH 5 shall continue with
respect to each share of Executive Stock following any Transfer
thereof.
(ii) Notwithstanding any provision in this Agreement to
the contrary, the restrictions on Transfer of shares of Executive
Stock set forth in this PARAGRAPH 5 shall terminate (A) with respect
to 50% of Executive Stock held by the Trust and 50% of Executive
Stock held by Executive, on the 180th day following consummation of
a Public Offering and (B) with respective to the remaining 50% of
Executive Stock held by each of the Trust and Executive, on a pro
rata basis over the twelve-month period following such 180-day
period.
FOR EXAMPLE, if a Public Offering occurs on November 30,
1999 and Executive holds 120 shares of Executive Stock
as of such date, 60 of Executive's shares (50% x 120 =
60) will be transferrable on May 29, 2000 and an
additional 5 of Executive's shares (1/12 x 60 = 5) will
become transferable on the last day of the month for
each month from June 2000 to May 2001.
6. ADDITIONAL RESTRICTIONS ON TRANSFER.
(a) The certificates representing Executive Stock shall bear the
following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ORIGINALLY
ISSUED ON ___________________, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD
OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, CERTAIN REPURCHASE OPTIONS AND
CERTAIN OTHER AGREEMENTS SET FORTH IN A MANAGEMENT EQUITY AGREEMENT
BETWEEN THE COMPANY, XXXX X. XXXXXX AND THE XXXX X. XXXXXX 1999
DYNASTIC TRUST DATED AS OF JUNE 3, 1999, AS AMENDED AND MODIFIED
FROM TIME TO TIME. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE
HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
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(b) No holder of Executive Stock may Transfer any Executive Stock
(except pursuant to an effective registration statement under the 1933 Act)
without first delivering to the Company an opinion of counsel (reasonably
acceptable in form and substance to the Company) that neither registration nor
qualification under the 1933 Act and applicable state securities laws is
required in connection with such transfer.
(c) Each holder of Executive Stock agrees not to effect any public
sale or distribution of any Executive Stock or other equity securities of the
Company, or any securities convertible into or exchangeable or exercisable for
any of the Company's equity securities, during the seven days prior to and the
180 days after the effectiveness of any underwritten public offering, except as
part of such underwritten public offering or if otherwise permitted by the
Company.
7. SALE OF THE COMPANY.
(a) If the Board and the holders of a majority of the Common Stock
approve a Sale of the Company (the "APPROVED SALE"), all holders of Executive
Stock (in each case, including, without limitation, Executive and the Trust)
shall consent to and raise no objections against the Approved Sale, and if the
Approved Sale is structured as a sale of stock, all holders of Executive Stock
shall agree to sell their shares of Executive Stock on the terms and conditions
approved by the Board and the holders of a majority of the Common Stock. All
holders of Executive Stock shall take all necessary and desirable actions in
connection with the consummation of the Approved Sale.
(b) The obligations of all holders of Executive Stock with respect
to the Approved Sale are subject to the satisfaction of the following
conditions: (i) upon the consummation of the Approved Sale, all of the holders
of the Common Stock shall receive the same form and amount of consideration per
share of the Common Stock, or if any holders of the Common Stock are given an
option as to the form and amount of consideration to be received, all holders
shall be given the same option; and (ii) all holders of then currently
exercisable rights to acquire shares of the Common Stock shall be given an
opportunity to either (A) exercise such rights prior to the consummation of the
Approved Sale and participate in such sale as holders of the Common Stock or
(B) upon the consummation of the Approved Sale, receive in exchange for such
rights consideration equal to the amount determined by multiplying (1) the same
amount of consideration per share of the Common Stock received by the holders of
the Common Stock in connection with the Approved Sale less the exercise price
per share of the Common Stock of such rights to acquire the Common Stock by
(2) the number of shares of the Common Stock represented by such rights.
(c) If the Company or the holders of the Company's securities
enter into any negotiation or transaction for which Rule 506 (or any similar
rule then in effect) promulgated by the Securities Exchange Commission may be
available with respect to such negotiation or transaction (including a merger,
consolidation or other reorganization), the holders of Executive Stock shall, at
the request of the Company, appoint a "purchaser representative" (as such term
is defined in Rule 501) reasonably acceptable to the Company. If any holder of
Executive Stock appoints a
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purchaser representative designated by the Company, the Company shall pay the
fees of such purchaser representative. However, if any holder of Executive
Stock declines to appoint the purchaser representative designated by the
Company, such holder shall appoint another purchaser representative (reasonably
acceptable to the Company), and such holder shall be responsible for the fees of
the purchaser representative so appointed.
(d) Executive, the Trust and the other holders of Executive Stock
(if any) shall each bear their pro rata share (based upon the number of shares
sold) of the costs of any sale of Executive Stock pursuant to an Approved Sale
to the extent such costs are incurred for the benefit of all holders of the
Common Stock and are not otherwise paid by the Company or the acquiring party.
Costs incurred by Executive, the Trust and the other holders of Executive Stock
on their own behalf shall not be considered costs of the transaction hereunder.
8. VOTING AGREEMENT. So long as the Investors hold any equity
securities of the Company, each holder of Executive Stock shall vote all of his
or its shares of Executive Stock (and, in the event such holder is entitled to
vote any of the Company's other securities for the election of directors, such
holder shall vote all such securities) and take all other necessary or desirable
actions (whether in such holder's capacity as a stockholder, director or officer
of the Company) as are requested by the Investors in order to cause the
representatives to be elected as members of the Board as directed by the
Investors for so long as the applicable provision of Section 3.3 of the
Stockholders Agreement, dated April 12, 1999, among the Company and the
Investors, is effective and enforceable against the parties thereto and has not
terminated or expired (whether by its terms, by agreement o the parties thereto
or by operation of law) and then as directed by PCA Holdings. In addition, each
holder shall not vote his or its shares of Executive Stock (or such other
securities) in connection with the removal of any of the Investors' designees as
a director unless and until the Investors direct such holder how to vote on such
removal. Except as otherwise provided herein, each holder of Executive Stock
shall at all times retain the right to vote his or its Executive Stock (and such
other securities) in his or its sole discretion on all other matters presented
to the Company's stockholders for a vote, including the election and removal of
directors to be determined by the holders of the Common Stock other than the
Investors' designees.
9. DEFINITIONS.
(a) "1933 ACT" means the Securities Act of 1933, as amended from
time to time.
(b) "CAUSE" shall mean (i) Executive's theft or embezzlement, or
attempted theft or embezzlement, of money or property of the Company or its
Subsidiaries, perpetration or attempted perpetration of fraud, or participation
in a fraud or attempted fraud, on the Company or its Subsidiaries or
unauthorized appropriation of, or attempt to misappropriate, any tangible or
intangible assets or property of the Company or its Subsidiaries, (ii) any act
or acts of disloyalty, misconduct or moral turpitude by Executive injurious to
the interest, property, operations, business or reputation of the Company or its
Subsidiaries or conviction of Executive of a crime the
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commission of which results in injury to the Company or its Subsidiaries or
(iii) Executive's failure or inability (other than by reason of his permanent
disability) to carry out effectively his duties and obligations to the Company
or its Subsidiaries or to participate effectively and actively in the management
of the Company or its Subsidiaries, as determined in the reasonable judgment of
the Board.
(c) "CODE" shall mean the Internal Revenue Code of 1986 and the
regulations promulgated thereunder, as it may be amended from time to time.
(d) "EXECUTIVE STOCK" shall mean all shares of Common Stock issued
hereunder or acquired hereafter by Executive or the Trust (including any Option
Shares issued upon exercise of Executive's Option granted hereunder). Executive
Stock shall continue to be Executive Stock in the hands of any holder other than
Executive or the Trust (except for the Company and the Investors and except for
transferees in a Public Sale), and except as otherwise provided herein, each
such other holder of Executive Stock shall succeed to all rights and be subject
to all obligations attributable to Executive and the Trust as a holder of
Executive Stock hereunder. Executive Stock shall also include shares of the
Company's capital stock and other securities issued with respect to Executive
Stock by way of a stock split, stock dividend or other recapitalization.
(e) "FAIR MARKET VALUE" of each share of Executive Stock means the
average of the closing prices of the sales of the Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or,
if on any day the Common Stock is not quoted in the NASDAQ System, the average
of the highest bid and lowest asked prices on such day in the domestic
over-the-counter market as reported by the National Quotation Bureau
Incorporated, or any similar successor organization, in each such case averaged
over a period of 21 days consisting of the day as of which the Fair Market Value
is being determined and the 20 consecutive business days prior to such day. If
at any time the Common Stock is not listed on any securities exchange or quoted
in the NASDAQ System or the over-the-counter market, the Fair Market Value shall
be the fair value of the Common Stock determined in good faith by the Board.
(f) "INDEPENDENT THIRD PARTY" means any person who, immediately
prior to the contemplated transaction, does not own in excess of 5% of the
Company's Common Stock on a fully-diluted basis, who is not controlling,
controlled by or under common control with any such 5% owner of the Company's
Common Stock and who is not the spouse or descendent (by birth or adoption) of
any such 5% owner of the Company's Common Stock.
-11-
(g) "ORIGINAL COST" of each share of Common Stock purchased
hereunder shall be equal to $1,000 (as proportionately adjusted for all
subsequent stock splits, stock dividends and other recapitalizations).
(h) "PERMITTED TRANSFEREE" means any holder of Executive Stock who
acquired such stock pursuant to a transfer permitted by PARAGRAPH 5(b).
(i) "PUBLIC OFFERING" means the sale, in an underwritten public
offering registered under the 1933 Act, of shares of the Company's Common Stock.
(j) "PUBLIC SALE" means any sale pursuant to a registered public
offering under the 1933 Act or any sale to the public pursuant to Rule 144 (or
similar rule then in effect) promulgated under the 1933 Act effected through a
broker, dealer or market maker.
(k) "SALE OF THE COMPANY" means the sale of the Company to an
Independent Third Party or affiliated group of Independent Third Parties
pursuant to which such party or parties acquire (i) capital stock of the Company
possessing the voting power to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
(l) "SUBSIDIARY" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or through one or more subsidiaries.
(m) "TRUST" means the Xxxx X. Xxxxxx 1999 Dynastic Trust and,
where the context clearly requires, sometimes includes its then acting trustee.
10. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class mail
(postage prepaid and return receipt requested), sent by reputable overnight
courier service (charges prepaid) or faxed (hard copy to follow) to the
recipient at the address or fax number below indicated:
TO THE COMPANY:
PACKAGING CORPORATION OF AMERICA
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Secretary
-12-
WITH COPIES TO:
XXXXXXXX & XXXXX
000 Xxxx Xxxxxxxx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxxx X. Xxxxxx, P.C.
TO EXECUTIVE:
Xxxx X. Xxxxxx
0000 Xxxxx Xxxxx Xxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
TO THE TRUST:
Xxxx X. Xxxxxx 1999 Dynastic Trust
c/o Xxxxx X. Xxxxxx, Trustee
Ericsson Inc.
000 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
TO THE INVESTORS:
PCA HOLDINGS LLC
c/o Madison Dearborn Partners, Inc.
Three First Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
-13-
TENNECO PACKAGING INC.
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
Attn: President
General Counsel
or such other address or fax number or to the attention of such other person as
the recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement shall be deemed to have been given when
so delivered or sent or, if mailed, five days after deposit in the U.S. mail.
11. GENERAL PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement shall be void, and the Company shall not record such Transfer on its
books or treat any purported transferee of such Executive Stock as the owner of
such stock for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents expressly
referred to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided herein,
this Agreement shall bind and inure to the benefit of and be enforceable by
Executive, the Trust, the Company, the Investors and their respective successors
and assigns (including subsequent holders of Executive
-14-
Stock); provided that the rights and obligations of Executive and the Trust
under this Agreement shall not be assignable except in connection with a
permitted Transfer of Executive Stock hereunder.
(f) CHOICE OF LAW. The corporate law of the State of Delaware
shall govern all questions concerning the relative rights of the Company and its
stockholders. All other questions concerning the construction, validity,
enforcement and interpretation of this Agreement and the exhibits hereto shall
be governed by the internal law, and not the law of conflicts, of the State of
Illinois.
(g) REMEDIES. Each of the parties to this Agreement (including
the Investors) shall be entitled to enforce its rights under this Agreement
specifically, to recover damages and costs (including reasonable attorney's
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. The parties hereto agree and
acknowledge that money damages would not be an adequate remedy for any breach of
the provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without posting
any bond or deposit) for specific performance and/or other injunctive relief in
order to enforce or prevent any violations of the provisions of this Agreement.
(h) AMENDMENT AND WAIVER. The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company, Executive
and, with respect to the Investors' rights under PARAGRAPHS 4 and 8 only, each
Investor, in each case only so long as such Investor owns Common Stock; provided
that no amendment shall be effective against the Trust without the Trust's
consent.
(i) THIRD-PARTY BENEFICIARIES. Certain provisions of this
Agreement are entered into for the benefit of and shall be enforceable by the
Investors as provided herein.
(j) BUSINESS DAYS. If any time period for giving notice or taking
action hereunder expires on a day which is a Saturday, Sunday or legal holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(k) RIGHTS OF THE COMPANY. Nothing in this Agreement shall
interfere with or limit in any way the right of the Company to terminate
Executive's employment at any time (with or without cause), nor confer upon
Executive any right to continue in the employ of the Company for any period of
time or to continue his present (or any other) rate of compensation, and in the
event of his termination of employment (including, but not limited to,
termination by the Company without cause) any portion of such Executive's Option
that was not previously vested and exercisable shall be forfeited. Nothing in
this Agreement shall confer upon Executive or the Trust any right to be selected
again as a Management Equity Plan participant.
-15-
(l) ADJUSTMENTS. In the event of a reorganization,
recapitalization, stock dividend or stock split, or combination or other change
in the shares of Common Stock, the Board may, in order to prevent the dilution
or enlargement of rights under Options granted hereunder, make such adjustments
in the number and type of shares authorized by the Management Equity Plan, the
number and type of shares covered by each Option granted hereunder and the
Exercise Price specified herein as may be determined to be appropriate and
equitable.
12. CODE SECTION 280G. Notwithstanding any provision of this
Agreement to the contrary, if all or any portion of the payments or benefits
received or realized by Executive pursuant to this Agreement either alone or
together with other payments or benefits which Executive receives or realizes or
is then entitled to receive or realize from the Company or any of its affiliates
would constitute an "EXCESS PARACHUTE PAYMENT" within the meaning of Section
280G of the Code and/or any corresponding and applicable state law provision,
such payments or benefits provided to Executive shall be reduced by reducing the
amount of payments or benefits payable to Executive to the extent necessary so
that no portion of such payments or benefits shall be subject to the excise tax
imposed by Section 4999 of the Code and any corresponding and/or applicable
state law provision; provided that such reduction shall only be made if, by
reason of such reduction, Executive's net after tax benefit shall exceed the net
after tax benefit if such reduction were not made. For purposes of this
paragraph, "NET AFTER TAX BENEFIT" shall mean the sum of (i) the total amount
received or realized by Executive pursuant to this Agreement that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision, plus (ii) all other
payments or benefits which Executive receives or realizes or is then entitled to
receive or realize from the Company and any of its affiliates that would
constitute a "parachute payment" within the meaning of Section 280G of the Code
and any corresponding and applicable state law provision, less (iii) the amount
of federal or state income taxes payable with respect to the payments or
benefits described in (i) and (ii) above calculated at the maximum marginal
individual income tax rate for each year in which payments or benefits shall be
realized by Executive (based upon the rate in effect for such year as set forth
in the Code at the time of the first receipt or realization of the foregoing),
less (iv) the amount of excise taxes imposed with respect to the payments or
benefits described in (i) and (ii) above by Section 4999 of the Code and any
corresponding and applicable state law provision.
13. PUBLIC OFFERING. In the event that the Board and the holders
of a majority of the shares of Common Stock (voting as a single class) then
outstanding approve a Public Offering, Executive and the Trust shall take all
necessary or desirable actions in connection with the consummation of the Public
Offering as requested by the Company. In the event that such Public Offering is
an underwritten offering and the managing underwriters advise the Company in
writing that in their opinion the capital stock structure would adversely affect
the marketability of the offering, Executive and the Trust shall consent to and
vote for a recapitalization, reorganization and/or exchange of Common Stock into
securities that the managing underwriters, the Board and the holders of a
majority of the shares of Common Stock then outstanding (voting as a single
class) find acceptable, and Executive and the Trust shall take all necessary or
desirable actions in connec-
-16-
tion with the consummation of the recapitalization, reorganization and/or
exchange as requested by the Company; provided that the resulting securities
reflect and are consistent with the rights and preferences set forth in the
Company's Certificate of Incorporation as in effect immediately prior to such
Public Offering.
* * * * *
-17-
IN WITNESS WHEREOF, this Management Equity Agreement has been executed as
of the date first written above.
Packaging Corporation of America
By: /s/ Xxxx X. Xxxxxx
----------------------------------------
Its: Chief Executive Officer
---------------------------------------
/s/ Xxxx X. Xxxxxx
----------------------------------------
Xxxx X. Xxxxxx
Shares of Common Stock
Purchased. 600
Aggregate Purchase Price
for Common Stock. $600,000
Option to Purchase Aggregate
Number of Shares of Common
Stock. 5,059
Executive's Address:
0000 Xxxxx Xxxxx Xxxx
Xxxx Xxxxxx, XX 00000
CONSENT
The undersigned spouse of Executive hereby acknowledges that I have
read the foregoing Management Equity Agreement and that I understand its
contents. I am aware that the Agreement provides for the repurchase of my
spouse's shares of Common Stock under certain circumstances and imposes other
restrictions on the transfer of such Common Stock. I agree that my spouse's
interest in the Common Stock is subject to this Agreement and any interest I may
have in such Common Stock shall be irrevocably bound by this Agreement and
further that my community property interest, if any, shall be similarly bound by
this Agreement.
-------------------------------
Spouse
-------------------------------
Witness
(SIGNATURE PAGE TO MANAGEMENT EQUITY AGREEMENT)
XXXX X. XXXXXX 1999 DYNASTIC TRUST
By: /s/ Xxxxx X. Xxxxxx
----------------------------------------
Xxxxx X. Xxxxxx
Trustee
Shares of Common Stock Pur-
chased. 2,600
Aggregate Purchase Price
for Common Stock. $2,600,000
Trust's Address:
c/o Xxxxx X. Xxxxxx, Trustee
Ericsson Inc.
000 Xxxx Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
(SIGNATURE PAGE TO MANAGEMENT EQUITY AGREEMENT)