VALLEY 2X
SEVERANCE AGREEMENT
THIS AGREEMENT, dated July 22, 1996, is made by and between Stone
Container Corporation, a Delaware corporation (the "Company"), and X (the
"Executive").
WHEREAS, the Company considers it essential to the best interests of its
stockholders to xxxxxx the continued employment of key management personnel;
and
WHEREAS, the Board recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management
personnel to the detriment of the Company and its stockholders; and
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members
of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the Company and the Executive hereby agree as follows:
1. DEFINED TERMS. The definitions of capitalized terms used in this
Agreement are provided in the last Section hereof.
2. TERM OF AGREEMENT. The Term of this Agreement shall commence on the
date hereof and shall continue in effect through December 31, 1998;
PROVIDED, HOWEVER, that commencing on January 1, 1998 and each January
1 thereafter, the Term shall automatically be extended for one
additional year unless a Change in Control shall have occurred prior
to such January 1 or, not later than September 30 of the preceding
year, the Company or the Executive shall have given notice not to
extend this Agreement; and FURTHER PROVIDED, HOWEVER, that if a Change
in Control shall have occurred during the Term, the Term shall be
extended for a period of twenty-four (24) months beyond the month in
which such Change in Control occurred.
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3. COMPANY'S COVENANTS SUMMARIZED. In order to induce the Executive to
remain in the employ of the Company and in consideration of the
Executive's covenants set forth in Section 4 hereof, the Company
agrees, under the conditions described herein, to pay the Executive
the Severance Payments and the other payments and benefits described
herein. Except as provided in Section 9.1 hereof, no amount or benefit
shall be payable under this Agreement unless there shall have been
(or, under the terms of the second sentence of Section 6.1 hereof,
there shall be deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control and during
the Term. This Agreement shall not be construed as creating an
express or implied contract of employment and, except as otherwise
agreed in writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the Company.
4. THE EXECUTIVE'S COVENANTS. The Executive agrees that, subject to the
terms and conditions of this Agreement, in the event of a Potential
Change in Control during the Term, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six
(6) months from the date of such Potential Change of Control, (ii) the
date of a Change in Control, (iii) the date of termination by the
Executive of the Executive's employment for Good Reason or by reason
of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. COMPENSATION OTHER THAN SEVERANCE PAYMENTS.
5.1 Following a Change in Control and during the Term, during any period
that the Executive fails to perform the Executive's full-time duties
with the Company as a result of incapacity due to physical or mental
illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such
period, together with all compensation and benefits payable to the
Executive under the terms of any compensation or benefit plan, program
or arrangement maintained by the Company during such period, until the
Executive's employment is terminated by the Company for Disability.
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5.2 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall
pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Change in
Control or, if greater, at the rate in effect at the time the Notice
of Termination is given, together with all compensation and benefits
payable to the Executive through the Date of Termination under the
terms of the Company's compensation and benefit plans, programs or
arrangements.
5.3 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the Term, the Company shall
pay to the Executive the Executive's normal post-termination
compensation and benefits as such payments become due. Such
post-termination compensation and benefits shall be determined under,
and paid in accordance with, the Company's retirement, insurance and
other compensation or benefit plans, programs and arrangements as in
effect immediately prior to the Change in Control or, to the extent
more favorable to the Executive, as in effect immediately prior to the
Date of Termination.
6. SEVERANCE PAYMENTS.
6.1 Subject to Section 6.2 hereof, if the Executive's employment
terminates following a Change in Control and during the Term, other
than (A) by the Company for Cause, (B) by reason of death or
Disability, or (C) by the Executive without Good Reason, then the
Company shall pay the Executive the payments described in this Section
6.1 (the "Severance Payments"), in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof.
For purposes of this Agreement, the Executive's employment shall be
deemed to have been terminated following a Change in Control by the
Company without Cause or by the Executive with Good Reason, if (i) the
Executive's employment is terminated by the Company without Cause
prior to a Change in Control which actually occurs during the term of
this Agreement and such termination was at the request or direction of
a Person who has entered into an agreement with the Company the
consummation of which would constitute a Change in Control, (ii) the
Executive terminates his
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employment with Good Reason prior to a Change in Control which actually
occurs during the term of this Agreement and the circumstance or event
which constitutes Good Reason occurs at the request or direction of
such Person, or (iii) the Executive's employment is terminated by the
Company without Cause prior to a Change in Control and the Executive
reasonably demonstrates that such termination is otherwise in
connection with or in anticipation of a Change in Control which
actually occurs during the term of this Agreement. For purposes of
any determination regarding the applicability of the immediately
preceding sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes to the Committee
by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company
shall pay to the Executive a lump sum severance payment, in cash,
equal to two times the sum of (i) the higher of the Executive's
annual base salary in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of Termination is
based and the Executive's annual base salary in effect immediately
prior to the Change in Control, and (ii) the product of (a) the
amount determined under clause (i) above and (b) the higher of the
average percentage of base salary paid to or earned by the Executive
pursuant to any annual bonus or incentive plan maintained by the
Company in respect of the three years immediately preceding that in
which the Date of Termination occurs or the average percentage of
base salary paid to or earned by the Executive in respect of the
three years immediately preceding that in which the Change in
Control occurs.
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(B) For the twenty-four (24) 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 (without giving
effect to any amendment to such benefits or perquisites made
subsequent to a Change in Control which amendment adversely affects
in any manner the Executive's entitlement to or the amount of such
benefits); 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 6.1(B) shall be reduced to the extent comparable benefits or
perquisites are actually received by or made available to the
Executive without cost during the twenty-four (24) 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).
If the Severance Payments shall be decreased pursuant to Section 6.2
hereof, and the Section 6.1(B) benefits or perquisites which remain
payable after the application of Section 6.2 hereof are thereafter
reduced pursuant to the immediately preceding sentence because of
the receipt or availability of comparable benefits or perquisites,
the Company shall, at the time of such reduction, pay to the
Executive the least of (a) the amount of the decrease made in the
Severance Payments pursuant to Section 6.2 hereof, (b) the amount of
the subsequent reduction in these Section 6.1(B) benefits or
perquisites, or (c) the maximum amount which can be paid to the
Executive without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
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(C) Notwithstanding any provision of any annual or long-term
incentive plan to the contrary, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of (i) any
incentive compensation which has been allocated or awarded to the
Executive for a completed fiscal year or other measuring period
preceding the Date of Termination under any such plan and which, as
of the Date of Termination, is contingent only upon the continued
employment of the Executive to a subsequent date or otherwise has
not been paid, and (ii) a pro rata portion to the Date of
Termination of the aggregate value of all contingent incentive
compensation awards to the Executive for all then uncompleted
periods under any such plan, calculated as to each such award by
multiplying the award that the Executive would have earned on the
last day of the performance award period, assuming the achievement,
at the target level, of the individual and corporate performance
goals established with respect to such award, by the fraction
obtained by dividing the number of full months and any fractional
portion of a month during such performance award period through the
Date of Termination by the total number of months contained in such
performance award period.
(D) 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 (i) the
actuarial equivalent of the aggregate retirement pension (taking
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 second anniversary of the Date of
Termination) as of which the actuarial equivalent of such annuity is
greatest) which the 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 on or 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) twenty-four (24) additional months
of service credit thereunder and had been credited under each
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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 or (ii) the Executive's compensation (as defined in such
Pension Plan) during the twelve (12) months immediately preceding
the Change in Control, over (ii) the actuarial equivalent of the
aggregate retirement pension (taking 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 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 6.1(D),
"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.
(E) If the Executive would have become entitled to benefits under the
Company's post-retirement health care or life insurance plans, as in
effect immediately prior to the 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
twenty-four (24) months after the Date of Termination, the Company
shall provide such post-retirement health care or 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
subsection (B) of this Section 6.1 terminate.
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6.2 (A) Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by
the Executive in connection with a Change in Control or the
termination of the Executive's employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Company, any Person whose actions result in a Change in
Control or any Person affiliated with the Company or such Person)
(all such payments and benefits, including the Severance Payments,
being hereinafter called "Total Payments") would be subject (in
whole or part), to the Excise Tax, then, after taking into account
any reduction in the Total Payments provided by reason of section
280G of the Code in such other plan, arrangement or agreement, the
cash Severance Payments shall first be reduced, and the noncash
Severance Payments shall thereafter be reduced, to the extent
necessary so that no portion of the Total Payments is subject to the
Excise Tax but only if (A) the net amount of such Total Payments, as
so reduced (and after subtracting the net amount of federal, state
and local income taxes on such reduced Total Payments) is greater
than (B) the excess of (i) the net amount of such Total Payments,
without reduction (but after subtracting the net amount of federal,
state and local income taxes on such Total Payments), over (ii) the
amount of Excise Tax to which the Executive would be subject in
respect of such unreduced Total Payments; PROVIDED, HOWEVER, that
the Executive may elect (at any time prior to the delivery of a
Notice of Termination hereunder) to have the noncash Severance
Payments reduced (or eliminated) prior to any reduction of the cash
Severance Payments.
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(B) For purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no portion of
the Total Payments the receipt or enjoyment of which the Executive
shall have effectively waived at such time and manner so that such
portion does not constitute a "payment" within the meaning of
section 280G(b) of the Code shall be taken into account, (ii) no
portion of the Total Payments shall be taken into account which, in
the opinion of tax counsel reasonably acceptable to the Executive
and selected by the accounting firm (the "Auditor") which was,
immediately prior to the Change in Control, the Company's
independent auditor, does not constitute a "parachute payment"
within the meaning of section 280G(b)(2) of the Code (including by
reason of section 280G(b)(4)(A) of the Code) and, in calculating the
Excise Tax, no portion of such Total Payments shall be taken into
account which constitutes reasonable compensation for services
actually rendered, within the meaning of section 280G(b)(4)(B) of
the Code, in excess of the Base Amount allocable to such reasonable
compensation, and (iii) the value of any non-cash benefit or any
deferred payment or benefit included in the Total Payments shall be
determined by the Auditor in accordance with the principles of
sections 280G(d)(3) and (4) of the Code.
6.3 The payments provided in subsections (A), (C) and (D) of Section 6.1
hereof shall be made not later than the fifth day following the Date
of Termination; PROVIDED, HOWEVER, that if the amounts of such
payments, and the limitation on such payments set forth in Section 6.2
hereof, cannot be finally determined on or before such day, the
Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Executive, of the minimum amount of
such payments to which the Executive is clearly entitled and shall pay
the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to
make such payments when due) at 120% of the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day after
the Date of Termination. In the event that the amount of the
estimated payments exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at 120% of the rate provided in
section 1274(b)(2)(B) of the Code). At the time
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that payments are made under this Section, the Company shall provide the
Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the
Company has received from Tax Counsel, the Auditor or other advisors
or consultants (and any such opinions or advice which are in writing
shall be attached to the statement).
6.4 The Company also 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 proceeding to
the extent attributable to the application of section 4999 of the Code
to any payment or benefit provided hereunder. Such payments shall be
made within five (5) business days after delivery of the Executive's
written requests for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
7. TERMINATION PROCEDURES AND COMPENSATION DURING DISPUTE.
7.1 NOTICE OF TERMINATION. After a Change in Control and during the
Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in
accordance with Section 10 hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall indicate the
specific termination provision in this Agreement relied upon and shall
set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire
membership of the Board at a meeting of the Board which was called and
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held for the purpose of considering such termination (after reasonable
notice to the Executive and an opportunity for the Executive, together
with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty
of conduct set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
7.2 DATE OF TERMINATION. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in
Control and during the Term, 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 the Executive's duties during
such thirty (30) day period), and (ii) if the Executive's employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall
not be less than thirty (30) days (except in the case of a termination
for Cause) and, in the case of a termination by the Executive, shall not
be less than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
7.3 DISPUTE CONCERNING TERMINATION. If within fifteen (15) days after
any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.3), the
party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination
shall be extended until the earlier of (i) the date on which the Term
ends or (ii) the date on which the dispute is finally resolved, either
by mutual written agreement of the parties or by a final judgment, order
or decree of an arbitrator or a court of competent jurisdiction (which
is not appealable or with respect to which the time for appeal therefrom
has expired and no appeal has been perfected); provided, however, that
the Date of Termination shall be extended by a notice of dispute given
by the Executive only if such notice is given in good faith and the
Executive pursues the resolution of such dispute with reasonable
diligence.
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7.4 COMPENSATION DURING DISPUTE. If a purported termination occurs
following a Change in Control and during the Term and the Date of
Termination is extended in accordance with Section 7.3 hereof, the
Company shall continue to pay the Executive the full compensation in
effect when the notice giving rise to the dispute was given (including,
but not limited to, salary) and continue the Executive as a participant
in all compensation, benefit and insurance plans in which the Executive
was participating when the notice giving rise to the dispute was given,
until the Date of Termination, as determined in accordance with Section
7.3 hereof. Amounts paid under this Section 7.4 are in addition to all
other amounts due under this Agreement (other than those due under
Section 5.2 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. NO MITIGATION. The Company agrees that, if the Executive's employment
with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 6
hereof or Section 7.4 hereof. Further, except as specifically provided
in Section 6.1(B) and (E) hereof, the amount of any payment or benefit
provided for in this Agreement shall not be reduced by any compensation
earned by the Executive as the result of employment by another employer,
by retirement benefits, by offset against any amount claimed to be owed
by the Executive to the Company, or otherwise.
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9. SUCCESSORS; BINDING AGREEMENT.
9.1 In addition to any obligations imposed by law upon any successor to
the Company, the Company will 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 to
expressly assume 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. Failure of the Company to obtain
such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the
same terms as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment for Good Reason
after a Change in Control, except that, for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall
be deemed the Date of Termination.
9.2 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 shall die while any amount would still be payable to
the Executive hereunder (other than amounts which, by their terms,
terminate upon the death of the Executive) if the Executive had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
executors, personal representatives or administrators of the Executive's
estate.
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10. NOTICES. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by
United States registered mail, return receipt requested, postage
prepaid, addressed, if to the Executive, to the address inserted below
the Executive's signature on the final page hereof and, if to the
Company, to the address set forth below, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective
only upon actual receipt:
To the Company:
Stone Container Corporation
000 X. Xxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: General Counsel
11. MISCELLANEOUS. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by the Executive and such officer as may
be specifically designated by the Board. No waiver by either party
hereto at any time of any breach by the other party hereto of, or of any
lack of compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement supersedes any other agreements or
representations, oral or otherwise, express or implied, with respect to
the subject matter hereof which have been made by either party. The
validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Illinois. All references
to sections of the Exchange Act or the Code shall be deemed also to
refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding
required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the
Company and the Executive under this Agreement which by their nature may
require either partial or total performance after the expiration of the
Term (including, without limitation, those under Sections 6 and 7
hereof) shall survive such expiration.
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12. VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any
other provision of this Agreement, which shall remain in full force and
effect.
13. COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
14. SETTLEMENT OF DISPUTES; ARBITRATION.
(a) All claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Committee and shall be in
writing. Any denial by the Committee of a claim for benefits under
this Agreement shall be delivered to the Executive in writing and
shall set forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Committee shall
afford a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Committee a decision of the Committee within sixty
(60) days after notification by the Committee that the Executive's
claim has been denied.
(b) Any further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration in
Chicago, Illinois in accordance with the rules of the American
Arbitration Association then in effect; PROVIDED, HOWEVER, that the
evidentiary standards set forth in this Agreement shall apply.
Judgment may be entered on the arbitrator's award in any court
having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek
specific performance of the Executive's right to be paid until the
Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
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15. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule 12b-2
promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in section
280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the Company.
(F) "Cause" for termination by the Company of the Executive's
employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's 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 after the issuance of a Notice of Termination
for Good Reason by the Executive pursuant to Section 7.1 hereof)
after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies the
manner in which the Board believes that the Executive has not
substantially performed the Executive's duties, or (ii) the willful
engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily
or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the
Company and (y) in the event of a dispute concerning the application
of this provision, no claim by the Company that Cause exists shall
be given effect unless the Company establishes to the Committee by
clear and convincing evidence that Cause exists.
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(G) A "Change in Control" shall be deemed to have occurred if the
event set forth in any one of the following paragraphs shall have
occurred:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities, excluding any Person who
becomes such a Beneficial Owner in connection with a transaction
described in clause (i) of paragraph (III) below; or
(II) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of
office is in connection with an actual or threatened election
contest, including but not limited to a consent solicitation,
relating to the election of directors of the Company) whose
appointment or election by the Board or nomination for election
by the Company's stockholders was approved or recommended by a
vote of at least two-thirds (2/3) of the directors then still in
office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously
so approved or recommended; or
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(III) there is consummated a merger or consolidation of the
Company or any direct or indirect subsidiary of the Company with
any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company
outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity or
any parent thereof), in combination with the ownership of any
trustee or other fiduciary holding securities under an employee
benefit plan of the Company or any subsidiary of the Company, at
least 60% of the combined voting power of the securities of the
Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which
no Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities
acquired directly from the Company or its Affiliates)
representing 20% or more of the combined voting power of the
Company's then outstanding securities; or
(IV) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets, other than a sale or
disposition by the Company of all or substantially all of the
Company's assets to an entity, at least 60% of the combined
voting power of the voting securities of which is owned by
stockholders of the Company in substantially the same proportions
as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, a "Change in Control" shall not be
deemed to have occurred by virtue of the consummation of any
transaction or series of integrated transactions immediately
following which the record holders of the common stock of the
Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate
ownership in an entity which owns all or substantially all of the
assets of the Company immediately following such transaction or
series of transactions.
18
(H) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(I) "Committee" shall mean (i) the individuals (not fewer than three
in number) who, on the date six months before a Change in Control,
constitute the Compensation Committee of the Board, plus (ii) in the
event that fewer than three individuals are available from the group
specified in clause (i) above for any reason, such individuals as
may be appointed by the individual or individuals so available
(including for this purpose any individual or individuals previously
so appointed under this clause (ii)).
(J) "Company" shall mean Stone Container Corporation and, except in
determining under Section 15(G) hereof whether or not any Change in
Control of the Company has occurred, shall include any successor to
its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(K) "Date of Termination" shall have the meaning set forth in Section
7.2 hereof.
(L) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the
Executive's incapacity due to physical or mental illness, the
Executive shall have been absent from the full-time performance of
the Executive's duties with the Company for a period of six (6)
consecutive months, the Company shall have given the Executive a
Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not
have returned to the full-time performance of the Executive's duties.
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(M) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(N) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(O) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(P) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a
Change in Control under the circumstances described in clause (ii)
of the second sentence of Section 6.1 hereof (treating all
references in paragraphs (I) through (VII) below to a "Change in
Control" as references to a "Potential Change in Control"), of any
one of the following acts by the Company, or failures by the Company
to act, unless, in the case of any act or failure to act described
in paragraph (I), (V), (VI) or (VII) below, such act or failure to
act is corrected prior to the Date of Termination specified in the
Notice of Termination given in respect thereof:
(I) the assignment to the Executive of any duties inconsistent
in any material respect with the Executive's positions, duties,
responsibilities or status with the Company immediately prior to
the Change in Control, a change in the Executive's reporting
responsibilities, titles or offices as in effect immediately
prior to the Change in Control, or any failure to re-elect the
Executive to any office, title or position with the Company held
by the Executive immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all executives of the Company and
all executives of any Person in control of the Company;
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(III) the relocation of the Executive's principal place of
employment to a location more than 50 miles from the Executive's
principal place of employment immediately prior to the Change in
Control or the Company's requiring the Executive to be based
anywhere other than such principal place of employment (or
permitted relocation thereof) except for required travel on the
Company's business to an extent substantially consistent with the
Executive's present business travel obligations;
(IV) the failure by the Company to pay to the Executive any
portion of the Executive's current compensation, or to pay to the
Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within
seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the
Executive's total compensation, including but not limited to any
such plans relating to stock options, restricted stock, stock
appreciation rights, incentive compensation, or annual or long
term bonus, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company to continue
the Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable, both
in terms of the amount or timing of payment of benefits provided
and the level of the Executive's participation relative to other
participants, as existed immediately prior to the Change in
Control;
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(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, savings, life
insurance, medical, health and accident, or disability plans in
which the Executive was participating immediately prior to the
Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit
enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the
number of paid vacation days to which the Executive is entitled
on the basis of years of service with the Company in accordance
with the Company's normal vacation policy in effect at the time
of the Change in Control; or
(VII) any purported termination of the Executive's employment which is
not effected pursuant to a Notice of Termination satisfying the
requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.The
Executive's right to terminate the Executive's employment for
Good Reason shall not be affected by the Executive's incapacity
due to physical or mental illness. The Executive's continued
employment shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting Good
Reason hereunder.
For purposes of any determination regarding the existence of Good
Reason, any claim by the Executive that Good Reason exists shall
be presumed to be correct unless the Company establishes to the
Committee by clear and convincing evidence that Good Reason does
not exist.
(Q) "Notice of Termination" shall have the meaning set forth in
Section 7.1 hereof.
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(R) "Pension Plan" shall mean any tax-qualified, supplemental or
excess benefit pension plan maintained by the Company and any other
plan or agreement entered into between the Executive and the Company
which is designed to provide the Executive with supplemental
retirement benefits.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or
any of its subsidiaries, (ii) a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or any of
its Affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of
the Company or (v) any descendant of Xxxxxx Xxxxx, the spouse of any
such descendant, the estate of any such descendant or spouse, any
trust or any other arrangement for the benefit of any such
descendant or any such spouse or any charitable organization
established by any such descendant or any such spouse.
(T) "Potential Change in Control" shall be deemed to have occurred if
the event set forth in any one of the following paragraphs shall
have occurred:
(I) the Company enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or
indirectly, of securities of the Company representing 10% or
more of either the then outstanding shares of common stock of
the Company or the combined voting power of the Company's then
outstanding securities (not including in the securities
beneficially owned by such Person any securities acquired
directly from the Company or its affiliates); or
23
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(U) "Retirement" shall be deemed the reason for the termination by
the Company or the Executive of the Executive's employment if such
employment is terminated in accordance with the Company's retirement
policy, including early retirement, generally applicable to its
salaried employees, as in effect immediately prior to the Change in
Control, or in accordance with any retirement arrangement
established with the Executive's express written consent with
respect to the Executive.
(V) "Severance Payments" shall mean those payments described in
Section 6.1 hereof.
(W) "Term" shall mean the period of time described in Section 2
hereof (including any extension, continuation or termination
described therein).
(X) "Total Payments" shall mean those payments so described in
Section 6.2 hereof.
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STONE CONTAINER CORPORATION
By: _______________________________________________________
Name: Xxxxxx X. Xxxxxxxxxx
Title: Senior Vice President,
Administration & Corporate Controller
By: _______________________________________________________
[Signature]
Name & Address:
_________________________________________________
_________________________________________________
_________________________________________________
(Please print)
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