EXHIBIT 10.1
EXECUTION
EMPLOYMENT AGREEMENT, dated as of February 6, 2006 (the "Effective Date"),
by and between Rock-Tenn Company, a Georgia corporation ("Rock-Tenn"), and Xxxxx
X. Xxxxxxxx ("Executive").
WHEREAS, the Compensation and Options Committee of the Board of Directors
of Rock-Tenn (the "Compensation Committee") has recommended, and the independent
directors of the Board of Directors have approved, that Rock-Tenn enter into
this Agreement with Executive;
NOW, THEREFORE, Rock-Tenn and Executive agree as follows:
1. CONTINUED EMPLOYMENT.
(a) Subject to the further terms and conditions hereof, Rock-Tenn
shall continue to employ Executive as Rock-Tenn's Chief Executive Officer,
and Executive shall continue to serve in that capacity, with such duties,
responsibilities and powers as Executive has at the Effective Date.
(b) Subject to compliance with the further terms and conditions
hereof, Rock-Tenn may terminate Executive's employment hereunder at any
time, and Executive may resign at any time, effective at the date stated
in a written notice of termination or resignation, which date, in the case
of termination by Rock-Tenn without cause or as a result of Executive's
permanent disability or by Executive voluntarily and not as a result of
the occurrence of any of the events specified in Section 2(b), may not be
earlier than thirty (30) days after the notice is given.
(c) Executive's base pay shall continue as in effect at the
Effective Date, payable in accordance with Rock-Tenn's standard payroll
practices and policies, and shall be subject to such withholdings as are
required by law and such practices and policies. Executive's base pay
shall be subject to annual review and periodic increases (but not
decreases) in accordance with Rock-Tenn's customary practices for its
senior executives.
(d) Executive shall continue to participate in all bonus, option,
stock, insurance and other employee benefit and welfare plans, programs
and policies maintained by Rock-Tenn and in which Executive is eligible by
their terms to participate. Such participation shall be based on the terms
and provisions of such plans, programs and policies and shall not be
affected by whether or not, by the terms of this Agreement, Executive is
contractually entitled to be provided with the rights and benefits
described in Section 3 hereof upon termination of his employment.
Additionally, such participation relative to other senior officers as a
class shall continue to be at a level that is commensurate with
Executive's position as Chief Executive Officer and, to the extent that
the level of participation is measured by performance criteria, at such
level as reflects both Executive's position and achievement of the
relevant performance criteria.
2. TERMINATION BENEFITS. Except as provided in Section 4 hereof, Rock-Tenn
will provide or cause to be provided to Executive the rights and benefits
described in Section 3 hereof in the event that Executive's employment is
terminated prior to Executive's 65th birthday:
(a) at any time by Rock-Tenn other than for "cause" (as such term is
defined in Section 4 hereof) or as a consequence of Executive's death or
"permanent disability" (as such term is defined in Section 4 hereof);
(b) by Executive following the occurrence of any of the following
events without Executive's prior specific written consent:
(i) (A) The assignment of Executive to any duties or
responsibilities that are inconsistent with Executive's position,
duties, responsibilities, status, or reporting responsibilities as
the Chief Executive Officer of the Company at the Effective Date,
(B) the failure of the Company to comply with Section 1(c) or
Section 1(d) of this Agreement, or (C) the reduction or alteration
to Executive's detriment of Executive's retirement program or
benefit, including without limitation, the SERP III Benefit as in
effect on the Effective Date; or
(ii) After a Change in Control,
(A) Rock-Tenn or the Ultimate Parent (as defined in
subsection (E) below) (x) reduces or alters to Executive's
detriment Executive's salary (including any deferred portions
thereof) or Executive's retirement program or benefit,
including without limitation, the SERP III Benefit as in
effect immediately prior to the Change in Control, or (y)
fails to provide to Executive a bonus or long-term incentive
compensation opportunity ("Bonus or LTI Opportunity") that is
at least as favorable to Executive as the average of the three
highest Bonus or LTI Opportunities that were in effect for
Executive for the five most recent Rock-Tenn fiscal years
before the fiscal year in which the Change in Control
occurred;
(B) Rock-Tenn or the Ultimate Parent reduces or
diminishes Executive's duties, responsibilities, status, chain
of persons reporting to him, staff assistance or office space
from those that Executive enjoys and define his position as
Chief Executive Officer of Rock-Tenn immediately prior to the
Change in Control;
(C) Rock-Tenn or the Ultimate Parent transfers Executive
to a location requiring a change in Executive's residence or a
material increase in the amount of travel normally required of
Executive in connection with Executive's employment;
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(D) Rock-Tenn or the Ultimate Parent fails to continue
to provide to Executive health and welfare benefits, and
deferred compensation, that are in the aggregate comparable to
those provided to Executive immediately prior to the Change in
Control; or
(E) If the Change in Control results in Rock-Tenn not
being and thereafter continuing as the ultimate surviving
parent ("Ultimate Parent") entity resulting from the Change in
Control transaction, the failure of Executive to be named as
and become (upon or promptly following the consummation of
such transaction) the Chief Executive Officer of Ultimate
Parent with duties and responsibilities the same as or
substantially equivalent to those he enjoys and that define
his position and status with Rock-Tenn immediately prior to
the Change in Control;
but only if, with respect to any act or omission in subsection
2(b)(i) prior to a Change in Control, (x) Executive delivers
to the Compensation Committee a detailed, written statement of
the basis for Executive's belief that one of the applicable
acts or omissions has occurred within 90 days after the act or
omission occurred, (y) Executive gives the Compensation
Committee a sixty (60) day period after the delivery of such
statement to cure the basis for such belief, and (z) Executive
actually submits Executive's written resignation to the
Compensation Committee during the sixty (60) day period that
begins immediately after the end of such sixty (60) day period
if Executive reasonably and in good faith determines that the
basis has not been cured during such sixty (60) day period.
The term "Change in Control" for purposes of this Section 2(b) shall
mean the consummation of a change in control of Rock-Tenn of a
nature that would be required to be reported in response to Item
6(e) of Schedule 14A of Regulation 14A promulgated under the
Exchange Act as in effect at the time of such "change in control",
provided that such a change in control shall be deemed to have
occurred at such time as (i) any "person" (as that term is used in
Sections 13(d) and 14(d)(2) of the Exchange Act), is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act)
directly or indirectly, of securities representing 50% or more of
the combined voting power for election of directors of the then
outstanding securities of Rock-Tenn or any successor of Rock-Tenn;
(ii) during any period of two consecutive years or less, individuals
who at the beginning of such period constitute the Board of
Directors of Rock-Tenn (the "Board") cease, for any reason, to
constitute at least a majority of the Board, unless the election or
nomination for election of each new director was approved in advance
by a vote of at least two-thirds of the directors then still in
office who were directors at the beginning of the period; (iii) the
shareholders of Rock-Tenn approve any reorganization, merger,
consolidation or share exchange as a result of which the common
stock of Rock-Tenn shall be changed, converted or exchanged into or
for securities of another corporation (other than a merger with a
wholly-owned subsidiary of Rock-Tenn) or any dissolution or
liquidation of Rock-Tenn
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or any sale or other disposition of 50% or more of the assets or
business of Rock-Tenn; or (iv) the shareholders of Rock-Tenn approve
any reorganization, merger, consolidation or share exchange unless
(A) the persons who were the beneficial owners of the outstanding
shares of the common stock of Rock-Tenn immediately before the
consummation of such transaction beneficially own more than 50% of
the outstanding shares of the common stock of the successor or
survivor corporation in such transaction immediately following the
consummation of such transaction and (B) the number of shares of the
common stock of such successor or survivor corporation beneficially
owned by the persons described in clause (A) immediately following
the consummation of such transaction is beneficially owned by each
such person in substantially the same proportion that each such
person had beneficially owned shares of Rock-Tenn common stock
immediately before the consummation of such transaction, provided
(C) the percentage described in clause (A) of the beneficially owned
shares of the successor or survivor corporation and the number
described in clause (B) of the beneficially owned shares of the
successor or survivor corporation shall be determined exclusively by
reference to the shares of the successor or survivor corporation
that result from the beneficial ownership of shares of common stock
of Rock-Tenn by the persons described in clause (A) immediately
before the consummation of such transaction.
Any prior written consent given by Executive pursuant to this
Section 2(b) shall relate only to the item or items so specifically
consented to and shall serve to re-establish as the status quo for
purposes of this Section 2(b) against which any future events are
thereafter measured, as altered only by the change(s) thereto so
specifically consented to and, if applicable, so previously
specifically consented to by Executive.
3. RIGHTS AND BENEFITS UPON TERMINATION. In the event of the termination
of Executive's employment prior to Executive's 65th birthday, under any of the
circumstances set forth in Section 2 hereof ("Termination"), Rock-Tenn agrees to
provide or cause to be provided to Executive the following rights and benefits:
(a) LUMP SUM PAYMENT AT TERMINATION. Executive shall be entitled to
receive within 30 days of Termination a lump-sum payment in cash in the
amount of three times Executive's Earnings (as such term is defined in
this Section 3(a)); provided, however, that if there are fewer than 36
months remaining from the date of Termination to Executive's 65th
birthday, the amount calculated pursuant to this paragraph will be reduced
by multiplying such amount by a fraction, the numerator of which is the
number of months (including any fraction of a month) so remaining to
Executive's 65th birthday, and the denominator of which is 36.
For purposes of this Agreement, "Earnings" shall mean the sum of (1)
Executive's Annual Base Pay (as defined below), (2) Executive's Recent Cash
Bonus (as defined below), and (3) Executive's Recent Long-Term Compensation (as
defined below).
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"Annual Base Pay" shall mean the annualized amount of Executive's rate of
base pay (as shown in Rock-Tenn's payroll records) measured at its highest level
existing at any time following the Effective Date.
"Recent Cash Bonus" shall mean the product of Executive's Annual Base Pay
multiplied by the average of the three highest quotients determined, for each of
the five most recent Rock-Tenn fiscal years before the fiscal year in which the
Termination occurred, by dividing (a) the sum of all cash bonuses and amounts
paid to Executive, under all Rock-Tenn short-term incentive plans in which
Executive participated (other than Rock-Tenn's 2005 Shareholder Value Creation
Plan) with respect to such fiscal year (including for this purpose any such
amount receipt of which was deferred by Rock-Tenn or Executive pursuant to the
terms of any applicable Rock-Tenn plan), by (b) the base pay (as shown in
Rock-Tenn's payroll records) paid to Executive with respect to such fiscal year.
Notwithstanding the foregoing, if the Termination occurs after the conclusion of
the payment of cash bonuses and other amounts as short-term incentive
compensation for a fiscal year, the quotients calculated as described above
shall be determined for such fiscal year and for the four preceding fiscal
years.
"Recent Long-Term Compensation" shall mean the product of Executive's
Annual Base Pay multiplied by the average of the three highest quotients
determined, for each of the five most recent Rock-Tenn fiscal years before the
fiscal year in which the Termination occurred, by dividing (a) the Grant Value
(as defined below) for all grants of stock options and/or restricted stock and
other long-term incentive compensation made under Rock-Tenn's 2004 Incentive
Stock Plan (and any successor plans or additional long-term incentive plan or
plans) during such fiscal year by (b) the annualized amount of Executive's rate
of base pay (as shown in Rock-Tenn's payroll records) on the date of such grant.
"Grant Value" shall mean, with respect to any such grant, the sum of (1) the
product of the number of stock options granted to Executive multiplied by the
value of each such stock option at the date of grant (as reasonably determined
or approved by the Compensation Committee as of the date of grant), plus (2) the
product of the number of shares of restricted stock granted to Executive
multiplied by the value of a share of restricted stock at the date of grant (as
reasonably determined or approved by the Compensation Committee as of the date
of grant), plus (3) the aggregate value of any other long-term incentive
compensation, however manifested, at the date of grant (as reasonably determined
or approved by the Compensation Committee as of the date of grant).
Notwithstanding the foregoing, if the Termination occurs after the conclusion of
the grant of stock options and/or restricted stock and other long-term incentive
compensation for a fiscal year, the quotients calculated as described above
shall be determined for such fiscal year and for the four preceding fiscal
years.
(b) RETIREMENT BENEFIT. Within 30 days of Termination, Rock-Tenn
shall pay to Executive, in the form of a cash lump sum, an amount equal to
the excess of (A) the amount that would be required to be paid to
Executive as a SERP III Benefit under the Rock-Tenn Company Supplemental
Executive Retirement Plan, as in effect on the Effective Date and as it
may be amended in any way that may be beneficial to Executive (the
"SERP"), if (i) the date of Termination were Executive's Employment
Termination Date under the SERP, and (ii) a Change of Control (within the
meaning of the SERP) had occurred and the related Change of Control Date
was the date of Termination, over (B) the amount that is required to be
paid to Executive as a SERP III Benefit under the SERP as of Executive's
Termination.
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(c) INSURANCE AND OTHER SPECIAL BENEFITS. To the extent Executive
and his dependents are eligible thereunder, until Executive's 65th
birthday Executive and his dependents shall continue to be covered by the
life and dependent life insurance and medical and dental insurance plans
of Rock-Tenn or any successor plan or program in effect on the date of
Termination for employees in the same class or category as Executive,
subject to the terms of such plans and to Executive's making any required
contributions thereto. In the event Executive and his dependents are
ineligible to continue to be so covered under the terms of any such
benefit, plan or program, or in the event Executive and his dependents are
eligible but the benefits applicable to them are not substantially
equivalent to the benefits applicable to them immediately prior to
Termination, then, for a period of 36 months following Termination (or
until Executive's 65th birthday, whichever is sooner), Rock-Tenn shall
provide such substantially equivalent benefits, or such additional
benefits as may be necessary to make the benefits applicable to Executive
and his dependents substantially equivalent to those in effect before
Termination, through other sources, subject to Executive's making dollar
amount contributions no greater than those he would have made under
Rock-Tenn's plans; provided, however, that if during such period Executive
should enter into the employ of another company or firm which provides
substantially similar benefit coverage and at no greater cost, Executive's
and his dependents' participation in the comparable benefit provided by
Rock-Tenn either directly or through such other sources shall cease.
Nothing contained in this paragraph shall be deemed to require or permit
termination or restriction of Executive's coverage under any plan or
program of Rock-Tenn or any successor plan or program thereto to which
Executive is entitled under the terms of such plan or program, whether at
the end of the aforementioned 36-month period or at any other time.
Executive shall be entitled to continuation ("COBRA") coverage under Code
Section 4980B upon the termination of the coverage provided under this
Section 3(c) to the same extent as if such coverage had not been provided.
Upon the termination of the medical coverage (including any COBRA coverage
elected by Executive) provided under this Section 3(c), Executive shall be
entitled to such retiree medical coverage as may be available generally to
early or normal retirees of Rock-Tenn, or to former employees in the same
class or category as Executive, subject to the terms of such coverage and
to Executive's making any required contributions thereto.
(d) VESTING. At the date of Termination, all of Executive's then
unvested rights under Rock-Tenn's 2004 Incentive Stock Plan shall vest.
After Termination, Executive shall continue to be treated as a participant
in Rock-Tenn's 2005 Shareholder Value Creation Incentive Plan as though he
had remained a Rock-Tenn employee, and shall receive, on the first payment
date provided for by such plan, payment in full of all amounts payable to
him under such plan.
(e) OTHER BENEFIT PLANS. The specific arrangements referred to in
this Section 3 are not intended to exclude Executive's participation in
other benefit plans in which Executive currently participates or which are
available to executive personnel generally in the class or category of
Executive or to preclude other compensation or benefits as may be
authorized by the Board of Directors from time to time.
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(f) NO DUTY TO MITIGATE. Executive's entitlement to benefits
hereunder shall not be governed by any duty to mitigate damages by seeking
further employment nor offset by any compensation which Executive may
receive from future employment.
(g) PAYMENT OBLIGATIONS ABSOLUTE. Rock-Tenn's obligation to pay or
cause to be paid to Executive the benefits and to make the arrangements
provided in this Section 3 shall be absolute and unconditional and shall
not be affected by any circumstances, including, without limitation, any
setoff, counterclaim, recoupment, defense or other right, which Rock-Tenn
may have against Executive or anyone else; provided, however, that any
payment of benefits pursuant to this Section 3 is conditioned on Executive
(i) providing Rock-Tenn with a valid and binding general release in the
form attached hereto as Exhibit 1, and (ii) strictly complying with
Executive's obligations under the covenants in Sections 5(b), (c), and
(d). All amounts payable by or on behalf of Rock-Tenn hereunder shall be
paid without notice or demand. Each and every payment made hereunder by or
on behalf of Rock-Tenn shall be final and Rock-Tenn shall not, for any
reason whatsoever, seek to recover all or any part of such payment from
Executive or from whomever shall be entitled thereto.
(h) DELAY IN PAYMENT. Notwithstanding any other provision of this
Employment Agreement, it is intended that any payment or benefit which is
provided pursuant to or in connection with this Employment Agreement which
is considered to be nonqualified deferred compensation subject to Section
409A of the Code shall be provided and paid in a manner, and at such time
and in such form, as complies with the applicable requirements of Section
409A of the Code. If and to the extent required by Section 409A of the
Code, no payment or benefit shall be made or provided to Executive prior
to the six (6) month anniversary of the Executive's separation from
service (as defined in Section 409A of the Code). In the event of such a
deferral, the amounts provided for in Sections 3(a) and (b) shall be paid
as soon as the six month deferral period ends, plus interest on such
amounts at a rate of equivalent to the prime lending rate as announced by
and then in effect at SunTrust Bank or any successor thereto up to such
payment date. In the event that benefits provided under Section 3(c) are
required to be deferred, any such benefit may be provided during such six
month deferral period at Executive's expense, with Executive having a
right to reimbursement from Rock-Tenn for any amounts paid by the
Executive (that Executive would not have been required to pay absent the
deferral) once the six month deferral period ends, and the balance of the
benefits shall be provided in accordance with Section 3(c). Rock-Tenn
shall indemnify and hold harmless Executive on an after-tax basis from any
tax or interest penalty imposed under Section 409A of the Code (or any
successor or replacement provision thereto) with respect to any payment or
benefit provided pursuant to this Employment Agreement.
4. CONDITIONS TO THE OBLIGATIONS OF ROCK-TENN. Rock-Tenn shall have no
obligation to provide or cause to be provided to Executive the rights and
benefits described in Section 3 hereof after Executive's 65th birthday or if any
of the following events shall occur:
(a) TERMINATION FOR CAUSE. Rock-Tenn shall terminate Executive's
employment for "cause". For purposes of this Agreement, the term "cause"
shall mean
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solely (i) conviction of a felony, (ii) gross neglect by Executive of his
duties as Chief Executive Officer which continues uncured for sixty (60)
days after Executive's receipt of written notice from the Chairman of the
Compensation Committee specifying with particularity the elements of such
alleged neglect, or (iii) willful gross misconduct by the Executive in the
performance of his duties as the Chief Executive Officer, which misconduct
remains uncured by the Executive for sixty (60) days after his receipt of
written notice from the Chairman of the Compensation Committee specifying
with particularity the elements of such alleged misconduct. Termination of
Executive for cause pursuant to either items (ii) or (iii) of the
definition of cause above may be accomplished only by vote of a majority
of the independent directors at a meeting of the Board of Rock-Tenn
convened for that purpose at which Executive shall be entitled and given
the opportunity to appear together, if he chooses, with his attorney and
make a full presentation to the Board with respect to his position on the
matter.
(b) TERMINATION FOR PERMANENT DISABILITY. Rock-Tenn shall terminate
Executive's employment as a result of his permanent disability. For
purposes of this Agreement, Executive shall be deemed to be permanently
disabled solely if Executive is "totally disabled" within the meaning of
Rock-Tenn's Group Long Term Disability Benefit in effect for salaried
employees at the Effective DatE.
(c) FAILURE TO RESIGN. Executive shall not, promptly after
termination of his employment and upon receiving a written request to do
so, resign as a director and/or officer of Rock-Tenn and of each
subsidiary and affiliate of Rock-Tenn of which Executive is then serving
as a director and/or officer.
(d) RESIGNATION WITHOUT GOOD REASON. Executive resigns his
employment in circumstances other than those described in Section 2(b).
5. CONFIDENTIALITY; NON-COMPETITION; NON-SOLICITATION; COOPERATION.
(a) CONFIDENTIALITY. Executive agrees that, during his employment
and for a period of three years following the date of termination of
Executive's employment or his resignation for any reason, Executive will
not knowingly, without the prior written consent of Rock-Tenn, disclose to
any person, firm or corporation any material confidential information of
Rock-Tenn or its subsidiaries which is now known to Executive or which
hereafter may become known to Executive as a result of Executive's
employment or association with Rock-Tenn and which would be helpful to a
competitor, unless such disclosure is required under the terms of a valid
and effective subpoena or order issued by a court or governmental body;
provided, however, that the foregoing shall not apply to confidential
information which becomes publicly disseminated by means other than a
breach of this Agreement.
(b) NON-SOLICITATION OF EMPLOYEES. Executive agrees that, for a
period of three years following the date of termination of Executive's
employment or his resignation, for any reason, Executive will not induce,
either directly or indirectly, any salaried employee of Rock-Tenn or any
of its subsidiaries with whom Executive had
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contact, knowledge, or association as a result of his employment with
Rock-Tenn at any time during the two years preceding such termination or
resignation, to terminate his or her employment.
(c) NON-SOLICITATION OF CUSTOMERS. Executive agrees that, for a
period of three years following the date of termination of Executive's
employment or his resignation, for any reason, Executive shall not, on
Executive's own behalf or on behalf of any person, firm, partnership,
association, corporation or business organization, entity or enterprise,
call on or solicit for the purpose of competing with Rock-Tenn or its
subsidiaries any customers of Rock-Tenn or its subsidiaries with whom
Executive had contact, knowledge, or association as a result of his
employment with Rock-Tenn at any time during the two years preceding such
termination or resignation.
(d) NON-COMPETE. Executive and Rock-Tenn agree that (a) Rock-Tenn is
a manufacturer of packaging, merchandising displays and paperboard,
produces laminated paperboard products, and collects and sells recycled
fiber, which shall be referred to as the "Business", (b) the Business is
conducted throughout the United States (the "Territory"), (c) Executive
is, and is expected to continue to be during his employment, intimately
involved in the Business wherever it operates in the Territory, and (d)
this Section is intended to provide fair and reasonable protection to
Rock-Tenn. Executive therefore agrees that Executive shall not, for a
period of three years following the date of termination of Executive's
employment or his resignation, for any reason (or until his 65th birthday,
if such period is shorter), assume or perform any managerial or
supervisory responsibilities and duties that are substantially the same as
those Executive performs for Rock-Tenn at the time of such termination or
resignation or at any time during the two years preceding such termination
or resignation, for or on behalf of any other corporation, partnership,
venture, or other business entity that engages in the Business in the
Territory.
(e) COOPERATION. Executive agrees that, for a period of three years
following termination of Executive's employment or his resignation, for
any reason (or until his 65th birthday, if such period is shorter),
Executive will furnish such information and render such assistance and
cooperation as may reasonably be requested in connection with any
litigation or legal proceedings concerning Rock-Tenn or any of its
subsidiaries (other than any legal proceedings concerning Executive's
employment). In connection with such cooperation, Rock-Tenn will pay or
reimburse Executive for reasonable expenses.
(f) REMEDIES FOR BREACH. It is recognized that damages in the event
of breach of this Section 5 by Executive would be difficult, if not
impossible, to ascertain, and it is therefore agreed that Rock-Tenn, in
addition to and without limiting any other remedy or right it may have,
shall have the right to an injunction or other equitable relief in any
court of competent jurisdiction enjoining any such breach, and Executive
hereby waives any and all requirements that Rock-Tenn post a bond in
connection with seeking or obtaining such relief and any and all defenses
Executive may have on the ground of lack of jurisdiction or competence of
the court to grant such an injunction or other equitable relief. The
existence of this right shall not preclude Rock-Tenn from pursuing any
other rights and remedies at law or in equity which Rock-Tenn may have.
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6. CERTAIN ADDITIONAL PAYMENTS BY ROCK-TENN.
(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any
payment or distribution by Rock-Tenn to or for the benefit of Executive,
or any benefit, arrangement regarding the exercise or vesting of options,
restricted stock, or other securities of Rock-Tenn, or other plan,
agreement or arrangement regarding a change of control of Rock-Tenn
(whether determined pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required under
this Section 6) (any such payment, distribution, benefit, arrangement,
plan, or agreement being referred to as a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then Rock-Tenn shall make
an additional payment to Executive (a "Gross-Up Payment") in accordance
with the provisions of this Section 6. The Gross-Up Payment shall be an
amount such that after payment by Executive of all federal, state, local,
employment and payroll taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any federal,
state, local, employment and payroll taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, Executive retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments. Notwithstanding the foregoing
provisions of this Section 6(a), if it shall be determined that Executive
is entitled to a Gross-Up Payment, but that Executive, after taking into
account the Payments and the Gross-Up Payment, would not receive a net
after-tax benefit of at least $50,000 (taking into account both federal,
state, local, employment and payroll taxes and any Excise Tax) as compared
to the net after-tax proceeds to Executive resulting from an elimination
of the Gross-Up Payment and a reduction of the Payments, in the aggregate,
to an amount (the "Reduced Amount") such that the receipt of Payments
would not give rise to any Excise Tax, then no Gross-Up Payment shall be
made to Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 6(c), all determinations
required to be made under this Section 6, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be
made by PricewaterhouseCoopers LLP or such other certified public
accounting firm as may be mutually agreed by Executive and Rock-Tenn (the
"Accounting Firm"), which shall provide detailed supporting calculations
both to Rock-Tenn and Executive within 15 business days of the receipt of
notice from Executive that there has been a Payment or such earlier time
as is requested by Rock-Tenn. All fees and expenses of the Accounting Firm
shall be borne solely by Rock-Tenn. Any Gross-Up Payment shall be paid by
Rock-Tenn to Executive within thirty (30) days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm
shall be binding upon Rock-Tenn and Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by Rock-Tenn should
have been made ("Underpayment"), consistent with the calculations required
to be made hereunder. In the event that Rock-Tenn exhausts its
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remedies pursuant to Section 6(c) and Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall determine the
amount of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by Rock-Tenn to or for the benefit of Executive.
(c) Executive shall notify Rock-Tenn in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by
Rock-Tenn of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after Executive is
informed in writing of such claim and shall apprise Rock-Tenn of the
nature of such claim and the date on which such claim is requested to be
paid. Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which he gives such notice to
Rock-Tenn (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If Rock-Tenn notifies Executive
in writing prior to the expiration of such period that it desires to
contest such claim, Executive shall:
(i) give Rock-Tenn any information reasonably requested by
Rock-Tenn relating to such claim,
(ii) take such action in connection with contesting such claim
as Rock-Tenn shall reasonably request in writing from time to time,
including without limitation, accepting legal representation with
respect to such claim by an attorney reasonably selected by
Rock-Tenn,
(iii) cooperate with Rock-Tenn in good faith in order
effectively to contest such claim, and
(iv) permit Rock-Tenn to participate in any proceedings
relating to such claim;
provided, however, that Rock-Tenn shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Executive
harmless, on an after-tax basis, for any Excise Tax or federal, state,
local, employment and payroll tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions of this
Section 6(c), Rock-Tenn shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option,
either direct Executive to pay the tax claimed and xxx for a refund or to
contest the claim in any permissible manner, and Executive agrees to
prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as Rock-Tenn shall determine; provided, however, that if Rock-Tenn
directs Executive to pay such claim and xxx for a refund, Rock-Tenn shall
advance the amount of such payment to Executive, on an interest-free
basis, and shall indemnify and hold Executive harmless on an after-tax
basis, from any Excise Tax or federal, state, local, employment or payroll
tax (including interest or penalties with
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respect thereto) imposed with respect to such advance or with respect to
any imputed income with respect to such advance; and further provided that
any extension of the statute of limitations relating to payment of taxes
for the taxable year of Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, Rock-Tenn's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder, and
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by Executive of an amount paid by
Rock-Tenn pursuant to Section 6(c), Executive becomes entitled to receive
any refund with respect to such claim, Executive shall (subject to
Rock-Tenn's complying with the requirements of Section 6(c)) promptly pay
to Rock-Tenn the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
Executive of an amount advanced by Rock-Tenn pursuant to Section 6(c), a
determination is made that Executive shall not be entitled to any refund
with respect to such claim and Rock-Tenn does not notify Executive in
writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
7. EXPENSES. Rock-Tenn shall pay or reimburse Executive for all costs and
expenses ("Costs and Expenses"), including, without limitation, court costs and
reasonable and necessary attorneys' fees, incurred by Executive as a result of
the mediation pursuant to Section 8(i) of any claim, action or proceeding
(including, without limitation, a claim, action or proceeding by Executive
against Rock-Tenn) arising out of, or challenging the validity or enforceability
of, this Agreement or any provision hereof (a "Claim"). Rock-Tenn shall pay or
reimburse Executive for all Costs and Expenses incurred by Executive in
connection with the litigation of any Claim, if Executive is the prevailing
party. Rock-Tenn shall pay or reimburse Executive for one-half of all Costs and
Expenses incurred by Executive in connection with the litigation of any Claim,
if Executive is not the prevailing party. Rock-Tenn shall pay or reimburse such
costs and expenses promptly (and within 30 days) after Executive has submitted
supporting documentation. Except as expressly provided in Section 6 and this
Section 7, each of Rock-Tenn and Executive shall bear and pay its and his
respective costs and expenses incurred in connection with any such claim, action
or proceeding.
8. MISCELLANEOUS.
(a) ASSIGNMENT. No right, benefit or interest hereunder shall be
subject to assignment, anticipation, alienation, sale, encumbrance,
charge, pledge, hypothecation or set-off in respect of any claim, debt or
obligation, or to execution, attachment, levy or similar process;
provided, however, that Executive may assign any right, benefit or
interest hereunder if such assignment is permitted under the terms of any
plan or policy of insurance or annuity contract governing such right,
benefit or interest.
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(b) CONSTRUCTION OF AGREEMENT. Nothing in this Agreement shall be
construed to amend any provision of any plan or policy of Rock-Tenn.
(c) AMENDMENT. This Agreement may not be amended, modified or
cancelled except by written agreement of the parties.
(d) WAIVER. No provision of this Agreement may be waived except by a
writing signed by the party to be bound thereby.
(e) SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall remain in full
force and effect to the fullest extent permitted by law.
(f) SUCCESSORS. This Agreement shall be binding upon and inure to
the benefit of Executive and Executive's personal representative and
heirs, and Rock-Tenn and any successor organization or organizations which
shall succeed to substantially all of the business and property of
Rock-Tenn, whether by means of merger, consolidation, acquisition of
substantially all of the assets of Rock-Tenn or otherwise, including by
operation of law. For purposes of this Agreement, all references herein to
Rock-Tenn shall mean and apply to Ultimate Parent, as successor to
Rock-Tenn's obligations hereunder.
(g) TAXES. Any payment or delivery required under this Agreement
shall be subject to all requirements of the law with regard to withholding
of taxes, filing, making of reports and the like, and Rock-Tenn shall use
its best efforts to satisfy promptly all such requirements.
(h) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Georgia.
(i) REQUIRED MEDIATION. Any dispute under this Agreement that is not
settled by negotiations by the parties may, by written notice given by
Executive or Rock-Tenn to the other party, be required to be submitted to
nonbinding mediation, to be completed within (45) forty-five days after
the first written notice of the dispute is given by one party to the
other. Such mediation, which must be commenced by delivery of the
mediation notice no later than (15) fifteen days after such first written
notice of dispute is given, shall be administered by the American
Arbitration Association under its Commercial Mediation Rules. Rock-Tenn
shall pay all costs and expenses of such mediation, including the cost of
any attorney engaged by Executive. No party may prosecute any litigation,
whether or not already commenced, with respect to such dispute while such
nonbinding mediation is ongoing unless and until any such mediation shall
have concluded without resolution of the dispute or the time period for
such mediation to have concluded shall have elapsed.
(j) ENTIRE AGREEMENT. This Agreement sets forth the entire agreement
and understanding of the parties hereto with respect to the matters
covered hereby, and incorporates into one document any previous severance
agreement executed by the
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parties and all amendments thereto as of the date hereof; provided,
however, that this Agreement does not limit or terminate any obligations
that are binding on Executive as an employee of Rock-Tenn under policies
of Rock-Tenn that are applicable to its employees generally.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
Effective Date.
ROCK-TENN COMPANY
By: /s/ Xxxxxx X. XxXxxxxx
--------------------------------------
Name: Xxxxxx X. XxXxxxxx
----------------------------------
Title: Sr. Vice President
---------------------------------
/s/ Xxxxx X. Xxxxxxxx
------------------------------------------
Xxxxx X. Xxxxxxxx
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EXHIBIT 1 TO
EMPLOYMENT AGREEMENT BETWEEN
ROCK-TENN COMPANY AND XXXXX X. XXXXXXXX
RELEASE
I, Xxxxx X. Xxxxxxxx, in consideration of my receiving, pursuant to that
certain Employment Agreement, dated as of February __, 2006, between Rock-Tenn
Company, a Georgia corporation (the "Company"), and me (the "Employment
Agreement"), certain post-separation benefits from the Company to which I am
otherwise not entitled, release (on behalf of myself, my spouse and our
respective heirs and assigns) the Company, its successors, agents, officers,
directors and other employees, and its direct and indirect affiliates,
subsidiaries, divisions and joint ventures, from any and all claims, demands,
debts, liabilities, damages, costs (including attorneys' fees) and obligations
of any kind in my favor (known or unknown) that arise, prior to the date I sign
this Release, out of my employment with, or the termination of my employment
with, the Company. This includes, but is not limited to, claims under the Age
Discrimination in Employment Act of 1967, as amended by the Older Workers
Benefit Protection Act of 1990; the Americans With Disabilities Act of 1990;
Title VII of the Civil Rights Act of 1964; The Rehabilitation Act of 1973; 42
U.S.C. Sections 1981 and 1983; the Fair Labor Standards Act of 1938; the Family
and Medical Leave Act; and other federal, state, or local laws including, but
not limited to, claims for discrimination or harassment based on age, race,
color, national origin, sex, religion, marital or veteran status, citizenship,
disability or any other unlawful criteria, wages, breach of express or implied
contract, wrongful discharge, economic or personal injury, injury to privacy or
reputation, emotional distress or any other type of injury. I acknowledge that
this Release releases unknown claims, as well as claims of which I am aware, and
I hereby waive and release any rights or benefits that I might otherwise have
under any federal, state or local laws that would otherwise preserve, or prevent
the release of, unknown claims, to the full extent that such rights and benefits
may be waived. I represent and warrant that I am the sole and lawful owner of
all right, title and interest in and to every claim or other matter that I
release herein, and that I have full power (on behalf of myself, my spouse and
our respective heirs and assigns) to enter into this Release and have not
previously
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assigned, transferred or encumbered, or purported to assign, transfer or
encumber, voluntarily or involuntarily, to any person or entity, all or any
portion of the claims, obligations or rights covered by this Release.
This Release does not apply to claims under the Employment Agreement or to
claims, if any, for which releases are prohibited by applicable law. The Company
and its agents expressly deny that they have any liability to me, and this
should not be construed as an admission of any such liability.
I am hereby advised to consult with an attorney, and have consulted with
an attorney, before signing this Release. I have been offered a period of at
least twenty-one (21) days to consider the terms of this Release.
I understand that I have the right to revoke this Release during the seven
(7) days following the date that I have signed this Release (set forth below),
and that this Release and my rights to receive payments and other benefits under
the Employment Agreement will not go into effect or be enforceable until this
seven (7) day period expires. In the event that I elect to revoke this Release,
I understand that I must do so in writing (delivered by mail, hand delivery, or
facsimile) PRIOR TO THE EXPIRATION OF THE SEVEN (7) DAY PERIOD, to
---------------------------, at
------------------------------------------------------------ , facsimile number
--------------------------.
IN WITNESS WHEREOF, I have executed and delivered this Release on the --
day of ------------, 20---
-----------------------------
Xxxxx X. Xxxxxxxx
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