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EXHIBIT 10.1
AMERICAN PAD & PAPER COMPANY
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement ("Agreement") is made and effective as of
the 15th day of July, 1997, by and between American Pad & Paper Company, a
Delaware corporation (the "Company"), and Xxxxx X. XxXxxxx ("Executive").
RECITALS
The Board of Directors of the Company (the "Board") has determined that it
is in the best interest of the Company to assure that the Company will have the
continued dedication of the Executive, notwithstanding the possibility, threat
or occurrence of a Change of Control (as defined below). The Board believes it
is imperative to diminish the inevitable distraction of the Executive by virtue
of the personal uncertainties and risks created by a pending or threatened
Change of Control, to encourage the Executive's full attention and dedication
to the Company currently and in the event of any threatened or pending Change
of Control, and to provide Executive with compensation and benefit arrangements
upon a Change of Control which insures that such compensation and benefits are
competitive with other corporations.
AGREEMENT
Now, therefore, in consideration of Executive's continued employment by
the Company, as well as the promises, covenants and obligations contained
herein, the Company and Executive agree as follows:
1. Payment of Severance Amount. Upon the occurrence of a Termination
Event (as defined in paragraph 2), the Company shall:
(a) pay Executive an amount equal to (i) Executive's Base Annual
Salary (as defined in paragraph 2) multiplied by a factor of three (3.0),
payable as a lump sum cash payment within ten (10) days following the date of
the termination constituting such Termination Event (the "Termination Date";
(b) provide Executive with life, disability and medical insurance at
the level provided at either the date of the occurrence of a Change of Control
(as defined in paragraph 2) or the Termination Date, as Executive shall in his
sole discretion elect by providing written notice hereof to the Company for a
period of time equal to twelve (12) months following the Termination Date or
such shorter period until Executive shall obtain substantially equivalent
insurance coverage from a subsequent employer, if any, in the same manner as if
Executive's employment had not been terminated until the end of such period.
Executive shall immediately notify the Company upon obtaining any insurance
from a subsequent employer and shall provide all information required by the
Company regarding such insurance to enable the Company to make a determination
of whether such insurance is substantially equivalent; and
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(c) pay all reasonable legal fees and expenses incurred by Executive
in seeking to obtain or enforce any right or benefit provided by the Agreement.
2. Definitions.
(a) A "Termination Event" shall be deemed to have occurred if:
(i) At any time within three years after a Change of Control, the
Company or any successor thereto shall terminate Executive's employment
for any reason other than for (A) Cause, (B) incapacity due to physical or
mental illness or (C) death; or
(ii) The Executive shall voluntarily terminate his employment
with the Company within one (1) year of a Change of Control for any reason
whatsoever.
(b) A "Change of Control" shall be deemed to have occurred if:
(i) individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least
fifty-one percent (51%) of the Board, provided that any person 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 shall be,
for purposes of this Agreement, considered as though such person were a
member of the Incumbent Board;
(ii) the stockholders of the Company shall approve a
reorganization, merger or consolidation, in each case, with respect to
which persons who were the stockholders of the Company immediately prior
to such reorganization, merger or consolidation do not, immediately
thereafter, own more than fifty percent (50%) of the combined voting power
entitled to vote generally in the election of directors ("Voting
Securities") of the reorganized, merged or consolidated company's then
outstanding voting securities; sale of all or substantially all of the
assets of the Company;
(iii) the stockholders of the Company shall approve a liquidation
or dissolution of the Company or a sale of all or substantially all of the
assets of the Company; or
(iv) any "person," as that term is defined in Section 3(a)(9) of
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than the Company, any of its subsidiaries, any employee benefit
plan of the Company or any of its subsidiaries, any entity organized,
appointed or established by the Company for or pursuant to the terms of
such plan or Xxxx Capital Funds), together with all "affiliates" and
"associates" (as such terms are defined in Rule 12b-2 under the Exchange
Act) of such person (as well as any "Person" or "group" as those terms are
used in Sections 13(d) and 14(d) of the Exchange Act), shall become the
"beneficial owner" or "beneficial owners" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act), directly or
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indirectly, of securities of the Company representing in the aggregate 50%
or more of either (A) the then outstanding shares of common stock, par
value $.01 per share, of the Company ("Common Stock") or (B) the Voting
Securities of the Company, in either such case other than as a result of
acquisitions of such securities directly from the Company.
Notwithstanding the foregoing, a "Change in Control" of the Company
shall not be deemed to have occurred for purposes of subparagraph (iv) of
this paragraph 2(a) solely as the result of an acquisition of securities
by the Company which, by reducing the number of shares of Common Stock or
other Voting Securities of the Company outstanding, increases (i) the
proportionate number of shares of Common Stock beneficially owned by any
person to 50% or more of the shares of Common Stock then outstanding or
(ii) the proportionate voting power represented by the Voting Securities
of the Company beneficially owned by any person to 50% or more of the
combined voting power of all then outstanding Voting Securities; provided,
however, that if any person referred to in clause (i) or (ii) of this
sentence shall thereafter become the beneficial owner of any additional
shares of Common Stock or other Voting Securities of the Company (other
than a result of a stock split, stock dividend or similar transaction),
then a "Change in Control" of the Company shall be deemed to have occurred
for purposes of subparagraph (iv) of this paragraph 2(a).
(c) "Base Annual Salary" shall, as determined on the Termination Date, be
equal to the greater of (i) Executive's annual salary on the date of the
earliest Change of Control to occur during the eighteen month period prior to
the Termination Date plus any bonuses or special incentive payments received in
the twelve months prior to such Change of Control or (ii) Executive's annual
salary on the Termination Date plus any bonuses or special incentive payments
received in the prior twelve months.
(d) For purposes of this Agreement, "Cause" shall mean (i) the willful and
continued failure by Executive to perform his duties as Chief Financial Officer
of the Company or any of its Subsidiaries or his continued failure to perform
duties reasonably requested or reasonably prescribed by the Board (other than
as a result of Executive's death or disability), (ii) the engaging by Executive
in conduct which is materially monetarily injurious to the Company or any of
its Subsidiaries, (iii) gross negligence or willful misconduct by Executive in
the performance of his duties which results in, or causes, material monetary
harm to the Company or any of its Subsidiaries, or (iv) Executive's commission
of a felony or other civil or criminal offense involving moral turpitude. In
the case of (i), (ii) and (iii) above, finding of Cause for termination shall
be made only after reasonable notice to Executive and an opportunity for
Executive, together with counsel, to be heard before the Board. A determination
of Cause by the Board shall be effective only if agreed upon by a majority of
the directors, which shall include at least one director who is not an employee
of the Company or its Subsidiaries and is not employed by Xxxx Capital, Inc.
("Bain").
3. Adjustments. Any provision of this Agreement to the contrary
notwithstanding, if, in the Company's determination, the total sum of (i) the
payments and benefits to be paid or provided to (or with respect to) Executive
under this Agreement which are considered to be "parachute payments" within the
meaning of Section 280G of the Internal Revenue Code of 1986,
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as amended (the "Code") and (ii) any other payments and benefits which are
considered to be "parachute payments," as so defined, to be paid or provided to
(or with respect to) Executive by the Company or a member of the Company's
affiliated group (within the meaning of Section 280G(d)(5) of the Code) (the
"Total Amount") exceeds the amount Executive can receive without having to pay
excise tax with respect to all or any portion of such payments or benefits
under Section 4999 of the Code (the "Reduced Amount"), then the amount payable
to Executive pursuant to paragraphs 1(a) and 1(b) of this Agreement shall be
reduced to the greater of zero or the highest amount which will not result in
Executive having to pay excise tax with respect to any payments and benefits
under Section 4999 of the Code; provided, however, that in the event that the
Reduced Amount minus any and all applicable federal, state and local taxes
(including but not limited to income and employment taxes imposed by the Code)
is less than the Total Amount minus any and all applicable federal, state and
local taxes (including but not limited to income and employment taxes imposed
by the Code and excise taxes applicable to such payments under Section 4999 of
the Code), then the reduction of the amount payable to Executive under
paragraphs 1(a) and 1(b) of this Agreement provided for in the preceding
provisions of this paragraph 3 shall not be made.
4. Notices. For purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be deemed to
have been duly given when personally delivered or when mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Company to: American Pad & Paper Company
00000 Xxxxxxx Xxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Chairman of the Board
If to Executive to: Xxxxx X. XxXxxxx
00000 Xxx Xxxxx Xxxxx
Xxxxxx, Xxxxx 00000
or to such other address as either party may furnish to the other in writing in
accordance herewith, except that notices of changes of address shall be
effective only upon receipt.
5. Applicable Law. This contract is entered into under, and shall be
governed for all purposes by, the laws of the State of Texas.
6. Severability. If a court of competent jurisdiction determines that any
provision of this Agreement is invalid or unenforceable, then the invalidity or
unenforceability of that provision shall not affect the validity or
enforceability of any other provision of this Agreement, and all other
provisions shall remain in full force and effect.
7. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
together will constitute one and the same Agreement.
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8. Withholding of Taxes. Company may withhold from any benefits payable
under this Agreement all federal, state, city or other taxes as may be required
pursuant to any law or governmental regulation or ruling.
9. No Employment Agreement. Nothing in this Agreement shall give Executive
any rights (or impose any obligations) to continued employment by the Company
or any subsidiary thereof or successor thereto, nor shall it give the Company
any rights (or impose any obligations) with respect to continued performance of
duties by Executive for the Company or any subsidiary thereof or successor
thereto.
10. Assignment.
(a) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign or transfer this
Agreement or any rights or obligations hereunder, except as provided in the
remainder of this paragraph 10. Without limiting the foregoing, Executive's
right to receive payments hereunder shall not be assignable or transferable,
whether by pledge, creation of a security interest or otherwise, other than a
transfer by his will or by the laws of descent or distribution, and in the
event of any attempted assignment or transfer contrary to this paragraph 10 the
Company shall have no liability to pay any amount so attempted to be assigned
or transferred. This Agreement shall inure to the benefit of and be enforceable
by Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.
(b) The Company may: (i) as long as it remains obligated with respect
to this Agreement, cause its obligations hereunder to be performed by a
subsidiary or subsidiaries for which Executive performs services, in whole or
in part; (ii) assign this Agreement and its rights hereunder in whole, but not
in part, to any corporation with or into which it may hereafter merge or
consolidate or to which it may transfer all or substantially all of its assets,
if said corporation shall by operation of law or expressly in writing assume to
the reasonable satisfaction of Executive all liabilities of the Company
hereunder as fully as if it has been originally named the Company herein; but
may not otherwise assign this Agreement or its rights hereunder. Subject to the
foregoing, this Agreement shall inure to the benefit of and be enforceable by
the Company's successors and assigns.
11. Modifications. This Agreement shall not be varied, altered, modified,
canceled, changed or in any way amended except by mutual agreement of the
parties in a written instrument executed by the parties hereto or their legal
representatives.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered as of the day and year first above written.
AMERICAN PAD & PAPER COMPANY
By: /s/ Xxxxxxx X. Xxxxxx III
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Name: Xxxxxxx X. Xxxxxx III
Title: Chief Executive Officer
EXECUTIVE
/s/ Xxxxx X. XxXxxxx
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Xxxxx X. XxXxxxx
