EXHIBIT 10.11
STOCK OPTION EXCHANGE AGREEMENT
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This Stock Option Exchange Agreement is entered into as of July 16, 1995
among Xxxxx Paper Company, a Pennsylvania corporation (the "Company"), Xxxxxxxx-
Xxxxx Corporation, a Delaware corporation ("Xxxxxxxx-Xxxxx"), and Xxxxx X.
Xxxxxxxx (the "Optionee").
WHEREAS, pursuant to stock option agreements, the Company has granted to
the Optionee options (the "Options") to purchase the number of common shares of
the Company ("Company Common Shares") set forth on Schedule A hereto at the
exercise price or prices set forth opposite such number of Company Common
Shares, giving effect to the two for one stock split of the Company Common
Shares declared on April 18, 1995;
WHEREAS, pursuant to an Amendment to Stock Option Agreement dated as of
February 24, 1995 (the "Stock Option Amendment"), Options which are not
exercisable become immediately exercisable in the event of a change in control
of the Company;
WHEREAS, concurrently herewith, Xxxxxxxx-Xxxxx, Rifle Merger Co. and the
Company are entering into an Agreement and Plan of Merger (the "Merger
Agreement"), pursuant to which Rifle Merger Co. is merging (the "Merger") with
and into the Company and the Company is becoming a wholly-owned subsidiary of
Xxxxxxxx-Xxxxx;
WHEREAS, pursuant to the terms of the Stock Option Amendment, the Options
designated on Schedule A as unexercisable (the "Unexercisable Options") are to
become exercisable at the Effective Time (as such term is defined in the Merger
Agreement);
WHEREAS, in order for the Merger to be accounted for as a pooling of
interests, the Company and the Optionee desire to rescind the Stock Option
Amendment prior to the Effective Time so that the Unexercisable Options remain
unexercisable at the Effective Time;
WHEREAS, the Company, the Optionee and Xxxxxxxx-Xxxxx desire to enter into
this Agreement to provide that at the Effective Time the Unexercisable Options
shall be cancelled and exchanged for shares of common stock of Xxxxxxxx-Xxxxx
("Xxxxxxxx-Xxxxx Common Stock") having a market value at the Effective Time
equal to the value (the "Unexercisable Option Value") of the Unexercisable
Options, as shall be determined by Xxxxxx Associates at the time and in the
manner set forth on Schedule B hereto; and
WHEREAS, in accordance with Section 5.8 of the Merger Agreement, the
Options designated on Schedule A as exercisable at the Effective Time (the
"Exercisable Options") will, at the Effective Time, become options to purchase
shares of Xxxxxxxx-Xxxxx Common Stock upon the terms and subject to the
conditions set forth in the Merger Agreement.
NOW, THEREFORE, in consideration of the mutual promises and agreements
contained herein, the adequacy and sufficiency of which are hereby acknowledged,
the Company, Xxxxxxxx-Xxxxx and the Optionee hereby agree as follows:
1. Rescission of Stock Option Amendment. At the Effective Time, the Stock
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Option Amendment shall be rescinded and shall be of no further force or effect
whatsoever.
2. Exchange of Unexercisable Options. At the Effective Time, the
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Unexercisable Options which are outstanding immediately prior to the Effective
Time shall be cancelled and exchanged for the number of shares of Xxxxxxxx-Xxxxx
Common Stock, decreased to the nearest whole share, having an aggregate market
value at the Effective Time equal to the Unexercisable Option Value. Xxxxxxxx-
Xxxxx shall pay cash to the Optionee in lieu of issuing fractional shares of
Xxxxxxxx-Xxxxx Common Stock, unless in the reasonable judgment of Xxxxxxxx-
Xxxxx, based on the advice of its independent accountants, such payment would
adversely affect the ability to account for the Merger as a pooling of interests
in accordance with generally accepted accounting principles. For purposes of
this Section 2, the market value of a share of Xxxxxxxx-Xxxxx Common Stock at
the Effective Time shall be equal to the closing price of the Xxxxxxxx-Xxxxx
Common Stock on the business day next preceding the Effective Time, as reported
in The Wall Street Journal as New York Stock Exchange Composite Transactions.
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Xxxxxxxx-Xxxxx shall register under the Securities Act of 1933, as amended (the
"Securities Act"), on the appropriate form all shares of Xxxxxxxx-Xxxxx Common
Stock issuable pursuant to this Section 2.
3. Exchange of Exercisable Options. In accordance with Section 5.8 of the
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Merger Agreement, at the Effective Time, each Exercisable Option which is
outstanding immediately prior to the Effective Time shall become and represent a
fully exercisable option to purchase the number of shares of Xxxxxxxx-Xxxxx
Common Stock (a "Substitute Option"), decreased to the nearest whole share,
determined by multiplying (i) the number of Company Common Shares subject to
such Exercisable Option immediately prior to the Effective Time by (ii) the
Conversion Number (as such term is defined in the Merger Agreement), at an
exercise price per share of Xxxxxxxx-Xxxxx Common Stock (increased to the
nearest whole cent) equal to the exercise price per Company Common Share
immediately prior to the Effective Time divided by the Conversion Number.
Xxxxxxxx-Xxxxx shall pay cash to the Optionee in lieu of issuing fractional
shares of Xxxxxxxx-Xxxxx Common Stock upon the
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exercise of a Substitute Option unless in the reasonable judgment of Xxxxxxxx-
Xxxxx, based on the advice of its independent accountants, such payment would
adversely affect the ability to account for the Merger as a pooling of interests
in accordance with generally accepted accounting principles. After the
Effective Time, except as provided by Section 5.8 of the Merger Agreement, each
Substitute Option shall be exercisable upon the same terms and conditions as
were applicable to the related Exercisable Option immediately prior to the
Effective Time. Xxxxxxxx-Xxxxx shall register under the Securities Act on Form
S-8 or another appropriate form all Substitute Options and all shares of
Xxxxxxxx-Xxxxx Common Stock issuable pursuant to all Substitute Options.
4. Termination of Agreement. This Agreement shall terminate and shall be
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of no further force or effect if the Merger Agreement shall be terminated and
the Merger shall not become effective pursuant to the terms thereof.
5. Successors; Binding Agreement. This Agreement shall inure to the
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benefit of and be enforceable by the Optionee and by his personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees and by the Company and Xxxxxxxx-Xxxxx and their respective successors
and assigns.
6. Notices. All notices and other communications required or permitted
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under this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered, when delivered by courier or overnight express
service or five days after having been sent by certified or registered mail,
postage prepaid, addressed (a) if to the Optionee, to the Optionee's address set
forth in the records of the Company, or if to the Company or Xxxxxxxx-Xxxxx, to
O. Xxxxxx Xxxxxxxx, Senior Vice President and General Counsel, Xxxxxxxx-Xxxxx
Corporation, 000 Xxxxxx Xxxxx, Xxxxxx, Xxxxx 00000, with a copy to Xxxxxx X.
Xxxx, Xxxxxx & Xxxxxx, Xxx Xxxxx Xxxxxxxx Xxxxx, Xxxxxxx, Xxxxxxxx 00000, or (b)
to such other address as any party may have furnished to the other parties in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
7. Governing Law; Validity. The interpretation, construction and
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performance of this Agreement shall be governed by and construed and enforced in
accordance with the internal laws of the State of Delaware without regard to the
applicable principles of conflicts of laws. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any of the other provisions of this Agreement, which other
provisions shall remain in full force and effect.
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8. Counterparts. This Agreement may be executed in two or more
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counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
9. Miscellaneous. No provision of this Agreement may be modified or
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waived unless such modification or waiver is agreed to in writing and executed
by the Optionee and by a duly authorized officer of the Company and of Xxxxxxxx-
Xxxxx. No waiver by any party hereto at any time of any breach by another party
hereto of, or failure to comply with, any condition or provision of this
Agreement to be performed or complied with by such other party shall be deemed a
waiver of any similar or dissimilar conditions or provisions at the same or at
any prior or subsequent time. Failure by the Optionee, the Company or Xxxxxxxx-
Xxxxx to insist upon strict compliance with any provision of this Agreement or
to assert any right which the Optionee, the Company or Xxxxxxxx-Xxxxx may have
hereunder shall not be deemed to be a waiver of such provision or right or any
other provision of or right under this Agreement.
IN WITNESS WHEREOF, each of the Company and Xxxxxxxx-Xxxxx has caused this
Agreement to be executed by its duly authorized officer and the Optionee has
executed this Agreement as of the day and year first above written.
XXXXX PAPER COMPANY
By:
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XXXXXXXX-XXXXX CORPORATION
By:
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OPTIONEE:
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SCHEDULE A
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Schedule of Options
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Exercisable Options
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Date of Grant Number of Shares Exercise Price
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5/19/87 6,000 17.219
2/16/88 12,000 17.594
2/21/89 8,000 19.813
2/20/90 8,000 21.750
2/19/91 24,000 22.969
2/18/92 12,000 21.750
2/16/93 9,000 19.281
2/15/94 7,500 22.500
9/16/94 200,000 31.875
Unexercisable Options
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Date of Grant Date of Vesting Number of Shares Exercise Price
------------- --------------- ---------------- --------------
2/15/94 2/15/96 7,500 22.500
SCHEDULE B
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Determination of Unexercisable Option Value
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by Xxxxxx Associates
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Valuation Methodology
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Calculations will be based on the Black-Scholes option pricing model.
To the Black-Scholes formula outputs there shall be applied an Annual Turnover
discount as indicated below for the probability that an option holder will not
complete the vesting schedule as outlined, and thus not receive full ownership
of the entire option grant.
Valuation Assumptions
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Xxxxx Xxxxx $_________
Stock Price on
Valuation Date $_________
Grant Date __________
Valuation Date Close of business on day preceding the Effective
Time
Annual Dividend $0.40
Interest Rate 7.00%
Volatility 24.30%
Annual Turnover 7.50%
Valuation Results
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Number of Vesting Current Total Current
Options Date Option Value Value
Unvested
Unvested
Unvested
Unvested
Total Unvested Value
