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EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
XXXX X. XXXXX
AGREEMENT dated January 25, 1996 and made effective as of the 1st day
of May, 1995, among SHOREWOOD PACKAGING CORPORATION, a Delaware corporation
having its principal executive offices at 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 (herein called the "Corporation" or the "Company"), and XXXX X. XXXXX,
currently residing at 00 Xxxxxxx Xxxx, Xxxxxxxx, XX 00000, Xxx Xxxx (herein
called the "Executive").
W I T N E S S E T H
The Corporation wishes to employ the Executive and Executive wishes to
accept employment by the Corporation.
The Corporation recognizes that the longer the Executive remains in the
full time active employ of the Corporation, the more valuable will be any
consultative and advisory services that the Executive may provide following his
full time employment by the Corporation.
The Corporation recognizes that the possibility of a proposal from a
third person, whether solicited by the Corporation or unsolicited, concerning a
possible business combination with the Corporation, including the acquisition of
a substantial share of the equity or voting securities of the Corporation, may
be unsettling to the Executive and deter him from entering into the employ of
the Corporation.
This Agreement is intended to help assure a continuing dedication by
the Executive to his duties to the Corporation notwithstanding the possibility
or occurrence of a business combination proposal.
The Corporation and the Executive believe it imperative that should the
Corporation receive proposals from third parties with respect to its future, the
Executive should, without being influenced by the uncertainties of his own
situation, assess and advise the Corporation whether such proposals would be in
the best interest of the Corporation and its stockholders and take such other
action regarding such proposals as the Corporation might determine to be
appropriate.
Accordingly, the parties desire to and do hereby enter into this
Agreement as of the date first set forth above.
NOW, THEREFORE,
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1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of
this Agreement shall be from May 1, 1995 through and including April 30, 2000.
The Corporation agrees to and does hereby employ the Executive as President for
the period commencing May 1, 1995 and terminating April 30, 2000 (the
"Employment Period") and the Executive agrees that he shall serve as President
of the Corporation during the Employment Period. The foregoing notwithstanding,
in the event of any "Change in Control" of the Corporation (as hereinafter
defined) at any time during the last two fiscal years of the Corporation
beginning prior to April 30, 2000, the Employment Period hereunder shall be
automatically extended through and including April 30, 2002.
2. EXECUTIVE. Except as hereinafter provided, the Executive
shall during the Employment Period perform the executive and administrative
duties and functions and shall have the powers and privileges of the President
of the Corporation, as such duties, functions, powers and privileges are defined
in the By-Laws of the Corporation in effect on the date hereof and as currently
interpreted, and, to the extent not defined therein, as the same are customarily
performed and exercised by a President of a publicly owned corporation
incorporated in one of the United States of America. If elected, the Executive
shall serve as a member of the Board of Directors (and of any Executive
Committee or similar committee having powers of the Board of Directors now in
existence or hereafter created) of the Corporation without any additional
compensation for such services. As used in this Agreement, the term
"Corporation" includes each Subsidiary of the Corporation. So long as he is an
officer of the Corporation, the Executive agrees to devote substantially all his
business time to the business and affairs of the Corporation, and to exert his
best efforts in the performance of his duties as an officer, director and member
of any committee of the Board of Directors of the Corporation to which he may be
elected, so as to promote the profit, benefit and advantage of the business to
the Corporation. The Executive agrees to accept the payments to be made to him
under this Agreement as full and complete compensation for the services required
to be performed by him under this Agreement.
3. COMPENSATION. As compensation for the services to be
rendered by the Executive pursuant to this Agreement, subject to the conditions
herein stated, the Corporation agrees to pay to the Executive all of the
following:
(a) BASE SALARY. Beginning May 1, 1995 and until the
expiration of the Employment Period the Corporation shall pay to the Executive a
base salary (the "Base Salary") at a minimum rate of $600,000 per year, payable
in weekly or bi-weekly installments as nearly equal as may be practicable or
otherwise in accordance with the Corporation's customary payroll practices for
its Executives. Executive's Base Salary shall be reviewed anually and may be
increased at the Corporation's discretion. This Agreement shall not be deemed
abrogated or terminated if the Corporation, in its discretion shall determine to
increase the compensation of the Executive for any period of time or if the
Executive shall accept such increase; but, nothing herein shall be deemed to
obligate the Corporation to make any such increase.
(b) BONUS. Executive shall during the Employment Period be
entitled to receive annual performance bonuses in accordance with the terms and
conditions of the Company's 1995 Performance Bonus Plan (the "Bonus Plan") in
the form annexed hereto as Exhibit I, as same may be amended from time to time
hereafter in accordance with its terms. The provisions of the Bonus Plan shall
govern the award of performance bonuses by the Corporation to Executive under
the Bonus Plan, and, to that extent, shall supersede any inconsistent or
contrary provisions contained in the main body of this Agreement. The
Corporation may in its discretion award bonuses to Executive outside of the
scope of
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the Bonus Plan; but, nothing herein shall be deemed to obligate the Corporation
to award any such bonuses.
(c) PARACHUTE EFFECTIVE DATE. Notwithstanding the present
effectiveness of this Agreement, the provisions of Sections 3(g), (h), (i), (k),
(l) and (n) of this Agreement shall become operative only when, as and if there
has been a "Change in Control" of the Corporation. For purposes of this
Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean each corporation
of which more than 50% of the outstanding capital stock entitled to vote for
directors is owned directly or indirectly by the Corporation and a "Change in
Control" of the Corporation shall be deemed to have occurred upon the occurrence
of any of the following events:
(i) A change in control of the direction and
administration of the Company's business of a nature that if any securities of
the Company were registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), would be required to be reported in response to
(a) Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, or (b) Item 1(a) of Form 8-K under the Exchange Act as each is in effect on
the date hereof and any successor provision of such regulations under the
Exchange Act, whether or not the Company is then subject to such reporting
requirements; or
(ii) Any "person" or "group" (as such term is used
in connection with Section 13(d) and 14(d)(2) of the Exchange Act) but excluding
any employee benefit plan of the Company or any "affiliate" or "associate" of
the Company (as defined in Regulation 12b-2 under the Exchange Act) (a) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's outstanding
securities then entitled ordinarily (and apart from rights accruing under
special circumstances) to vote for the election of directors or (b) acquires by
proxy or otherwise 50% or more of the combined voting securities of the Company
having the right to vote for the election of directors of the Company, for any
merger or consolidation of the Company, for the election of Directors, or for
any other matter; or
(iii) During any period of twenty-four (24)
consecutive months, the individuals who at the beginning of such period
constitute the Board of Directors of the Company or any individuals who would be
"Continuing Directors" (as hereinafter defined) cease for any reason to
constitute at least a majority thereof; or
(iv) The Company shall cease to meet the basic
conditions of listing on the Nasdaq National Market in respect of the number of
the Company's Common Stock (as hereinafter defined) held by the public; or
(v) There shall be consummated (A) any
consolidation, merger or recapitalization of the Company or any similar
transaction involving the Company, whether or not the Company is the continuing
or surviving corporation, pursuant to which shares of the Company's common
stock, par value $.01 per share ("Common Stock"), would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same proportion
and ownership of common stock of the surviving corporation immediately after the
merger, (B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets of
the Company or (C) the adoption of a plan of complete liquidation of the Company
(whether or not in connection with the sale of all or
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substantially all of the Company's assets) or a series of partial liquidations
of the Company that is de jure or de facto part of a plan of complete
liquidation of the Company; provided, that the divestiture of less than
substantially all of the assets of the Company in one transaction or a series
of related transactions, whether effected by sale, lease, exchange, spin-off,
sale of the stock or merger of a Subsidiary or otherwise, or a transaction
solely for the purpose of reincorporating the Company in another jurisdiction,
shall not constitute a "Change in Control"; or
(vi) The Board of Directors of the Company shall
approve any merger, consolidation or like business combination or reorganization
of the Company, the consummation of which would result in the occurrence of any
event described in Section 3(c)(i), (ii) or (v) above.
(d) DEFINITION OF "CONTINUING DIRECTORS". For purposes of
this Agreement, "Continuing Directors" shall mean the directors of the Company
in office on the date hereof and any successor to any such director and any
additional director who after the date hereof (i) was nominated or selected by a
majority of the Continuing Directors in office at the time of his nomination or
selection and (ii) who is not an "affiliate" or "associate" (as defined in
Regulation 12b-2 under the Exchange Act) of any person who is the beneficial
owner, directly or indirectly, of securities representing ten percent (10%) or
more of the combined voting power of the Company's outstanding securities then
entitled ordinarily to vote for the election of directors.
(e) TERMINATION RIGHTS UNCHANGED. Except as provided in
Section 3(f) below, nothing in this Agreement shall affect any right which the
Executive may otherwise have to terminate his employment by the Company or a
Subsidiary, nor shall anything in this Agreement affect any right which the
Company or any Subsidiary may have to terminate the Executive's employment at
any time in any lawful manner, subject to the provision that in the event of
termination of the Executive's employment under the circumstances specified in
Sections 3(g) and 3(n) below following a Change in Control, the Company will
provide to the Executive the payments and benefits described in Sections 3(g)
and 3(n) of this Agreement.
(f) VOLUNTARY TERMINATION. In the event any person or
organization commences a tender or exchange offer, circulates a proxy statement
to the Company's stockholders, or takes other steps designed to effect a Change
in Control of the Company, the Executive agrees that in order to receive the
benefits provided by this Agreement, he will not voluntarily leave the employ of
the Company or any of its Subsidiaries, and will continue to perform his regular
duties and to render the services specified in the recitals of this Agreement,
until such person or organization has abandoned or terminated his or its efforts
to effect a Change in Control or until a Change in Control has occurred. Should
the Executive voluntarily terminate his employment before any such effort to
effect a Change in Control of the Company has commenced, or after any such
effort has been abandoned or terminated without effecting a Change in Control
and no such effort is then in process, this Agreement shall lapse and be of no
further force or effect. Should the Executive voluntarily terminate his
employment with the Company or any of its Subsidiaries during such time as any
person or organization has commenced, but has not yet abandoned, any steps
designed to effect a Change in Control of the Company, but at a time when a
Change in Control has not been effected, the Executive shall not be entitled to
receive any of the benefits of Sections 3(g) and 3(n) hereof.
(g) TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change
in Control of the Company shall have occurred, then Executive shall be entitled
to the benefits provided in Section 3(n) hereof upon the subsequent termination
of his employment within the applicable period set forth in
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Section 3(n) hereof following such Change in Control, unless such termination
is (i) due to the Executive's death or voluntary Retirement (as defined herein)
or (ii) by the Company or a Subsidiary by reason of the Executive's Disability
(as defined herein) or for Cause (as defined herein) or (iii) by the Executive
other than for Good Reason, as such term is defined in Section 3(j) hereof.
(h) TERMINATION BY REASON OF DEATH OR DISABILITY. If the
Executive's employment is terminated by reason of his death or Disability during
the two (2) years following a Change in Control, the Executive shall be entitled
to death or long-term disability benefits, as the case may be, from the Company
no less favorable than the most favorable benefits to which he would have been
entitled had the death or termination for Disability occurred at any time during
the period commencing one year prior to the initiation of actions that resulted
in a Change in Control. If prior to any such termination for Disability during
the two (2) years following a Change in Control, the Executive fails to perform
his duties as a result of incapacity due to physical or mental illness, he shall
continue to receive his Base Salary (as defined herein) less any benefits as may
be received by him under the Company's or Subsidiary's disability plan until his
employment is terminated for Disability, and shall be entitled to the most
favorable other benefits applicable under the Company's policies during the
period commencing one year prior to the initiation of actions that resulted in
the Change in Control.
(i) TERMINATION FOR CAUSE. If the Executive's employment
shall be terminated by the Company for Cause or by the Executive other than for
Good Reason during the two (2) years following a Change in Control, the Company
shall pay to the Executive his full Base Salary through the Date of Termination
(as defined herein) at the rate in effect at the time Notice of Termination (as
defined herein) is given and any amounts to be paid to the Executive pursuant to
any deferred compensation or other employee benefit plan or program, and the
Company shall have no further obligations to the Executive under this Agreement.
(j) DEFINITIONS. For purposes of this Agreement:
(i) "Disability" shall mean that, as a result of
the Executive's incapacity due to physical or mental illness, the Executive has
been absent from the full-time performance of his duties with the Company for
six (6) consecutive months and, within thirty (30) days after Notice of
Termination is given to the Executive, he has not returned to the full-time
performance of his duties. Any question as to the existence of Disability shall
be determined by a qualified independent physician selected by the Executive
(or, if he is unable to make such selection, such selection shall be made by any
adult member of the Executive's family) and approved by the Company. The
written determination of such physician shall be final and conclusive for
purposes of this Agreement.
(ii) "Retirement" shall mean that the Executive
shall have retired after reaching the earliest normal or early retirement date
provided in the Company's retirement plans as then in effect (or if Executive
retires after a Change in Control of the Company, as in effect on the date of
the Change in Control).
(iii) "Cause" shall mean:
(A) The willful and continued failure by
the Executive to perform substantially his duties with the Company (other than
any such failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from
termination by the Executive for Good Reason) which is not cured within thirty
(30) days after a
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written demand for substantial performance is delivered to the Executive by the
Board of Directors, which demand specifically identifies the manner in which
the Board of Directors believes that the Executive has not substantially
performed his duties; or
(B) The willful engagement in conduct by
the Executive which is demonstrably and materially injurious to the Company,
monetarily or financially, which is not discontinued within five (5) days after
written demand to cease and desist from such conduct is delivered to the
Executive by the Board of Directors, which demand specifically identifies the
conduct which the Board of Directors believes is injurious to the Company; or
(C) Conviction for a felony or other crime
punishable by imprisonment for more than one (1) year, or the entering of a plea
of nolo contendere thereto.
Notwithstanding any of the foregoing, the Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to the Executive a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board of Directors
(other than the Executive) at a meeting called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before the Board of Directors), finding
that in the good faith opinion of the Board of Directors the Executive was
guilty of conduct set forth above in clause (A), (B) or (C) and specifying the
particulars thereof in detail.
(iv) "Good Reason" shall mean:
(A) The assignment by the Company or a
Subsidiary to the Executive of duties which (i) are inconsistent with, or
require travel significantly more time-consuming or extensive than, the
Executive's duties and business travel obligations immediately prior to the
Change in Control, or (ii) result, without the Executive's express written
consent, in a significant reduction in the Executive's authority and
responsibility when compared to the highest level of authority and
responsibility assigned to the Executive at any time during the six (6) month
period prior to the Change in Control; or
(B) A reduction by the Company or a
Subsidiary of the Executive's Base Salary as the same may be increased from
time to time hereafter; or
(C) A change of the Executive's assigned
site location without the Executive's express written consent or, in the event
of any relocation of the Executive with his express written consent, the failure
by the Company to pay (or reimburse the Executive for) all reasonable moving
expenses incurred by the Executive and relating to a change of his principal
residence and to indemnify the Executive against any loss realized by the
Executive and/or the Executive's spouse in the sale of the Executive's principal
residence in connection with any such change of residence, all to the effect
that the Executive shall incur no loss on an after-tax basis; or
(D) The failure of the Company to continue
to provide the Executive with substantially the same level of retirement and
welfare benefits (which for purposes of this Agreement shall mean benefits under
all welfare plans as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) and perquisites (including
participation on a comparable basis in the Company's retirement plans, stock
option plans, incentive plans, group life insurance plans, medical, health,
accident, disability and other plans in which employees of the Company
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of comparable title and salary grade participate) and any other material
benefits hereunder as were provided to the Executive immediately prior to such
Change in Control, or with a package of retirement and welfare benefits and
perquisites that, though one or more such benefits or perquisites (including
participation on a comparable basis in the Company's or a Subsidiary's
retirement plans, stock option plans, incentive plans, group life insurance
plans, medical, health, accident, disability and other plans) may vary from
those provided before such Change in Control, is substantially comparable in
all material respects when taken as a whole to such retirement and welfare
benefits and perquisites provided prior to the Change in Control; or
(E) The failure by the Company to obtain
the express written assumption of and agreement to perform this Agreement by any
successor as contemplated in Section 12 hereof; or
(F) Any purported termination of the
Executive's employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(k) hereof.
For purposes of this Section 3(j), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him knowing and with the intent that such action or inaction would not
be in the best interests of the Company or otherwise was done or omitted to be
done in bad faith.
(v) "Base Salary" shall mean the annual base
salary paid to the Executive immediately prior to the Change in Control of the
Company (provided that such amount shall in no event be less than the annual
base salary paid to the Executive during the one (1) year period immediately
prior to the Change in Control).
(k) NOTICE OF TERMINATION. Any purported termination of
employment by the Company by reason of the Executive's Disability or for Cause,
or by the Executive for Good Reason, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice given by the Executive or by the
Company or a Subsidiary, as the case may be, which shall indicate the specific
basis for termination and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for determination of any payments under
this Agreement; provided, however, that the (i) Executive shall not be entitled
to give a Notice of Termination that he is terminating his employment with the
Company or a Subsidiary for Good Reason after the expiration of six (6) months
following the last to occur of the events specified by him to constitute Good
Reason and (ii) the Corporation shall not be entitled to give a Notice of
Termination that it is terminating Executive's employment hereunder with the
Company or a Subsidiary by reason of Executive's Disability or For Cause after
the expiration of six (6) months following the last to occur of the events
specified by it to constitute Good Reason or Disability.
(l) DATE OF TERMINATION. For purposes of this Agreement,
"Date of Termination" shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of his
duties during such thirty (30) day period) and (ii) if the Executive's
employment is terminated for Cause or Good Reason, the date specified in the
Notice of Termination, which shall be not more than ninety (90) days after such
Notice of Termination is given. If within thirty (30) days after any Notice of
Termination is given, the party who receives such Notice of Termination notifies
the other
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party that a Dispute (as hereinafter defined) exists, the parties agree to
pursue promptly the resolution of such Dispute with reasonable diligence.
Pending the resolution of any such Dispute, the Company or a Subsidiary shall
make the payments and provide the benefits provided for in Section 3(m) hereof
to the Executive. In the event that it is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no appeal having
been perfected), that a challenged termination by the Company or a Subsidiary
by reason of the Executive's Disability or for Cause was justified, or that a
challenged termination by the Executive for Good Reason was not justified, then
all sums paid by the Company or a Subsidiary to the Executive from the Date of
Termination specified in the Notice of Termination until final resolution of
the Dispute pursuant to this Section 3(l) shall be repaid promptly by the
Executive to the Company or a Subsidiary, with interest at the base rate
charged from time to time by the Company's principal commercial bank. In the
event that it is finally determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause
was not justified, or that a challenged termination by the Executive for Good
Reason was justified, then the Executive shall be entitled to retain all sums
paid to the Executive pending resolution of the Dispute.
(m) DEFINITION OF "DISPUTE". For purposes of this
Agreement, "Dispute" shall mean (i) in the case of the Executive's termination
as an Executive with the Company or a Subsidiary for Disability or Cause, that
the Executive challenges the existence of Disability or Cause and (ii) in the
case of the Executive's termination as an Executive with the Company or a
Subsidiary by the Executive for Good Reason, that the Company or a Subsidiary
challenges the existence of Good Reason.
(n) PARACHUTE PAYMENTS UPON TERMINATION. If within two (2)
years after a Change in Control of the Company, the Company or a Subsidiary
shall terminate the Executive's employment other than by reason of the
Executive's death, Disability, voluntary Retirement or for Cause or if the
Executive shall terminate his employment for Good Reason then, in any such
event, and subject in each case to Section 3(l) hereof, the Company or a
Subsidiary will pay to the Executive as compensation for services rendered,
beginning not later than the fifth business day following completion of the
"Parachute Procedure" (as hereinafter defined) if the Company elects to follow
such procedure and not later than the fifteenth day after the Date of
Termination otherwise:
(i) the Executive's Base Salary through the Date
of Termination, any existing fringe benefits (including medical benefits) and
incentive compensation for the fiscal year in which the termination occurs in
accordance with any arrangements then existing with the Executive and
proportionate to the period of the fiscal year which has expired prior to the
termination; and
(ii) a lump sum severance payment equal to 2.99
times the Executive's average annual compensation during the Base Period (as
hereinafter defined) (subject to any applicable payroll or other taxes and
charges required to be withheld computed at the rate for supplemental payments)
provided that in no event shall "Total Payments" (as hereinafter defined) exceed
2.99 times the Executive's "Base Amount," as such term is defined in Section
28OG of the Internal Revenue Code (the "Code"). The Executive's Base Amount
shall be determined in accordance with temporary or final regulations
promulgated under Section 28OG of the Code then in effect, if any. In the
absence of such regulations, if the Executive was not employed by the Company
(or any corporation or partnership affiliated with the Company (an "Affiliate")
within the meaning of Section 1504 of the Code or a predecessor of the Company)
during the entire five calendar years (the "Base Period") preceding the calendar
year in which a Change in Control of the Company occurred, the Executive's
average annual compensation
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for the purposes of such determination shall be the lesser of (1) the average
of the Executive's annual compensation for the complete calendar years during
the Base Period during which the Executive was so employed or (2) the average
of the Executive's annual compensation for both complete and partial calendar
years during the Base Period during which the Executive was so employed,
determined by annualizing any compensation (other than nonrecurring items)
includible in the Executive's gross income for any partial calendar year or (3)
the annual average of the Executive's total compensation for the Base Period
during which the Executive was so employed, determined by dividing such total
compensation by the number of whole and fractional years included in the Base
Period. Compensation payable to the Executive by the Company or any Affiliate
or predecessor of the Company shall include every type and form of compensation
includible in the Executive's gross income in respect of the Executive's
employment by the Company or any Affiliate or predecessor of the Company,
including compensation income recognized as a result of the Executive's
exercise of stock options or sale of the stock so acquired, except to the
extent otherwise provided in temporary or final regulations promulgated under
Section 28OG of the Code. For purposes of this Section 3(n) a "change in
control of the Company" shall have the meaning set forth in Section 28OG of the
Code and any temporary or final regulations promulgated thereunder, subject to
the limitation stated in Section 3(n)(iii) below; and
(iii) (A) Notwithstanding anything to the contrary
contained herein, in the event that any portion of the aggregate payments and
benefits (the "Total Payments") received or to be received by the Executive,
whether paid or payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, a Subsidiary or any other
person or entity, would not be deductible in whole or in part by the Company, a
Subsidiary or by such other person or entity in the calculation of its Federal
income tax by reason of Section 28OG of the Code, the Total Payments payable
shall be reduced by the least amount necessary so that no portion of the Total
Payments would fail to be deductible by reason of being an "excess parachute
payment."
(B) At the option of the Company, no
payments shall be made pursuant to this section until the procedure described
in this Section 3(n)(iii) is completed (the "Parachute Procedure"). If the
Company elects to comply with such procedure, the Company shall cause its
independent auditors to deliver to the Executive, within fifteen (15) days
after the Date of Termination, a statement which shall indicate whether payment
to the Executive of the Total Payments would cause any portion of the Total
Payment not to be deductible in whole or part in the calculation of Federal
income tax by reason of Section 28OG of the Code, or would cause, directly or
indirectly, an "excess parachute payment" to exist within the meaning of
Section 28OG of the Code. Such statement shall set forth the value, calculated
in accordance with the principles of Section 28OG of the Code and any temporary
or final regulations promulgated thereunder, of any non-cash benefits or any
deferred or contingent payment or benefit payable pursuant to the terms of this
Agreement or any other plan, arrangement or benefit, together with sufficient
information to enable the Employer to determine the payments that may be made
to the Executive without resulting in a loss of deduction under Section 28OG of
the Code or an "excess parachute payment" to the Executive within the meaning
of Section 28OG of the Code. The Company warrants to the Executive the
accuracy of all information and calculations supplied to the Executive in such
statement. If such statement indicates that payment of the Total Payments
would result in a loss of a deduction by reason of Section 28OG of the Code or
would cause an "excess parachute payment" to exist within the meaning of
Section 28OG of the Code, the Executive shall, within thirty (30) days after
receipt of the statement, deliver to the Company a statement indicating which
of the payments and benefits specified in such auditor's statement the
Executive elects to receive; provided, however, that the payments and benefits
selected by the Executive shall not result in a loss of deduction under Section
28OG of the Code or an "excess parachute payment" to the Executive within the
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meaning of Section 28OG of the Code and, provided, further, however, that if
the Company does not comply with the Parachute Procedure, it shall deliver the
payments required by this Section 3(n) within fifteen (15) days after the Date
of Termination. Delivery of the statement by the Executive to the Company
shall constitute completion of the Parachute Procedures; and
(iv) The Company shall contest any improper assessment of an
excise or other tax imposed as a result of determination that an "excess
parachute payment" has been made to the Executive within the meaning of Section
28OG of the Code. If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that
an "excess parachute payment" does in fact exist, within the meaning of Section
28OG of the Code, then the Executive shall pay to the Company, upon demand, an
amount not to exceed the sum of (i) the excess of the aggregate Total Payments
over the aggregate Total Payments that would have been paid without any portion
of such payment being deemed an "excess parachute payment" within the meaning of
Section 28OG of the Code and (ii) interest on the amount set forth in clause (i)
above at the applicable federal rate specified in Section 1274(d) of the Code
from the date of receipt by the Executive of such excess until the date of such
repayment.
4. BENEFITS. (a) The Executive shall be entitled to participate
in any life, accident, disability and health insurance, hospitalization or any
other plan or benefits afforded by the Corporation to its executives generally,
if and to the extent that the Executive is eligible to participate in accordance
with the provisions of any such plan or for such benefits. Nothing herein is
intended, or shall be construed, to require the Corporation to institute any, or
any particular, plan or benefits. In addition, the Executive shall be furnished
with an automobile lease allowance of $2,050 per month for the remainder of the
lease term now in effect and $2,250 per month thereafter for the balance of the
Employment Period plus reimbursement for reasonable insurance, maintenance,
gasoline and parking expenses incurred in furtherance of the Corporation's
business.
(b) The Corporation shall maintain in effect during the Employment
Period a term life insurance policy on the life of Executive in a declining
amount equal at any one time to the aggregate Base Salary payable hereunder over
the then unexpired balance of the Employment Period. In addition, the
Corporation shall maintain in effect during the Employment Period disability
insurance for the benefit of Executive covering, in the event this Agreement is
terminated on account of Executive's Disability, 100% of Executive's Base Salary
through the end of the Employment Period less any benefits as may be received by
him during such time under the Company's other disability plans. In connection
therewith, Executive shall, at such time or times and at such place or places as
the Corporation may reasonably direct, subject himself to such physical
examinations and execute and deliver such documents as the Corporation may deem
necessary.
5. EARLY TERMINATION; NO CHANGE OF CONTROL. If prior to the
expiration of this Agreement or a Change in Control of the Corporation, (a) the
Executive fails because of Disability to perform services of the character
contemplated by Section 2 of this Agreement; or (b) if the Corporation's Board
of Directors determines that the Executive has been negligent in the performance
of his duties, has willfully neglected his duties, has been dishonest, has
willfully disobeyed the Corporation's rules, instructions or orders or has
breached any of his covenants herein contained (any such conduct, to be referred
to as "Objectionable Conduct"); then, the Corporation may by written Notice of
Termination (defined below) terminate Executive's employment herein. In
addition, this Agreement shall terminate immediately upon the death or
Retirement of Executive. Upon any termination of the Executive's employment
under this Section 5, the Executive shall be deemed removed from all positions
held by him
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with the Corporation, its subsidiaries and affiliates, effective as of the
"Date of Termination" (defined below), and shall be entitled to receive solely
all amounts and benefits to be paid or provided by the Corporation under
Sections 3(a), 3(b) and 4 of this Agreement up to the Date of Termination and
any other amounts to be paid thereafter to Executive or his beneficiaries
pursuant to any deferred compensation plan or other employee benefit plan or
program in effect on the Date of Termination, to the extent he remains eligible
to participate thereunder under the terms of the Corporation's applicable
policies and plans. The provisions of this Section 5 shall terminate and cease
to be of any force or effect immediately upon any Change in Control of the
Corporation. For purposes of this Section 5 only, (i) "Date of Termination"
shall mean, (x) in respect of any termination of Executive's employment by
reason of death or retirement, the effective date of Retirement or the date of
death, as the case may be, (y) in respect of any termination of Executive's
employment by reason of Disability, thirty (30) days after the Notice of
Termination is given to Executive (provided that Executive shall not have
returned to the full-time performance of his duties during such thirty (30) day
period) and (z) in respect of any termination of Executive's employment by
reason of Objectionable Conduct, fifteen (15) days after the Notice of
Termination is delivered to Executive (provided that Executive shall not have
cured and/or ceased, as appropriate, such conduct within such fifteen (15) day
period); and (ii) "Notice of Termination" shall mean a notice given by the
Company to Executive which shall indicate the specific basis for termination
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for determination of any payments due under this Agreement;
provided, however, that the Company shall not be entitled to give a Notice of
Termination that it is terminating Executive's employment after the expiration
of six (6) months following the last to occur of the events constituting the
basis for such termination.
6. COMPLETE PAYMENT. (a) Upon the payment of the amounts provided
in this Agreement, the Corporation shall have no further liability of any kind
or nature whatsoever to the Executive under this Agreement, except such
liability, if any, as may continue under any plan or for the benefits (in
accordance with the express terms hereof) referred to in Section 4 hereof.
Notwithstanding the foregoing, Executive expressely reserves any rights he may
have at law, equity or otherwise in the event that his employment by the Company
is terminated in contravention of this Agreement.
(b) NON-COMPETITION. The Executive expressly covenants and
agrees that during the term of this Agreement he will not, directly or
indirectly, own, manage, operate, join, control or participate in or be
connected with as an officer, employee, partner, stockholder, or otherwise, any
business, individual, partnership, firm or corporation (other than a parent of
the Corporation or a subsidiary or affiliate of such parent), which is at the
time engaged wholly or partly, in the business of manufacturing and marketing
packaging products or in any business which is directly in competition with the
then business of the Corporation or any subsidiary or affiliate of the
Corporation (as defined in the General Rules and Regulations promulgated under
the Securities and Exchange Act of 1934), or any firm, partnership or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary or affiliate.
(c) INVESTMENTS. Nothing in this Agreement is intended, or
shall be construed, to prevent the Executive during the term of his employment
hereunder from investing in the stock or other securities listed on a national
securities exchange or actively traded on the over-the-counter market of any
corporation which is at the time engaged wholly or partly in any business which
is, directly or indirectly, at the time, in competition with the business of the
Corporation or any such subsidiary or affiliate, or any firm, partnership, or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary or affiliate, provided that the
Executive and direct
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members of his family living in the same household as the Executive shall not
directly or indirectly, hold, beneficially or otherwise, in the aggregate, more
than three percent of any issue of such stock or other securities of any one
such corporation.
(d) CONFIDENTIAL INFORMATION. The Executive expressly
covenants and agrees that he will not at any time, during the term of his
employment hereunder or thereafter and without regard to when or for what
reason, if any, such employment shall terminate, directly or indirectly, use or
permit the use of any trade secrets, customers' lists or other information of,
or relating to, the Corporation, or any Subsidiary or affiliate, in connection
with any activity or business, except the business of the Corporation or any
Subsidiary or affiliate of the Corporation, and will not divulge such trade
secrets, customers' lists, and information to any person, firm, or corporation
whatsoever, except as may be necessary in the performance of his duties
hereunder.
(e) REMEDIES. It is expressly understood and agreed that
the services to be rendered hereunder by the Executive are special, unique, and
of extraordinary character, and in the event of the breach by the Executive of
any of the terms and conditions of this Agreement on his part to be performed
hereunder, including, but not limited to, the terms and provisions of
subparagraphs (b) or (d) of this Section, then the Corporation shall be
entitled, if it so elects, to institute and prosecute any proceedings in any
court of competent jurisdiction, either in law or equity, for such relief as it
deems appropriate, including, without limiting the generality of the foregoing,
any proceedings, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Executive or to enjoin the
Executive from performing services for any other person, firm or corporation.
7. SEVERABILITY. The invalidity or unenforceability of any
provisions of this Agreement in any circumstance shall not affect the validity
or enforceability of such provision in any other circumstance or the validity or
enforceability of any other provision of this Agreement, and except to the
extent such provision is invalid or unenforceable, this Agreement shall remain
in full force and effect. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof in such jurisdiction,
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail,
to his then residence in the case of the Executive or to its principal office in
the case of the Corporation, and shall be deemed given when deposited in the
United States mails, postage prepaid.
9. SUCCESSORS. The rights and obligations of the Corporation
under this Agreement shall inure to the benefit of and shall be binding upon any
successor of the Corporation or to the business of the Corporation. Neither
this Agreement or any rights or obligations of the Executive hereunder shall be
transferable or assignable by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to the Executive hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there be no such designee, to the Executive's estate.
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10. ATTORNEYS' FEES. If litigation shall be brought to enforce or
interpret any provision contained herein, the Company shall indemnify the
Executive for his attorneys' fees and disbursements incurred in such litigation
and pay prejudgment interest on any money judgment obtained by the Executive
calculated at the base rate of interest charged from time to time from the date
that payment should have been made under this Agreement; provided, however, that
the Executive shall not have been found by the court to have had no cause to
bring the action, or to have acted in bad faith, which findings must be final
with the time to appeal therefrom having expired and no appeal having been
taken.
11. OBLIGATION TO PAY COMPENSATION. The Company's obligation to
pay the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand. Except as expressly provided herein, the Company
waives all rights it may now have or may hereafter have conferred upon it, by
statute or otherwise, to terminate, cancel or rescind this Agreement in whole or
in part. Except as otherwise provided herein, each and every payment made
hereunder by the Company shall be final and the Company will not seek to recover
for any reason all or any part of such payment from the Executive or any person
entitled thereto. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment, and if
Executive obtains such other employment, any compensation earned by Executive
pursuant thereto shall not be applied to mitigate any payment made to Executive
pursuant to this Agreement.
12. SUCCESSORS BOUND BY AGREEMENT. The Company shall require any
successor (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by written agreement, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used in this
Agreement, the term "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which executes and
delivers the agreement required by this Section 12, or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
13. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the Executive and the Company concerning the subject matter
hereof and supersedes all prior agreements between the parties with respect
thereto. In the event that Executive's employment is terminated subsequent to a
Change in Control as provided herein, performance by the Company of its
obligations hereunder shall constitute full settlement and release of any claim
or cause of action, of whatsoever nature, which the Executive might otherwise
assert or claim against the Company or any of its directors, stockholders,
officers or employees on account of such termination. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive and an authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of any similar or dissimilar provision or condition at such same or at any prior
or subsequent time. No assurances or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. However, this
Agreement is in addition to and not in lieu or any other plan providing for
payments to or benefits for the Executive or any agreement now existing or which
hereafter may be entered into between the Company and the
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Executive, provided that, notwithstanding anything to the contrary contained in
the terms of any such plan or agreement, in the event of Executive's
termination, within two (2) years after a Change in Control as provided herein,
of Executive's employment, this Agreement shall govern the rights and the
obligations of the Company and the Executive. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without giving effect to the provisions, principles, or
policies thereof relating to choice or conflict of laws.
14. MISCELLANEOUS. The masculine or neuter gender shall include
the feminine gender. This Agreement may be executed in more than one
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly exercised this
Agreement in duplicate original as of the day and year first above written.
SHOREWOOD PACKAGING CORPORATION
By:/s/ Xxxxxx X. Xxxxxxx
--------------------------------
Xxxxxx X. Xxxxxxx
Executive Vice President
/s/ Xxxx X. Xxxxx
--------------------------------
Xxxx X. Xxxxx
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