EMPLOYMENT AGREEMENT
THIS AGREEMENT is made effective the 18th day of November
1998, by and between Smurfit-Stone Container Corporation, a Delaware corporation
(the "Company"), and Xxxxxx X. Xxxxxx, a resident of the State of Illinois (the
"Executive").
WHEREAS, Executive and Stone Container Corporation have
previously entered into the Stone Container Corporation Severance Agreement
dated July 2, 1996 (the "1996 Agreement");
WHEREAS, Stone Container Corporation and Jefferson Smurfit
Corporation on May 10, 1998, agreed to merge to form the Company;
WHEREAS, the parties desire to cancel the 1996 Agreement; and
WHEREAS, as a result of such events the parties desire to set
forth the terms and conditions under which the Executive shall be employed and
upon which the Company shall compensate the Executive.
NOW, THEREFORE, in consideration of the premises and promises
contained herein, the parties agree as follows:
1. Employment. The Company hereby employs the Executive, and
the Executive hereby agrees to continue employment with the Company, as Vice
President. In such capacity, the Executive will perform such duties and services
of an executive and administrative character as shall be assigned to the
Executive from time to time by the Company's Chief Executive Officer (the
"Services").
2. Performance. The Executive agrees to devote the Executive's
best efforts, energies and skills on a full time basis during normal working
hours to performance of the Executive's duties hereunder (except for vacations
and reasonable periods of illness or incapacity). During the term of this
Agreement, the Executive shall not engage in any other business or business
activity, whether or not such business activity is pursued for gain, profit or
other pecuniary advantage; provided, however, that the Executive shall not be
prevented from (i) investing the Executive's assets in such form or manner as
will not require any substantial amount of time or services on the part of the
Executive in the operation of the affairs of the enterprises in which such
investments are made or (ii) engaging in limited outside business activities,
such as serving on the board of directors of an entity or organization which
will not conflict with the Executive's duties hereunder. The principal place for
performance of the Services shall be Chicago, Illinois and the Company will
permit the Executive to perform substantially all of the Services therefrom. The
Executive may be obliged, from time to time, and for reasonable periods of time,
to travel in the performance of the Services.
3. Base Salary. For all duties to be performed by the
Executive hereunder, the Executive shall receive an annual base salary (the
"Base Salary") of $305,000.00, payable by the Company in equal semi-monthly
installments (prorated for any partial
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year). The Base Salary shall be subject to upward adjustment annually on the
basis of an annual salary review to reflect performance. In no event, however,
shall the Base Salary be decreased.
4. Bonus and Stock Options. In addition to Base Salary, the
Executive shall be eligible to participate in incentive programs approved by the
Board of Directors of the Company offered to senior management, including
consideration for an annual bonus (the "Bonus") and the Stock Option Plan of the
Company ("Stock Option Plan") with such Bonus and stock option award
commensurate with awards made to Executive in prior years with Stone Container
Corporation.
5. Vacation. The Executive shall be entitled to five weeks
annual paid vacation, which may be taken at such times as are consistent with
good business practices.
6. Fringe Benefits. The Executive shall be entitled to receive
such fringe benefits as are made available to executive employees of the Company
generally, including participation in any Company retirement and deferred
compensation programs, approved by the Board of Directors but in no case less
than those in effect on November 1, 1998. The Company shall also provide the
Executive with an automobile and pay (or reimburse on a monthly basis) all
reasonable expenses of operation, licensing, repair and maintenance, including
gasoline, parking, insurance and tires and club membership dues. In addition,
all such fringe benefits shall be substantially similar to those which Executive
received immediately prior to November 1, 1998.
7. Insurance. The Executive shall be enrolled in the Company's
senior management group medical and other insurance program(s). The cost of all
insurance coverage shall be paid by the Company and the Executive in accordance
with the Company's standard practice. In addition, the Company shall maintain
life insurance coverage equal to four times the Executive's Base Salary with
beneficiaries to be selected by the Executive.
8. Expenses. The Executive is authorized to incur reasonable
expenses in rendering Services hereunder and in the performance of the
Executive's duties hereunder. The Company will reimburse the Executive in a
timely manner at least monthly for all such expenses upon presentation of an
itemized written accounting therefor (together with such vouchers and other
verifications as the Company may require) within thirty (30) days after they
have been incurred.
9. Confidential Information. The Executive acknowledges that
(i) the Executive holds a senior management position with the Company, (ii) in
connection with the Services being rendered under this Agreement, the Executive
will acquire and make use of confidential information and trade secrets of the
Company ("Confidential Information"), including, but not limited to, financial
statements, client lists, project reports, software design and documentation,
internal memoranda, marketing programs, credit underwriting process and
approach, reports and other materials or records of a proprietary nature which
are not generally known to the public, (iii) the Confidential Information
constitutes a unique and valuable asset of the Company, (iv) maintenance of
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the proprietary character of such information, to the full extent feasible, is
important to the Company, (v) the Confidential Information is sufficiently
secret as to derive economic value from not being generally known to others who
could obtain economic value from its disclosure or use, and (vi) the
Confidential Information is currently the subject of efforts to maintain its
secrecy or confidentiality. Therefore, in order to protect the Confidential
Information, the Executive agrees as follows:
(a) to hold the Confidential Information in strictest
confidence and not to use or disclose such Confidential
Information without the written authorization of the Company,
except in connection with the Services being rendered under
this Agreement, for so long as any such Confidential
Information may remain confidential, secret or otherwise
wholly or partially protectable;
(b) to take all appropriate steps to safeguard any
Confidential Information and to protect it against disclosure,
misuse, espionage, loss and theft; and
(c) to return to the Company upon termination of
employment all materials relating to the Company or its
business, including all Confidential Information, coming into
the Executive's possession during the term of the Executive's
employment with the Company or while employed by a predecessor
to the Company's business.
10. Covenants Not to Compete or Solicit.
10.1. So long as the Executive is employed by the Company and
for a period of one (1) year thereafter, the Executive shall not (except in
connection with the rendering of services hereunder), directly or indirectly, by
or for the Executive or as the agent of another, or through others as the
Executive's agent:
(a) solicit or accept any business from customers of
the Company, or request, induce or advise customers of the
Company to withdraw, curtail or cancel their business with the
Company;
(b) solicit for employment or employ or become
employed by any past, present of future employee of the
Company, or request, induce or advise any employee to leave
the employ of the Company; or
(c) use or disclose any nonpublic information
concerning the Company or its businesses and affairs,
including Confidential Information.
10.2. The Executive agrees that if the Executive shall violate
any of the provisions of this Section 10, the Company shall be entitled to an
accounting and repayment of all profits, compensation, commission, remuneration
or other benefits that the Executive, directly or indirectly, may realize
arising from or related to any such violation. These remedies shall be in
addition to, and not in limitation of, any injunctive relief or other rights to
which the Company may be entitled.
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10.3 The parties agree and acknowledge that the duration,
scope and geographic areas applicable to the covenant not to compete described
in this Section are fair, reasonable and necessary, that adequate compensation
has been received by the Executive for such obligations, and that these
obligations do not prevent the Executive from earning a livelihood. If, however,
for any reason any court determines that the restrictions in this Section 10 are
not reasonable, that consideration is inadequate or that the Executive has been
prevented from earning a livelihood, such restrictions shall be interpreted,
modified or rewritten to included as much of the duration, scope and geographic
area identified in this Section as will render such restrictions valid and
enforceable.
11. Remedies. The Executive acknowledges that the Executive
has carefully read and considered the terms of this Agreement and knows them to
be essential to induce the Company to enter into this Agreement and that any
breach of the provisions contained herein will result in serious and irreparable
injury to the Company. The Executive further acknowledges that the Company's
business interests protected hereby are substantial and legitimate. Therefore,
in the event of a breach of any such provisions, the Company shall be entitled
to equitable relief against the Executive by way of injunction (in addition to,
but not in substitution for, any and all other relief to which the Company may
be entitled at law or in equity) to restrain the Executive from such breach and
to compel compliance by the Executive with the Executive's obligations
hereunder. The Company shall also be entitled to seek a protective order to
ensure the continued confidentiality of its trade secrets and proprietary
information. The Executive hereby waives any requirement of proof that such
breach will cause series or irreparable injury to the Company, or that there is
an adequate remedy at law.
12. Termination.
12.1 Term. Except as provided below, this Agreement shall
remain in full force and effect from the date hereof through April 30, 2000,
(the "Term") and shall be automatically renewed for a period of one year each
May 1 thereafter unless cancellation notice is provided 60 days prior to the end
of such applicable term.
12.2 Termination Payments. Upon the Executive leaving his
employment of the Company by virtue of: (i) by resignation (ii) by involuntary
termination without good reason (iii) by retirement, or (iv) by death or
disability, the Company shall pay the Executive the payouts described in this
Section 12.2 ("Termination Payments") in addition to any payments and benefits
to which the Executive is entitled under Section 6 hereof as follows:
1. Any unpaid Base Salary through the date of termination;
2. Any Bonus for the year in which such termination occurs
prorated as of the date of termination (with such Bonus to be paid
within 60 days of end of fiscal year;
3. Accrued and unpaid vacation pay;
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4. Proceeds, benefits or other sums due under any of the
Company's benefit, insurance, retirement or other plans;
5. Any unreimbursed expenses incurred by the Executive on the
Company's behalf.
6. A lump sum amount equal to three (3) times the sum of:
(a) Executive's Base Salary then in effect and
(b) The product of such Base Salary and a
percentage equal to the greater of (x) the
average percentage that the aggregate amount
earned by Executive under all annual Bonus
or long or short term incentive plans of
Stone Container Corporation or the Company
in respect of the three Years immediately
preceding the Year in which the Date of
Termination occurs represents of the
aggregate amount of salary earned by
Executive from Stone Container Corporation
and the Company for such year, or (y) the
average percentage that the aggregate amount
earned by Executive under all annual Bonus
of long or short term incentive plans of
Stone Container Corporation in respect of
each year during the 1995-1997 period
represented of the aggregate amount of Base
Salary earned by the Executive for such
Year;
7. For the thirty-six (36) month period immediately following
the Date of Termination, the Company shall arrange to provide the
Executive with life, disability, accident and health insurance benefits
and Company-provided perquisites (including, but not limited to a
Company car, and club membership dues), in each case substantially
similar to those which the Executive is receiving immediately prior to
the Notice of Termination; provided, however, that, such health
insurance benefits shall be provided through a third-party insurer.
Benefits and perquisites otherwise receivable by the Executive pursuant
to this Section 7 shall be reduced to the extent comparable benefits or
perquisites are actually received by or made available to the Executive
without cost during the thirty-six month period following the
Executive's termination of employment (and any such benefits and
perquisites actually received by or made available to the Executive
shall be reported to the Company by the Executive).
8. In addition to the retirement benefits to which the
Executive is entitled under each Pension Plan, the Company shall pay
the Executive a lump sum amount, in cash equal to the excess of (a) the
actuarial equivalent of the aggregate retirement pension (taking
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into account any early retirement subsidies associated therewith and
determined as a straight life annuity commencing at the date (but in no
event earlier than the third anniversary of the Date of Termination) as
of which the actuarial equivalent of such annuity is greatest) which
Executive would have accrued under the terms of all Pension Plans
(without regard to any amendment to any Pension Plan made subsequent to
a Change in Control and prior to the Date of Termination, which
amendment adversely affects in any manner the computation of retirement
benefits thereunder), determined as if the Executive were fully vested
thereunder and had accumulated (after the Date of Termination)
thirty-six (36) additional months of service credit thereunder and had
been credited under each Pension Plan during such period with
compensation at the higher of (i) the Executive's compensation (as
defined in such Pension Plan) during the twelve (12) months immediately
preceding the Date of Termination and (ii) the Executive's compensation
(as defined in such Pension Plan) during the twelve (12) months
immediately preceding a Change in Control, over (b) the actuarial
equivalent of the aggregate retirement pension (taking into account any
early retirement subsidies associated therewith and determined as
straight life annuity commencing at the date (but in no event earlier
than the Date of Termination) as of which the actuarial equivalent of
such annuity is greatest) which the Executive had accrued pursuant to
the provisions of the Pension Plans as of the Date of Termination. For
purposes of this Section 8,"actuarial equivalent" shall be determined
using the same assumptions utilized under the Stone Container
Corporation Salaried Employees Retirement Plan immediately prior to the
Date of Termination.
9. If the Executive would have become entitled to benefits
under the Company's post retirement health care of life insurance
plans, as in effect immediately prior to a Change in Control or the
Date of Termination, (whichever is more favorable to the Executive),
had the Executive's employment terminated at any time during the period
of thirty-six (36) months after the Date of Termination, the Company
shall provide such post-retirement health care of life insurance
benefits to the Executive and the Executive's dependents commencing on
the later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in
Section 12.2
Items (1) through (9) are hereinafter referred to as the "Termination Payments".
However, in no event shall Executive receive less than the amounts Executive
would have received as a result of the lump sum payment provided to the
Executive under the 1996 Agreement had the Executive terminated for Good Reasons
as such term is defined in the 1996 Agreement on December 31, 1998.
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12.3 Death. In the event of the death of the Executive during the term
hereof, this Agreement shall terminate at the end of the month in which the
Executive dies. The Company shall pay within thirty (30) days of the date of
death to the Executive's legal representatives or, if the Executive shall have
filed with the Company a designation of a person to receive such payment, such
person, the Termination Payments as set forth in Section 12.2.
12.4. Disability. If, during the Term, the Executive comes
under such illness, physical or mental disability or other incapacity that the
Board of Directors of the Company determines that the Executive is unable to
perform the Executive's duties under this Agreement for a period in excess of
ninety days (90) substantially consecutive days, the Company may terminate this
Agreement by giving notice to the Executive of its intention to terminate due to
disability and this Agreement shall terminate at the end of the month following
the month in which such notice was given. In the event of such termination, the
Company shall pay the Termination Payments, as set forth in Section 12.2, to the
Executive within thirty (30) days of such termination and the Executive's Base
Salary shall be continued (offset by any amounts payable to the Executive under
the Company's benefit plans or short or long term disability insurance or social
security payable) until the earliest of (i) one (1) year after termination, (ii)
the end of the Term, or (iii) the death of the Executive.
12.5 Termination by the Company Without Cause. The Company may
terminate this Agreement without cause upon thirty (30) days' prior written
notice. In the event of such termination, the Company shall pay the Termination
Payments as set forth in Section 12.2 plus one (1) year of Base Salary.
12.6 Resignation. The Executive shall have the right to
terminate the Executive's employment under this Agreement at any time upon
thirty (30) days' prior written notice to the Company. At any time during such
thirty-day notice period, the Company may terminate the Executive (which shall
not be considered a termination under Section 12.5). In the event of such
termination or resignation, the Company shall pay the Termination Payments to
the Executive as set forth in Section 12.2.
12.7 Termination for Cause. Notwithstanding any other
provision hereof, the Company may terminate the Executive's employment under
this Agreement without prior notice at any time for "Cause". For purposes of
this Agreement, "Cause" shall mean (i) fraud, misappropriation or embezzlement
involving property of the Company or other intentional wrongful acts that
materially impair the goodwill or business of the Company or that cause material
damage to their property, goodwill or business; (ii) commission by the Executive
of a felony other than a felony predicated upon the Executive's vicarious
liability; or (iii) a material breach by the Executive of this Agreement,
including any willful and continued failure by the Executive to substantially
perform his duties with the Company (other than any such failure resulting from
the Executive's incapacity due to physical or mental illness), after a demand
for substantial performance is delivered to the Executive by the Board of
Directors of the Company that specifically identifies the manner in which the
Board of Directors believes the Executive has not substantially performed his
duties and after the Executive has been given at least thirty (30) days in which
to cure such alleged performance deficiencies. In the event of such termination,
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the Company shall pay the Termination Payments to the Executive within thirty
(30) days of such termination; provided, however, that the Company shall have no
obligation to pay any Bonus and any stock options that would have been earned by
the Executive for the year in which such termination occurs.
12.8 Vesting of Stock Options. Upon a termination other than a
termination described in Section 12.7, the Executive shall become vested in all
stock options and stock awards granted to the Executive during the period of
employment.
12.9 Effect of Termination. Upon termination of this
Agreement, all obligations of the Company and rights of the Executive under this
Agreement shall cease, except as otherwise provided herein. Notwithstanding
anything to the contrary contained herein, the provisions of Sections 9 through
12 shall survive any termination of this Agreement or employment and shall
remain in full force and effect.
13. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach thereof, shall be settled by
arbitration in accordance with the Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. The decision of such
arbitrator(s) shall be conclusive and binding upon the parties hereto. The
Company shall pay to the Executive all legal fees and expenses incurred by the
Executive in disputing in good faith any issue hereunder relating to the
termination of the Executive's employment, in seeking in good faith to obtain or
enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceedings. Notwithstanding the foregoing, the Company may, in
its discretion, apply to a court of competent jurisdiction for the purposes of
obtaining any relief contemplated by Section 11.
14. Notice. Any notice required to be given, served or
delivered to any of the parties hereto shall be sufficient if it is in writing
and sent by certified or registered mail, with proper postage prepaid, addressed
as follows:
To Executive: Xxxxxx X. Xxxxxx
000 X. Xxxxxxxx Xxxxxx #0000
Xxxxxxx, XX 00000
To Company: Stone Container Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attn: Chief Executive Office
or to such other address as a party from time to time may designate by notice
to the other. Notice shall be deemed effective on the date deposited for
delivery in the U.S. mail.
15. Assignment. This Agreement shall inure to the benefit of
and be binding upon the Executive, the Executive's administrative executors and
heirs and the Company, its successors and assigns. This Agreement is for
personal services and may not be assigned or pledged by the Executive in any
manner, by operation of law or otherwise,
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without the written consent of the Company. This Agreement may not be assigned
by the Company; provided however, that if substantially all of the business or
assets of the Company are sold and the Executive agrees to become an employee of
the acquiror, then the Company may assign this Agreement to such acquiror.
16. Applicable Law. This Agreement shall be governed by and
construed in accordance with the internal substantive laws of the State of
Illinois, and the parties hereby consent to the jurisdiction of Illinois courts
over all matters relating to this Agreement.
17. Entire Agreement. This Agreement contains the entire
agreement of the parties in regard to the subject matter hereof, supersedes all
prior discussions, agreements and understandings of every kind between the
parties and may be changed only by a written document signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought. The waiver of any breach of any provision of this Agreement
shall be effective only in the specific instance and for the specific purpose
for which given and shall not operate or be construed as a waiver of any
subsequent breach hereof.
18. Severability. If any provision of this Agreement shall be
prohibited by or invalid under applicable law, or otherwise determined to be
unenforceable, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement. The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed as of the date first written above.
EXECUTIVE: SMURFIT-STONE CONTAINER CORP.
/s/ Xxxxxx X. Xxxxxx By: /s/ Xxxxx X. Xxxxx
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Xxxxxx X. Xxxxxx Xxxxx X. Xxxxx
Its: President
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