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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(D)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN BUSINESS PRODUCTS, INC.
(Name of Subject Company)
AMERICAN BUSINESS PRODUCTS, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $2.00 PER SHARE
(Title of Class of Securities)
024763 10 4
(CUSIP Number of Class of Securities)
HAROLD R. SMETHILLS
CHIEF EXECUTIVE OFFICER
AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY, SUITE 1200
ATLANTA, GEORGIA 30328
(770) 953-8300
(Name, Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
COPY TO:
LEONARD A. SILVERSTEIN, ESQ.
LONG ALDRIDGE & NORMAN LLP
303 PEACHTREE STREET, N.E.
SUITE 5300
ATLANTA, GEORGIA 30308-3201
(404) 527-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (the "Schedule 14D-9") relates is American Business
Products, Inc., a Georgia corporation (the "Company"). The principal executive
offices of the Company are located at 2100 RiverEdge Parkway, Suite 1200,
Atlanta, Georgia 30328. The class of equity securities to which this statement
relates is the Common Stock, par value $2.00 per share (the "Shares"). The
Shares are traded on the New York Stock Exchange under the symbol "ABP."
ITEM 2. TENDER OFFER OF THE BIDDER.
This Schedule 14D-9 relates to a tender offer by Sherman Acquisition
Corporation, a Georgia corporation ("Purchaser") and wholly-owned indirect
subsidiary of Mail-Well, Inc., a Colorado corporation ("Mail-Well"), to purchase
all of the outstanding Shares. The offer is being made at a price of $20.00 per
Share, net to the seller in cash (the "Offer Price"), upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated January 21, 2000
(the "Offer to Purchase"), and the related Letter of Transmittal (which
together, with any amendments or supplements thereto, constitute the "Offer").
Purchaser and Mail-Well filed a Tender Offer Statement on Schedule 14D-1 on
January 21, 2000. Purchaser is making the Offer for the purpose of acquiring
that number of Shares (the "Minimum Number") which would constitute at least a
majority of the outstanding Shares on a fully diluted basis. The consummation of
the Offer is conditioned on, among other things, at least the Minimum Number of
Shares being validly tendered and not withdrawn in the Offer.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 13, 2000 (the "Merger Agreement"), among the Company, Mail-Well
and Purchaser. The Merger Agreement provides, among other things, that, upon the
terms and subject to the conditions set forth in the Merger Agreement, following
the purchase of Shares pursuant to the Offer, Purchaser will be merged with and
into the Company (the "Merger"). Following consummation of the Merger, Purchaser
will cease to exist and the Company will continue as the surviving corporation
(the "Surviving Corporation") and a wholly-owned indirect subsidiary of
Mail-Well.
At the effective time of the Merger (the "Effective Time"), each Share
outstanding immediately prior to the Effective Time (other than Shares held by
the Company, Mail-Well, or any of their respective subsidiaries or Shares as to
which dissenters' rights have been exercised under the Georgia Business
Corporation Code) will be converted automatically into the right to receive
$20.00 in cash, without interest.
The Merger Agreement is summarized in the Offer to Purchase in Section 13
under the caption "The Merger Agreement and the Tender Agreement" and the Merger
Agreement is also filed as Exhibit 4 to this Schedule 14D-9 and is incorporated
herein by reference.
The address of the principal executive offices of Purchaser and Mail-Well,
as set forth in the Offer to Purchase, is 23 Inverness Way East, Suite 160,
Englewood, Colorado 80112.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and business address of the Company, which is the person
filing this Schedule 14D-9, are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
the Company and its executive officers, directors or affiliates are described in
the sections entitled "Director Compensation," "Executive Compensation,"
"Compensation and Nominating Committee Report on Executive Compensation," and
"Proposal 2 -- Approval and Adoption of the American Business Products, Inc.
1999 Incentive Compensation Plan" in the Company's Proxy Statement for the
Annual Meeting of Shareholders held on May 5, 1999 (the "Proxy Statement"). A
copy of the relevant portions of the Proxy Statement is filed as Exhibit 1
hereto and the portions of the Proxy Statement referred to above are
incorporated herein by reference.
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COMMERCIAL ARRANGEMENTS BETWEEN MAIL-WELL AND THE COMPANY
The information contained in Section 11 under the caption "Background of
the Offer; Past Contacts, Transactions or Negotiations with the Company" of the
Offer to Purchase is incorporated herein by reference.
MASTER SUPPLY AND COOPERATION AGREEMENT BETWEEN THE COMPANY AND MAIL-WELL
DATED SEPTEMBER 30, 1999
The Company and its subsidiaries purchase products from and supply products
to Mail-Well and its subsidiaries under the terms of a Master Supply and
Cooperation Agreement (the "Master Agreement"). The Master Agreement was entered
into on September 30, 1999. The Master Agreement has an initial term of five
years, after which it is renewable for additional one year periods and
terminable by either party upon 60 days notice prior to expiration of the
initial term or any renewal term. In addition, any party can terminate the
Master Agreement upon 180 days notice in the event of a material breach by the
other party which has not been resolved, upon a "change of control" (as defined
in the Master Agreement) of the other party, or after September 30, 2002.
Pursuant to the Master Agreement, Curtis 1000, Inc., a subsidiary of the
Company, is committed to purchase stock/specialty envelopes from Quality Park
Products, a Mail-Well subsidiary, and medium/long run forms from Poser Business
Forms, Inc., also a Mail-Well subsidiary. In exchange for this commitment,
Mail-Well has committed to purchase Tyvek(R) envelopes from International
Envelope Company, a subsidiary of the Company.
The Master Agreement governs the terms of the following supply agreements
between the parties and their subsidiaries: the Business Edge Supply Agreement
between Curtis 1000 and Quality Park Products dated September 30, 1999; the
Business Edge Supply Agreement between Curtis 1000 and Poser Business Forms
dated September 30, 1999; and the Business Edge Supply Agreement between
International Envelope and Mail-Well Envelope, dated September 30, 1999. Each of
the foregoing supply agreements has an initial term of five years and is
terminable only upon termination of the Master Agreement. The Company believes
the above-described supply agreements facilitate the efficiency of the Company's
operations in the ordinary course of business. The Company does not believe that
these agreements are material. Moreover, the Company believes that, if these
agreements are terminated, the Company could purchase from and sell to third
parties the identified products at substantially similar prices.
CONFIDENTIALITY AGREEMENT
On November 4, 1999, Mail-Well and the Company entered into a
Confidentiality Agreement (the "Confidentiality Agreement") under which the
Company agreed to provide certain confidential information relating to its
business to Mail-Well for the purpose of evaluating a possible transaction with
the Company (the "Evaluation Material"). Pursuant to the Confidentiality
Agreement, Mail-Well agreed that it and its representatives would use the
Evaluation Material received from the Company only for the purpose of evaluating
a possible transaction with the Company and would keep the Evaluation Material
confidential; provided, however, that permissible disclosure of any such
information may be made to Mail-Well's directors, officers, employees and
representatives who need to know such information for the purpose of evaluating
the transaction. The term Evaluation Material does not include information that
(1) was already in the possession of Mail-Well prior to the date of the
Confidentiality Agreement, provided such information was not subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another party; (2) becomes generally available to the public other than as a
result of disclosure by Mail-Well or its representatives; or (3) becomes
available to Mail-Well on a non-confidential basis from a source other than the
Company or its advisors, provided such source is not known by Mail-Well to be
bound by a confidentiality agreement with or other obligation of secrecy to the
Company or another party.
The foregoing description of the Confidentiality Agreement does not purport
to be complete and is qualified in its entirety by reference to the
Confidentiality Agreement, which is filed as Exhibit 7 hereto and incorporated
herein by reference.
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AGREEMENTS AND ARRANGEMENTS WITH EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
SEVERANCE AGREEMENTS WITH RAYMOND J. WILSON, JOHN H. KARR, RICHARD G. SMITH
AND L. GEOFFREY GREULICH
The Company amended the Employment Agreements of Raymond J. Wilson, John H.
Karr and Richard G. Smith on June 30, 1999 and entered into a Severance
Agreement with L. Geoffrey Greulich on October 15, 1999 to provide protection to
these executives in the event of a termination of employment following a change
in control. These agreements define a "qualifying termination" to include the
termination of the executive's employment by the Company without cause or the
executive's termination of his employment for good reason. In the event of a
qualifying termination, accrued pay and benefits, severance pay, welfare
benefits, bonuses and stock rights, retirement benefits, and outplacement
benefits will all be granted to the individuals. These agreements contain
typical nonsolicitation and confidentiality provisions. For Mr. Wilson, Mr. Karr
and Mr. Greulich, the severance pay consists of a lump sum cash payment equal to
the executive's annual rate of base salary and bonus in effect upon the date of
the qualifying termination, if such qualifying termination occurs before the
change in control, and two times his base salary and bonus if such qualifying
termination occurs following a change in control of the Company. For Mr. Smith,
the severance pay consists of a lump sum payment of $330,000 and bonus if the
qualifying termination occurs before the change in control, and two times his
base salary and bonus if it occurs following a change in control. The agreements
with Messrs. Wilson, Karr and Smith provide for a gross-up payment for excise
taxes.
Mr. Wilson's and Mr. Karr's agreements both continue in effect until July
1, 2001 and Mr. Greulich's agreement continues in effect until June 30, 2001.
These agreements extend automatically for one additional year at the end of the
initial term, and then for successive one-year periods. However, either party
may terminate by giving the other party written notice of intent not to renew,
delivered at least 60 calendar days prior to the end of any term. In the event
that a change in control occurs, the term of the agreement becomes a term ending
on the first anniversary of the effective date of the change in control. Mr.
Smith's agreement continues in effect until July 1, 2003. Mr. Smith's agreement
may be extended for additional one-year periods upon written agreement by the
parties. In the event that a change in control occurs during the initial term of
the agreement, the term of the agreement shall automatically continue through
the end of the initial term; provided, that if the remainder of the initial term
is less than one year, the term of the agreement shall be for a term ending on
the first anniversary of the effective date of the change in control. In the
event that a change in control occurs during any successive period, the term of
this agreement shall become a term ending on the first anniversary of the
effective date of the change in control.
The foregoing descriptions of the Severance Agreements with Raymond J.
Wilson, John H. Karr, Richard G. Smith and L. Geoffrey Greulich do not purport
to be complete and are qualified in their entirety by reference to the Severance
Agreements with Raymond J. Wilson, John H. Karr, Richard G. Smith and L.
Geoffrey Greulich, which are filed as Exhibits 8, 9, 10 and 11 hereto,
respectively, and incorporated herein by reference.
LETTER AGREEMENT WITH DANIEL W. MCGLAUGHLIN, AS AMENDED
On October 15, 1999, the Company's Board of Directors entered into a letter
agreement with Mr. McGlaughlin, pursuant to which he would serve as Acting Chief
Executive Officer and President of the Company. Mr. McGlaughlin received $30,000
per month for his services. On December 31, 1999, the parties terminated the
letter agreement, based upon the Board's hiring of Harold Smethills to assume
the position of Chief Executive Officer and President. Mr. McGlaughlin agreed to
act as a consultant through January 31, 2000, in order to effect a smooth
transition. The compensation of $30,000 per month will remain in effect until
that time.
The foregoing description of the Letter Agreement with Daniel W.
McGlaughlin, as amended, does not purport to be complete and is qualified in its
entirety by reference to the Letter Agreement with Daniel W. McGlaughlin, as
amended, filed as Exhibit 12 hereto and incorporated herein by reference.
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LETTER AGREEMENT WITH G. HAROLD NORTHROP, AS AMENDED
On October 15, 1999, the Company's Board of Directors entered into a letter
agreement with Mr. Northrop, pursuant to which he would serve as Acting Chairman
of the Board until such time as his successor had been elected by the Board. His
compensation as Acting Chairman was $30,000 per month. On December 31, 1999, the
parties amended that letter agreement to extend Mr. Northrop's services as
Acting Chairman of the Board through June 30, 2000. Mr. Northrop will be
compensated $30,000 a month through February 29, 2000; thereafter, he will
receive compensation in the amount of $5,000 per month for his services as
Acting Chairman through June 30, 2000. The Company's Board of Directors has
recommended a performance bonus to be paid to Mr. Northrop upon closing of a
change in control of the Company in an amount to be determined by the Executive
Committee of the Board of Directors. Mail-Well has consented to the Payment of
this bonus in the amount of $100,000 as required by the Merger Agreement.
The foregoing description of the Letter Agreement with G. Harold Northrop,
as amended, does not purport to be complete and is qualified in its entirety by
reference to the Letter Agreement with G. Harold Northrop, as amended, filed as
Exhibit 13 hereto and incorporated herein by reference.
LETTER AGREEMENT WITH W. STELL HUIE, AS AMENDED
On October 15, 1999, the Company's Board of Directors entered into a letter
agreement with Mr. Huie, pursuant to which he acts as a consultant to the acting
management of the Company with regard to certain executive compensation and
employment issues. Mr. Huie receives compensation in the amount of $400 per hour
for his services in this consultant capacity. On December 31, 1999, the parties
amended the letter agreement to extend his services as consultant through
February 29, 2000.
The foregoing description of the Letter Agreement with W. Stell Huie, as
amended, does not purport to be complete and is qualified in its entirety by
reference to the Letter Agreement with W. Stell Huie, as amended, filed as
Exhibit 14 hereto and incorporated herein by reference.
LETTER AGREEMENT WITH HAROLD R. SMETHILLS
Mr. Smethills began employment as Chief Executive Officer and President of
the Company effective as of December 6, 1999. The initial term of his employment
pursuant to a Letter Agreement dated December 1, 1999 is three months, during
which time the Compensation Committee of the Company's Board of Directors was
directed to negotiate an agreement with Mr. Smethills to extend the term of his
employment and include appropriate cash and equity incentives. Mr. Smethills
will be paid a base salary of $40,000 per month. The Company reimburses Mr.
Smethills for travel and living expenses. In the event of a change in control of
the Company during the term of this agreement, the Company will pay Mr.
Smethills a cash bonus in the amount of $200,000, which may be increased at the
discretion of the Company, payable on the date of closing of the change in
control transaction. A payment in the same amount will be made if the Company
has either executed a definitive agreement or has engaged in substantive and
substantial negotiations with a prospective purchaser at the time of the end of
this agreement, if those actions result in the Company's execution of a
definitive agreement within 90 days following the end of this agreement. During
the three-month term of this agreement, the Company may not terminate Mr.
Smethills' employment for any reason except for cause. The Company's Board of
Directors has recommended a performance bonus to be paid to Mr. Smethills upon
closing of a change in control of the Company in an amount to be determined by
the Chairman of the Board of Directors. The Chairman of the Board of Directors
has determined that the amount of this bonus will be $50,000, and Mail-Well has
consented to the payment of this bonus as required by the Merger Agreement.
The foregoing description of the Letter Agreement with Harold R. Smethills
does not purport to be complete and is qualified in its entirety by reference to
the Letter Agreement with Harold R. Smethills filed as Exhibit 15 hereto and
incorporated herein by reference.
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EMPLOYMENT AGREEMENT WITH LARRY L. GELLERSTEDT, III
The Company entered into an employment agreement dated May 11, 1999 with
Larry L. Gellerstedt, III as its President and Chief Executive Officer. Pursuant
to the agreement, the Company agreed to pay Mr. Gellerstedt a base salary of
$450,000 per year, along with annual incentive compensation, long-term
incentives, coverage under employee benefit plans, an automobile allowance,
vacation time, business expense reimbursement, and payment of club dues. The
agreement contains typical restrictive covenants.
The foregoing description of the Employment Agreement with Larry L.
Gellerstedt, III does not purport to be complete and is qualified in its
entirety by reference to the Employment Agreement with Larry L. Gellerstedt, III
filed as Exhibit 16 hereto and incorporated herein by reference.
SEPARATION AGREEMENT WITH LARRY L. GELLERSTEDT, III
The Company entered into a Separation Agreement dated January 19, 2000 with
Larry L. Gellerstedt, III pursuant to which his employment with the Company
formally terminated as of the close of business on December 31, 1999. As of
September 16, 1999, Mr. Gellerstedt tendered his resignation as President and
Chief Executive Officer of the Company, as a member of the Board of Directors of
the Company, and as an officer and director of each of the Company's
subsidiaries. The Company agreed to continue the salary of Mr. Gellerstedt at a
monthly base rate of $37,500, payable for the period beginning on January 1,
2000 through June 30, 2000. He will not be eligible for consideration for any
awards under any annual or long-term incentive compensation or bonus plan for
1999 or any year thereafter. All stock options held by Mr. Gellerstedt became
immediately exercisable as of his resignation date and shall remain exercisable
for a period of two years. In addition, 29,256 shares of the restricted stock
grant of 131,000 shares of the Company's Common Stock awarded to Mr. Gellerstedt
on February 25, 1999 were immediately vested and nonforfeitable effective as of
the resignation date. The remaining shares were forfeited as of that date. The
agreement contains covenants not to disclose the Company's proprietary
information and other typical provisions.
The foregoing description of the Separation Agreement with Larry L.
Gellerstedt, III does not purport to be complete and is qualified in its
entirety by reference to the Separation Agreement with Larry L. Gellerstedt, III
filed as Exhibit 17 hereto and incorporated herein by reference.
STOCK OPTIONS
Since January 1, 1999, the Company's Board of Directors has granted stock
options to executive officers and directors of the Company under the Company's
1999 Incentive Compensation Plan as follows:
<TABLE>
<CAPTION>
NAME GRANT DATE NUMBER OF SHARES EXERCISE PRICE
---- ----------------- ---------------- --------------
<S> <C> <C> <C>
Larry L. Gellerstedt, III............... February 25, 1999 232,000 $18.000
Henry Curtis VII........................ May 5, 1999 4,000 15.125
Hollis L. Harris........................ May 5, 1999 4,000 15.125
W. Stell Huie........................... May 5, 1999 4,000 15.125
Thomas F. Keller........................ May 5, 1999 4,000 15.125
James F. McDonald....................... May 5, 1999 4,000 15.125
Daniel W. McGlaughlin................... May 5, 1999 4,000 15.125
C. Douglas Miller....................... May 5, 1999 4,000 15.125
G. Harold Northrop...................... May 5, 1999 4,000 15.125
Joe W. Rogers........................... May 5, 1999 4,000 15.125
William B. Stokely III.................. May 5, 1999 4,000 15.125
</TABLE>
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RESTRICTED STOCK AWARDS
Since January 1, 1999, the Company's Board of Directors has granted shares
of restricted stock to executive officers and directors of the Company under the
Company's 1999 Incentive Compensation Plan as follows:
<TABLE>
<CAPTION>
NAME GRANT DATE NUMBER OF SHARES
---- ------------- ----------------
<S> <C> <C>
Larry L. Gellerstedt, III.............................. June 21, 1999 131,000
Hollis L. Harris....................................... May 5, 1999 100
W. Stell Huie.......................................... May 5, 1999 100
Thomas F. Keller....................................... May 5, 1999 100
James F. McDonald...................................... May 5, 1999 100
Daniel W. McGlaughlin.................................. May 5, 1999 100
C. Douglas Miller...................................... May 5, 1999 100
G. Harold Northrop..................................... May 5, 1999 100
Joe W. Rogers.......................................... May 5, 1999 100
William B. Stokely, III................................ July 19, 1999 100
Henry Curtis VII....................................... May 5, 1999 100
Richard B. Curtis...................................... May 5, 1999 100
</TABLE>
Additionally, the Company's Board of Directors issued 200 shares of
restricted stock to Joe W. Rogers on January 25, 1999 under the Company's 1993
Directors' Stock Incentive Plan and 5,000 shares of restricted stock to Larry L.
Gellerstedt, III on February 11, 1999 under the Company's 1991 Stock Incentive
Plan.
OTHER ARRANGEMENTS
In addition to the foregoing, the Board of Directors of the Company has
approved consideration of performance bonuses to be paid to Messrs. Huie and Mr.
McGlaughlin upon closing of a change in control of the Company in an aggregate
amount of up to $60,000, subject to consent by Mail-Well.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
AT A MEETING OF THE BOARD OF DIRECTORS ON JANUARY 12, 2000, THE BOARD OF
DIRECTORS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS
CONTEMPLATED THEREBY AND DETERMINED THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER, ARE FAIR
TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS. THE BOARD OF
DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
The Offer is scheduled to expire at 12:00 midnight, New York City time, on
February 18, 2000, unless Purchaser extends the period of time for which the
Offer is open. A copy of a letter to the Company's shareholders communicating
the Board's recommendation has been filed as Exhibit 5 hereto and is
incorporated herein by reference.
(b) Background; Reasons for the Recommendation of the Board of Directors.
As part of its ongoing efforts to enhance shareholder value, the Company's
Board of Directors has from time to time considered various strategic
alternatives. To assist the Board of Directors in the process of exploring
strategic alternatives, on August 25, 1999, the Company retained Goldman Sachs &
Co. to serve as its exclusive financial advisor. The Board of Directors of the
Company engaged Alston & Bird LLP as its special legal counsel with respect to
its consideration of strategic alternatives.
Some of the strategic alternatives explored by the Board of Directors
included:
- continuing to operate the Company's business as currently operated,
coupled with ongoing efforts to further improve operating performance;
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- a shift in the business direction of the Company from an emphasis on
packaging to an increased emphasis on office products, including
e-commerce based marketing and customer inventory management systems;
- a sale of certain or substantially all of the Company's assets; and
- merging with a strategic buyer having significant resources to bring to
the combination.
On September 16, 1999, the Company's Board of Directors instructed Goldman
Sachs to initiate a process to explore the sale of the entire equity interest in
the Company through an auction process (the "Auction Process"). After evaluating
with the Board of Directors the likely interest of various strategic and
financial buyers in engaging in the Auction Process and the perceived ability of
each party to consummate a transaction with the Company, Goldman Sachs contacted
approximately 50 parties regarding the possibility of such parties submitting an
indication of interest in potentially purchasing the Company.
Thereafter, interested parties were asked to enter into a confidentiality
agreement with the Company. After execution of a confidentiality agreement, 28
interested parties, including Mail-Well, were sent information concerning the
Company to seek preliminary indications of interest. During the months of
November and December 1999, certain of these parties who had indicated a high
level of interest in a proposed transaction at a range of values attractive to
the Board of Directors were given additional information regarding the Company,
including (a) a presentation by the management of the Company and its operating
subsidiaries, (b) a proposed form of agreement on which they were asked to
indicate their proposed revisions, and (c) access to financial and other
information of the Company, including tours of certain of the Company's
operating facilities and interviews with certain of the Company's and its
operating subsidiaries' employees.
On December 20, 1999, Goldman Sachs invited Mail-Well to submit by January
6, 2000 a definitive proposal to acquire the Company. On January 6, 2000,
Mail-Well submitted a written offer to acquire the Company at a price of $19.25
per share. The Company's Board of Directors met to consider Mail-Well's offer on
January 10, 2000 and directed the Company's management to negotiate with
Mail-Well for a higher acquisition price.
Commencing on the afternoon of January 10, 2000, discussions were held
among the Company, Goldman Sachs and Mail-Well which culminated in Mail-Well
submitting a revised written offer on January 11, 2000 to acquire the Company at
a price of $20.00 per share, subject to the approval of its Board of Directors.
On January 12, 2000, Mail-Well advised the Company that its $20.00 per share
offer had been approved and authorized by its Board of Directors. On January 12,
2000, the Company's Board of Directors met to consider Mail-Well's revised
written offer. At the meeting on January 12, 2000, Goldman Sachs informed the
Company's Board of Directors that Goldman Sachs would be able to issue an
opinion, based upon and subject to certain matters set forth therein, with
respect to the fairness, from a financial point of view, of the proposed
consideration to the Company's shareholders. The Company's Board of Directors
then approved Mail-Well's offer of $20.00 per share subject to the negotiation,
execution and delivery of a definitive agreement substantially in the form
previously presented to the Company by Mail-Well and the receipt of an executed
commitment letter from a nationally recognized financial institution, in form
and content satisfactory to the Executive Committee of the Board of Directors,
agreeing to finance the transaction proposed by Mail-Well. The Board of
Directors at that meeting expressly delegated to the Executive Committee of the
Board of Directors authority to negotiate the terms of a definitive agreement
and to determine whether such commitment letter is satisfactory, and authorized
and directed the officers of the Company to execute and deliver a definitive
agreement in form and content acceptable to the Executive Committee.
The Company and Mail-Well began negotiating a definitive agreement on
January 12, 2000. The transaction was publicly announced on January 14, 2000 at
6:05 a.m. Eastern standard time. A commitment letter from Mail-Well's lenders
was furnished to the Executive Committee on January 13, 2000 and was determined
by the Executive Committee, after consulting with its financial and legal
advisors, to be satisfactory. The Executive Committee approved the form and
content of a written definitive agreement on January 13, 2000 and the definitive
agreement was executed and delivered by the parties on that date.
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In reaching its conclusions with respect to the Offer and Merger Agreement,
the Board of Directors considered a number of factors, including the following:
(1) the terms and conditions of the Merger Agreement and related
agreements and transactions;
(2) the opinion of Goldman Sachs to the effect that, as of the date of
such opinion, and based upon and subject to the matters set forth therein,
the $20.00 per Share in cash to be offered to the shareholders of the
Company pursuant to the Offer and the Merger is fair from a financial point
of view to such shareholders. A copy of such opinion setting forth the
assumptions made, procedures followed, matters considered, and limits on
the review undertaken is attached as Annex A to this Schedule 14D-9 and
shareholders are urged to read such opinion in its entirety;
(3) that the $20.00 per Share in cash to be paid in the Offer and the
Merger would represent a significant premium over recent market prices (the
closing price of the Shares as reported by the New York Stock Exchange on
January 13, 2000, the last full trading day prior to the announcement of
the execution of the Merger Agreement, was $12.00 per share);
(4) the Company's current business and future prospects, including
difficulties in achieving desired economies of scale;
(5) that the Merger Agreement provides for a first-step cash tender
offer for all outstanding Shares thereby enabling shareholders who tender
their shares to receive promptly $20.00 per Share in cash, and that
shareholders who do not tender their Shares will receive the same cash
price in the subsequent Merger;
(6) a review of possible alternatives to the Offer and the Merger, the
range of possible benefits and risks to the shareholders of such
alternatives, and the timing and likelihood of accomplishing any such
alternatives; and
(7) the likelihood that the Offer and Merger will be consummated.
The foregoing discussion of the information and factors considered and
given weight by the Board of Directors is not intended to be exhaustive. In view
of the variety of factors considered in connection with its evaluation of the
Offer and the Merger Agreement, the Board of Directors did not find it
practicable to, and did not, quantify or otherwise assign relative weights to
the specific factors considered in reaching its determination. In addition,
individual members of the Board of Directors may have given different weights to
different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to an agreement dated August 25, 1999 (the "Goldman Sachs
Agreement"), the Company retained Goldman Sachs as the Company's exclusive
financial advisor to assist the Company in its analysis and consideration of
various financial alternatives. Pursuant to the Goldman Sachs Agreement, the
Company paid Goldman Sachs a $250,000 initial advisory fee, and has agreed to
pay Goldman Sachs a transaction fee of 1.33% of the aggregate consideration paid
in connection with the Offer and the Merger (including amounts paid to holders
of options, warrants and convertible securities), plus the principal amount of
all indebtedness for borrowed money of the Company outstanding as set forth in
the most recent consolidated balance sheet of the Company prior to consummation
of the Offer, against which the initial advisory fee will be credited.
The Company also agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees and disbursements, and to
indemnify Goldman Sachs and related persons against certain liabilities,
including liabilities under the federal securities laws.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company other than routine
transactions pursuant to employee benefit plans available to all employees.
8
<PAGE> 10
(b) Henry Curtis VII, Richard B. Curtis, Jr., Hollis L. Harris, W. Stell
Huie, Thomas F. Keller, James F. McDonald, Daniel W. McGlaughlin, C. Douglas
Miller, G. Harold Northrop, Joe W. Rogers and William B. Stokely, III, each of
whom is a director of the Company, entered into a Shareholders' Stock Tender
Agreement with Purchaser and Mail-Well, dated as of January 13, 2000 (the
"Shareholders' Agreement"), pursuant to which they have agreed to tender a total
of 415,306 Shares beneficially owned by them pursuant to the Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Item 4 above, the Company is not engaged in any
negotiation in response to the Offer which relates to or would result in (i) an
extraordinary transaction such as a merger or reorganization involving the
Company; (ii) a purchase, sale or transfer of a material amount of assets by the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as described in Item 4 above, there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
Reference is hereby made to the Offer to Purchase and the related Letter of
Transmittal, filed as Exhibits 2 and 3 hereto, respectively, and which are
incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C> <C>
Exhibit 1 -- Excerpts from the Company's Proxy Statement for the Annual
Meeting of Shareholders held on May 5, 1999.
Exhibit 2 -- Offer to Purchase dated January 21, 2000.+
Exhibit 3 -- Letter of Transmittal.+
Exhibit 4 -- Agreement and Plan of Merger, dated as of January 13, 2000,
among American Business Products, Inc., Mail-Well, Inc. and
Sherman Acquisition Corporation.+
Exhibit 5 -- Letter to Shareholders of the Company, dated January 21,
2000.*
Exhibit 6 -- Shareholders' Stock Tender Agreement, dated as of January
13, 2000, by and among Mail-Well, Inc., Sherman Acquisition
Corporation, and each of Henry Curtis VII, Richard B.
Curtis, Jr., Hollis L. Harris, W. Stell Huie, Thomas F.
Keller, James F. McDonald, Daniel W. McGlaughlin, C. Douglas
Miller, G. Harold Northrop, Joe W. Rogers and William B.
Stokely, III.+
Exhibit 7 -- Confidentiality Agreement between Mail-Well and the Company
dated November 4, 1999.
Exhibit 8 -- Severance Agreement between the Company and Raymond J.
Wilson dated June 30, 1999.
Exhibit 9 -- Severance Agreement between the Company and John H. Karr
dated June 30, 1999.
Exhibit 10 -- Severance Agreement between the Company and Richard G. Smith
dated June 30, 1999.
Exhibit 11 -- Severance Agreement between the Company and L. Geoffrey
Greulich dated October 15, 1999.
Exhibit 12 -- Letter Agreement between the Company and Daniel W.
McGlaughlin dated October 15, 1999, as amended on December
31, 1999.
Exhibit 13 -- Letter Agreement between the Company and G. Harold Northrop
dated October 15, 1999, as amended on December 31, 1999.
Exhibit 14 -- Letter Agreement between the Company and W. Stell Huie dated
October 15, 1999, as amended on December 31, 1999.
Exhibit 15 -- Letter Agreement between the Company and Harold R. Smethills
dated December 1, 1999.
</TABLE>
9
<PAGE> 11
<TABLE>
<S> <C> <C>
Exhibit 16 -- Employment Agreement between the Company and Larry L.
Gellerstedt, III dated May 11, 1999.
Exhibit 17 -- Separation Agreement between the Company and Larry L.
Gellerstedt, III dated January 19, 2000.
Exhibit 18 -- Notice to Participants in the Company's Profit Sharing
Retirement Plan dated January 21, 2000.++
Exhibit 19 -- Notice to Participants in the Company's Employee Savings
Plan dated January 21, 2000.++++
Exhibit 20 -- Press Release issued by Mail-Well and the Company on January
14, 2000.+
Exhibit 21 -- Press Release issued by Mail-Well on January 14, 2000.+
Exhibit 22 -- Press Release issued by Mail-Well and the Company on January
21, 2000.+
</TABLE>
- ---------------
* Included with Schedule 14D-9 mailed to shareholders of the Company.
+ Filed as an exhibit to Sherman Acquisition Corporation's Tender Offer
Statement on Schedule 14D-1 dated January 21, 2000 and incorporated herein
by reference.
++ Included with Schedule 14D-9 mailed to participants in the Company's Profit
Sharing Retirement Plan.
++++ Included with Schedule 14D-9 mailed to participants in the Company's
Employee Savings Plan.
This document and the exhibits attached hereto may contain certain
statements that are not strictly historical and are considered forward-looking
statements. Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be realized. Forward-looking statements
involve known and unknown risks which may cause the Company's actual results and
corporate developments to differ materially from those expected. Factors that
could cause results and developments to differ materially from the Company's
expectations include, without limitation, the risks described from time to time
in the Company's reports filed with the Securities and Exchange Commission
including quarterly reports on Form 10-Q, annual reports on Form10-K and reports
on Form 8-K. The safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 with respect to forward-looking statements are not available
to statements made in connection with a tender offer.
10
<PAGE> 12
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ HAROLD R. SMETHILLS
------------------------------------
Name: Harold R. Smethills
Title: Chief Executive Officer
Dated: January 21, 2000
11
<PAGE> 13
ANNEX A
PERSONAL AND CONFIDENTIAL
January 14, 2000
Board of Directors
American Business Products
2100 RiverEdge Parkway
Suite 1200
Atlanta, Georgia 30328
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $2.00
per share (the "Shares"), of American Business Products, Inc. (the "Company") of
the $20.00 per Share in cash to be received by such holders in the Tender Offer
and the Merger (as defined below) pursuant to the Agreement and Plan of Merger,
dated as of January 13, 2000, among Mail-Well, Inc. ("Parent"), Sherman
Acquisition Corp., a wholly-owned subsidiary of Parent ("Merger Sub"), and the
Company (the "Agreement"). Subject to the terms of the Agreement, Parent will
cause Merger Sub to commence a tender offer for all the Shares (the "Tender
Offer") at a price equal to $20.00 per Share in cash for each Share accepted.
The Agreement further provides that following purchase of the Shares pursuant to
the Tender Offer, Merger Sub shall be merged with and into the Company (the
"Merger") and each outstanding Share will be converted into the right to receive
$20.00 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having provided certain investment banking services to
the Company from time to time, including having acted as agent on the Company's
share repurchase program, and having acted as its financial advisor in
connection with, and having participated in certain of the negotiations leading
to, the Agreement. In addition, Goldman, Sachs & Co. provides a full range of
financial advisory and securities services and, in the course of normal trading
activities, may from time to time effect transactions and hold securities,
including derivative securities, of the Company or Parent for its own account
and for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company for the five years ended December 31, 1998; certain interim reports to
Stockholders and Quarterly Reports on Form 10-Q of the Company; certain other
communications from the Company to its stockholders; and certain internal
financial analyses and forecasts for the Company prepared by its management. We
also have held discussions with members of the senior management of the Company
regarding their assessment of its past and current business operations,
financial condition and future prospects. In addition, we have reviewed the
reported price and trading activity for the Shares, compared certain financial
and stock market information for the Company with similar information for
certain other companies the securities of which are publicly traded, reviewed
the financial terms of certain recent business combinations in the office
products industry specifically and in other industries generally and performed
such other studies and analyses as we considered appropriate.
We have relied upon the accuracy and completeness of all of the financial
and other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not made an independent evaluation or appraisal of the assets and
liabilities of the Company or any of its subsidiaries and we have not been
furnished with any such evaluation or appraisal. Our advisory services and the
opinion expressed herein are provided for the information and assistance of the
Board of Directors of the Company in connection with its consideration of the
transaction contemplated by the Agreement and such opinion does not constitute a
recommendation as to whether or not
<PAGE> 14
Board of Directors
American Business Products
January 14, 2000
Page Two
any holder of Shares should tender such Shares in connection with, or how any
holder of Shares should vote with respect to, such transaction.
Based upon and subject to the foregoing and based upon such other matters
as we consider relevant, it is our opinion that as of the date hereof the $20.00
per Share in cash to be received by the holders of Shares in the Tender Offer
and the Merger is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN SACHS & CO.
(GOLDMAN, SACHS & CO.)
<PAGE> 1
EXHIBIT 1
DIRECTOR COMPENSATION
Nonemployee directors of the Company are compensated for their services
through a combination of cash, restricted stock awards and stock option grants.
Each nonemployee director may elect to defer some or all of his cash
compensation. The specifics are described below.
CASH COMPENSATION
Nonemployee directors receive a quarterly retainer fee of $3,750 plus
$1,100 for each meeting of the Board of Directors attended, and a nonemployee
Chairman of the Board receives an additional fee of $500 for each meeting of the
Board of Directors attended. Nonemployee directors who are members of the
Executive Committee, the Compensation Committee, the Audit Committee or the
Finance and Strategic Planning Committee receive $750 for each committee meeting
attended, and nonemployee chairmen of these committees receive an additional fee
of $500 for each committee meeting attended. Nonemployee directors who were
members of the Search Committee received $1,100 for each committee meeting
attended, and the nonemployee chairman of this committee received an additional
$500 for each committee meeting attended. Directors who are salaried employees
of the Company or any of its subsidiaries generally do not receive fees for
their services as directors. However, Mr. Carmody continued to receive
nonemployee directors' fees for the period November 7, 1997 to March 30, 1998,
during which he served as Interim President and Chief Executive Officer of the
Company. See "Table 1: Summary Compensation Table."
The Board of Directors asked Mr. Northrop to provide additional services in
assisting the Company's management personnel and in transitioning management.
For these additional services, Mr. Northrop was paid $40,000 during fiscal 1998.
NONCASH COMPENSATION
1993 Directors Stock Incentive Plan. The American Business Products, Inc.
1993 Directors Stock Incentive Plan, effective as of October 1, 1993, and as
amended December 11, 1996 and May 8, 1998 (the "1993 DSIP"), currently provides
for the discretionary grant of nonqualified stock options ("NSOs") to directors
who are not otherwise compensated employees of the Company or its subsidiaries.
The 1993 DSIP also provides that as of the date of the annual shareholders
meeting at the beginning of each year for which a nonemployee director is
reelected or continues to serve as a director, he will receive an award of 100
shares of the Common Stock, subject to certain restrictions ("restricted
stock"). Newly elected directors receive an award of 200 shares. No director may
receive more than 2,000 shares of restricted stock under this plan.
Ten directors currently are eligible to participate in the 1993 DSIP.
During the fiscal year ended December 31, 1998, the plan committee granted NSOs
to purchase 4,000 shares of the Common Stock at an option price of $22.50 per
share to each of the following directors of the Company: Messrs. Ackerman,
Harris, Huie, Keller, McDonald, McGlaughlin, Miller, Northrop and Stokely.
During the fiscal year ended December 31, 1998, the plan committee awarded 100
shares of restricted stock to each of Messrs. Ackerman, Harris, Huie, Keller,
McDonald, McGlaughlin, Miller, Northrop and Stokely. Upon his election to the
Board of Directors, the plan committee awarded 200 shares of restricted stock to
Mr. Rogers.
Subject to approval of the shareholders, the Board of Directors has adopted
the American Business Products, Inc. 1999 Incentive Compensation Plan, a new
plan designed to provide incentive compensation to both nonemployee directors
and key employees of the Company. (See Proposal 2 -- APPROVAL AND ADOPTION OF
THE AMERICAN BUSINESS PRODUCTS, INC. 1999 INCENTIVE COMPENSATION PLAN.) The new
plan is designed to replace the 1993 DSIP, and any shares authorized under that
1
<PAGE> 2
plan that remain available for issuance will be "transferred" to the new plan.
The company is using this method of transferring available shares rather than
asking for additional new shares for the new plan in order to avoid shareholder
dilution. If any awards are made under the 1993 DSIP between the date of this
proxy and the shareholders' approval of the new 1999 Incentive Compensation
Plan, the number of shares available under the new plan will be diminished. Upon
shareholder approval of the new plan, no further grants or awards shall be made
under the 1993 DSIP.
Deferred Compensation Plan for Directors. The Company maintains the
Deferred Compensation Plan for Directors in which all nonemployee directors of
the Company are eligible to participate. If a director elects to participate,
the director may elect to defer retainer fees, meeting fees or all fees
otherwise payable to him for service on the Board of Directors. At the election
of each participant, amounts deferred under the plan prior to April 1, 1994 are
treated as if invested under either a "cash deferral program" or a "phantom
stock program." Under the cash deferral program, the deferred fees are credited
with deemed interest at a rate determined from time to time by a committee
appointed by the Board of Directors of the Company. Under the phantom stock
program, the deferred fees are treated as if applied to purchase shares of the
Common Stock of the Company. A bookkeeping account is set up for the participant
which is credited with a number of "stock units" equal to the number of shares
of Common Stock that could have been purchased with the fees at the time of
deferral. The number of stock units credited to the participant is adjusted
periodically to account for dividends, stock splits and other events affecting
the number of outstanding shares, as if the stock units were actual shares of
the Common Stock. All amounts deferred under the plan on or after April 1, 1994
are invested under the cash deferral program.
Generally, a participant will receive payment of his benefit under the plan
in quarterly installments over five years, in cash, beginning after he attains
age 70 or, if later, after he retires or otherwise leaves the Board of Directors
of the Company. The amount of each cash payment is determined, in the case of
the cash deferral program, by the amount of fees deferred plus the interest
accrued thereon or, in the case of the phantom stock program, by the number of
stock units credited to the participant's account and the market value per share
of the Common Stock. If a participant dies before receiving full payment of his
benefit under the plan, the remaining amount will be paid in a lump sum, in
cash, to his beneficiary.
Of the executive officers of the Company named in the Summary Compensation
Table, only Mr. Carmody received fees for services as a director. Mr. Carmody
received no fees for his service as a director prior to his retirement from
employment with the Company on June 30, 1996; thereafter, he received fees for
his services as a nonemployee director and Chairman of the Board of Directors
until May 8, 1998. No amounts have been deferred by Mr. Carmody under the plan.
For the 1998 fiscal year, $105,936.94 representing deemed interest at the rate
of 10.29% was credited pursuant to the cash deferral program under the plan and
241.49 stock units representing dividends on phantom stock units, were credited
pursuant to the phantom stock program under the plan for the benefit of all
current nonemployee directors participating in the plan as a group.
Deferred Compensation Investment Plan (Directors). The Deferred
Compensation Investment Plan (Directors) was implemented as a one-time deferral
plan in 1985 for nonemployee directors of the Company. No directors other than
those who elected to participate in 1985 have entered the plan. Each participant
could elect to defer some or all of his 1985 annual compensation for services as
a director to be invested in the plan. The Company has invested the deferred
funds in company-owned life insurance contracts, but the Company may change its
investment at any time. The maximum annual amount of benefit payable to a fully
vested participant is specified in the participant's joiner agreement with the
Company but may be reduced due to certain adverse changes in federal income tax
provisions.
2
<PAGE> 3
A participant's vested benefit will never fall below the amount of the
deferral, plus interest compounded at an annual rate of 12%.
A participant becomes fully vested in his benefit (i) if he remains on the
Board of Directors to age 60, (ii) if prior to retirement, he becomes disabled
or dies, or (iii) upon a change in control of the Company. Upon retirement or
other termination of service as a director after attaining age 60, a participant
(or his beneficiary if he dies) generally will receive equal monthly payments,
beginning at the later of age 70 or retirement, for a period of ten years. If a
participant terminates his service on the Board of Directors prior to attaining
age 60 for reasons other than death or disability, he or his beneficiary will
receive a lump-sum payment of the amount of compensation he has deferred, plus
interest compounded at an annual rate of 12%.
In fiscal 1998, no amounts were paid under the plan to any current
director, no amounts were deferred by any current director, and the Company
incurred expense of $50,808 for all current and retired directors who
participate in this plan.
Consulting Agreement with Henry Curtis VII. In May 1998, Henry Curtis VII
retired from his 28-year career with the Company. Mr. Curtis most recently
served as a Vice President of the Company from 1995 until his retirement, and
continues to serve as a director of the Company. In recognition of his
dedication and service to the Company, and in exchange for his assistance in
transitioning certain duties, the Company entered into a consulting agreement
with Mr. Curtis, dated May 26, 1998, which provided certain payments and
benefits through December 31, 1998. Further, any stock options held by Mr.
Curtis on December 31, 1998 became 100% exercisable and remain exercisable until
March 31, 1999. The Company also agreed to make certain payments to him each
year (beginning in 2000) to assist him with the cost of group health insurance
coverage for himself and his family until he reaches age 65.
3
<PAGE> 4
EXECUTIVE COMPENSATION
Table 1 summarizes by various categories, for the fiscal years ended
December 31, 1998, 1997 and 1996, the total compensation earned by (i) the Chief
Executive Officer of the Company, (ii) each of the four most highly compensated
executive officers of the Company who were serving as executive officers at
December 31, 1998 and whose salary and bonus for the fiscal year ended December
31, 1998 exceeded $100,000, and (iii) the Interim Chief Executive Officer of the
Company from January 1, 1998 through March 30, 1998 (collectively referred to as
the "named executive officers"). For information regarding the various factors
considered by the Compensation Committee in recommending the compensation of the
Chief Executive Officer of the Company and, generally, the other executive
officers of the Company, see "Compensation and Nominating Committee Report"
below.
TABLE 1: SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION AWARDS
-----------------------
RESTRICTED SECURITIES
ANNUAL COMPENSATION STOCK UNDERLYING ALL OTHER
NAME AND --------------------------- AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) ($) (#) (3)
- ------------------ ---- --------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt, III (4)........... 1998 $341,138 $100,000 $250,000 50,000 0
President and Chief Executive
Officer
T.R. Carmody (5).................... 1998 142,252 0 0 0 94,852
Interim President and Chief 1997 45,000 0 0 0 39,047
Executive Officer from November 7, 1996 237,500 0 0 0 878,026
1997 through March 30, 1998
R.G. Smith.......................... 1998 235,800 115,190 0 24,000 12,398
Vice President 1997 220,000 0 0 84,000 11,801
Finance and Chief 1996 200,000 75,000 0 5,000 0
Financial Officer
R.J. Wilson (6)..................... 1998 146,300 73,478 0 14,000 4,631
Corporate Controller 1997 70,771 17,500 0 8,000 0
J. H. Karr (7)...................... 1998 131,900 63,164 0 14,000 4,271
Treasurer and Assistant Secretary 1997 62,500 15,625 0 7,000 25,000
C.R. Williams (8)................... 1998 108,719 80,060 0 29,000 469
Vice President and Chief
Information Officer
</TABLE>
- ---------------
(1) Includes before-tax contributions made to the Employee Savings Plan, the
Company's tax-qualified Code Section 401(k) plan, during fiscal 1998 by
Messrs. Smith, Wilson and Karr, and during fiscal 1997 by Mr. Smith.
(2) Reflects cash bonus awards earned by Messrs. Smith, Wilson, Karr and
Williams, and a stock bonus award earned by Mr. Gellerstedt during the
respective fiscal years for the achievement of performance criteria pursuant
to the Annual Management Incentive Bonus Plan. In October 1998, before any
amounts under the Company's Bonus Plan were earned or calculable, Mr.
Gellerstedt recommended to the Compensation Committee that his bonus for
1998 be limited to $100,000 and that any excess over $100,000 that the
Compensation Committee might otherwise have considered granting to him under
the
4
<PAGE> 5
Bonus Plan formula be used, at the discretion of the Compensation Committee,
for merit bonuses to other employees. The Compensation Committee, in
exercising its sole right to determine bonuses, honored Mr. Gellerstedt's
recommendation and set his 1998 bonus under the Plan at $100,000. At the end
of the performance period, the actual bonus formula resulted in an excess of
$135,000, which the Compensation Committee granted as discretionary bonuses
(in addition to any bonuses earned under the 1998 Bonus Plan) to selected
executives based on their efforts during 1998 and contributions to overall
results that were viewed as substantial.
(3) All Other Compensation earned during fiscal 1998 includes the following: (i)
Company contributions to the Profit Sharing Plan, the Company's
tax-qualified profit sharing retirement plan: Mr. Smith -- $6,646, Mr.
Wilson -- $3,220, and Mr. Karr -- $2,984; (ii) Company matching
contributions to the Employee Savings Plan: Mr. Smith -- $1,600, Mr.
Wilson -- $772, and Mr. Karr -- $716; (iii) group term life insurance
premiums paid by the Company: Mr. Smith -- $893, Mr. Wilson -- $639, Mr.
Karr -- $571, and Mr. Williams -- $469; (iv) a special bonus paid in lieu of
certain contributions to the Profit Sharing Plan due to limitations imposed
by the Internal Revenue Service: Mr. Smith -- $3,259; and (v) the following
payments to Mr. Carmody attributable to the period January 1, 1998 through
March 30, 1998 during which he served as Interim President and Chief
Executive Officer: nonemployee directors' quarterly retainer fee -- $5,325,
nonemployee directors' meeting fees -- $5,450, Supplemental Retirement
Income Plan -- $43,750, Deferred Compensation Investment Plan
(Executives) -- $13,950, transfer of automobile -- $8,877, and payments for
community activities -- $17,500.
All Other Compensation earned during fiscal 1997 includes the following: (i)
Company contributions to the Profit Sharing Plan: Mr. Smith -- $5,424; (ii)
Company contributions to the Employee Savings Plan: Mr. Smith -- $1,600;
(iii) a special bonus paid in lieu of certain contributions to the Profit
Sharing Plan due to limitations imposed by the Internal Revenue Service: Mr.
Smith -- $4,777; (iv) the following payments to Mr. Carmody attributable to
the period November 7 through December 31, 1997 during which he served as
Interim President and Chief Executive Officer: nonemployee directors'
quarterly retainer fee -- $2,188, nonemployee directors' meeting fees
-- $3,200, Supplemental Retirement Income Plan -- $25,521, and Deferred
Compensation Investment Plan (Executives) -- $8,138; and (v) with respect to
Mr. Karr -- $25,000 representing a moving allowance.
All Other Compensation earned during fiscal 1996 includes the following: (i)
Company contributions to the Profit Sharing Plan: Mr. Carmody -- $7,950;
(ii) premiums paid by the Company for life insurance policies, any proceeds
of which are payable to the respective beneficiaries designated by the named
executive officers: Mr. Carmody -- $1,310; (iii) a special bonus paid in
lieu of certain contributions to the Profit Sharing Plan due to limitations
imposed by the Internal Revenue Service: Mr. Carmody -- $32,166; (iv)
expense incurred by the Company under the Deferred Compensation Investment
Plan (Executives): Mr. Carmody -- $39,000; (v) the cash surrender value of a
life insurance policy transferred to Mr. Carmody on September 9,
1996 -- $675,600; and (vi) expense incurred by the Company under the
Supplemental Retirement Income Plan: Mr. Carmody -- $122,000.
(4) Mr. Gellerstedt became President and Chief Executive Officer of the Company
as of March 30, 1998.
(5) Mr. Carmody retired from his employment with the Company on June 30, 1996;
his 1996 salary is attributable to the period January 1, 1996 to June 30,
1996. From November 7, 1997 through March 30, 1998, Mr. Carmody held the
positions of Interim President and Chief Executive Officer; his 1997 salary
is attributable to the period November 7, 1997 through December 31, 1997;
his 1998 salary is attributable to the period January 1, 1998 through March
30, 1998. See "Employment and Other Agreements" for a description of the
agreement pursuant to which Mr. Carmody served.
(6) Mr. Wilson began employment and became the Company's Corporate Controller as
of June 30, 1997.
5
<PAGE> 6
(7) Mr. Karr began employment with the Company on June 30, 1997, and became
Treasurer on July 23, 1997 and Assistant Secretary on December 9, 1998.
(8) Mr. Williams began employment with the Company and became the Vice President
and Chief Information Officer on March 30, 1998.
OPTION GRANTS
Table 2 sets forth information regarding the number and terms of stock
options granted to the named executive officers during the fiscal year ended
December 31, 1998. Included in such information, in accordance with the rules
and regulations of the Commission, is the potential realizable value of each
option granted, calculated using the 5% and 10% option pricing model.
TABLE 2: OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ------------------------------------------------------------------------------------ ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ---------------------
NAME GRANTED (1) FISCAL YEAR (PER/SH) (2) DATE (3) 5% 10%
- ---- ----------- ------------ ------------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt............ 50,000 10.71 $22.4375 3/30/08 $705,541 $1,787,979
T.R. Carmody................ 0 -- -- -- -- --
R.G. Smith.................. 24,000 5.14 $21.5625 12/09/08 325,452 824,761
R.J. Wilson................. 14,000 3.00 $21.5625 12/09/08 189,847 481,111
J. H. Karr.................. 14,000 3.00 $21.5625 12/09/08 189,847 481,111
C.R. Williams............... 5,000 1.07 $ 22.50 05/08/08 70,750 179,296
24,000 5.14 $21.5625 12/09/08 225,453 824,761
</TABLE>
- ---------------
(1) 50,000 options were granted to Mr. Gellerstedt on March 30, 1998, which were
immediately exercisable, pursuant to the provisions of his offer of
employment. An aggregate of 76,000 options were granted to the named
executive officers on December 9, 1998, under the terms of the American
Business Products, Inc. 1991 Stock Incentive Plan (the "1991 Stock Incentive
Plan"). Other than the options granted to Mr. Gellerstedt, the options will
become exercisable in increments, with 25% of the option shares becoming
exercisable on the first anniversary of the date of grant, an additional 25%
of the option shares becoming exercisable on each successive anniversary
date, with full exercisability occurring on the fourth anniversary date.
(2) The exercise price of an option may be paid in cash, by delivery of shares
of the Common Stock, by broker-assisted cashless exercise or by a
combination thereof, subject to certain conditions. To the extent that the
exercise price of an option is paid with shares of the Common Stock, the
optionee may be eligible for a reload option if he is still employed by the
Company at the time of exercise. The options granted on December 9, 1998 are
limited to one reload. A reload option is an option granted for the same
number of shares as is exchanged in payment of the exercise price and is
subject to all of the same terms and conditions as the original option
except for the exercise price, which is the fair market value of the Common
Stock on the date the reload option is granted.
(3) The options were granted for a term of 10 years, subject to earlier
termination upon occurrence of certain events related to termination of
employment or change of control of the Company.
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<PAGE> 7
OPTION EXERCISES
Table 3 sets forth the number of shares of the Common Stock acquired upon
the exercise of options by the named executive officers during the fiscal year
ended December 31, 1998, including the aggregate value of gains on the date of
exercise. The table also sets forth (i) the number of shares covered by
unexercised options (both exercisable and unexercisable) as of December 31,
1998, and (ii) the respective values of "in-the-money" options, which represent
the positive spread between the exercise price of existing options and the fair
market value of the Common Stock at December 31, 1998, which was $23.50.
TABLE 3: AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
FISCAL YEAR-END
---------------------------------------------------------
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
EXERCISES DURING YEAR OPTIONS IN-THE-MONEY OPTIONS
-------------------------- AT FISCAL YEAR-END AT FISCAL YEAR-END
SHARES ACQUIRED VALUE --------------------------- ---------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- --------------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
L.L. Gellerstedt............ 0 $0 50,000 0 $53,125 $ 0
T.R. Carmody................ 0 0 33,000 0 216,500 0
R.G. Smith.................. 0 0 23,500 89,500 71,406 246,968
R.J. Wilson................. 0 0 2,000 20,000 7,375 49,250
J.H. Karr................... 0 0 1,750 19,250 6,453 46,484
C.R. Williams............... 0 0 0 29,000 0 51,500
</TABLE>
LONG-TERM INCENTIVE COMPENSATION
Table 4 sets forth information regarding the long-term incentive awards
granted to the named executive officers during the fiscal year ended December
31, 1998. Included in this information, in accordance with the rules and
regulations of the Commission, are the potential threshold, target and maximum
amounts of future payments under awards that are not based on the Company's
stock price.
TABLE 4: LONG-TERM INCENTIVE PLANS -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE
NUMBER OF OR OTHER ESTIMATED FUTURE PAYOUTS
SHARES, UNITS PERIOD UNTIL UNDER NON-STOCK PRICE-BASED PLANS
OR OTHER MATURATION OR -------------------------------------
NAME RIGHTS(#)(1) PAYOUT THRESHOLD($) TARGET($) MAXIMUM($)
- ---- ------------- ----------------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C>
L.L. Gellerstedt(2)............ 0 -- $ 0 $ 0 $ 0
R.G. Smith..................... 70,000 1/1/99 - 12/31/00 14,000 70,000 175,000
1/1/99 - 21/31/01 14,000 70,000 175,000
R.J. Wilson.................... 35,000 1/1/99 - 12/31/00 7,000 35,000 87,500
1/1/99 - 12/31/01 7,000 35,000 87,500
J.H. Karr...................... 30,000 1/1/99 - 12/31/00 6,000 30,000 75,000
1/1/99 - 12/31/01 6,000 30,000 75,000
C.R. Williams.................. 35,000 1/1/99 - 12/31/00 7,000 35,000 87,500
1/1/99 - 12/31/01 7,000 35,000 87,500
</TABLE>
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<PAGE> 8
- ---------------
(1) Payouts of awards for the 1999-2000 performance period and the 1999-2001
performance period are tied to achieving specified levels of economic profit
(as defined elsewhere in this proxy statement). The target amount will be
earned for each period if 100% of the targeted economic profit goal
established for that period is achieved. The threshold amount for each
period will be earned at the achievement of 87% of the targeted goals,
whereas the maximum awards will only be earned for achieving 127% of the
target performance goals.
(2) Mr. Gellerstedt did not receive long-term incentive awards in fiscal year
1998 other than those reported in Table 1: Summary Compensation Table and
Table 2: Option Grants in Last Fiscal Year, which were made to him under the
provisions of his offer of employment. After year-end, the Board of
Directors approved a separate long-term incentive arrangement for Mr.
Gellerstedt that is discussed in more detail in the Compensation and
Nominating Committee Report on Executive Compensation as well as in the
section covering Compensatory Plans and Arrangements.
COMPENSATORY PLANS AND ARRANGEMENTS
Set forth below is information regarding the Company's compensatory plans
and arrangements under which the named executive officers have vested rights to
receive future payments in an amount exceeding $100,000. Consistent with the
Company's pay-for-performance philosophy, the Company currently does not intend
to include any new participants under the Supplemental Retirement Income Plan.
Supplemental Retirement Income Plan. The Supplemental Retirement Income
Plan (the "SRIP") is a nonqualified plan established for the benefit of certain
executives that generally provides fixed monthly cash payments for life upon
retirement, with guaranteed payments to the participant or his beneficiary for a
minimum of 15 years. Annual payments generally are equal to 50% of the highest
annual compensation (base salary plus bonus) paid to a vested participant during
the last three years in which the participant received his annual salary prior
to reaching age 62, but amounts payable under the plan are subject to dollar
limits set by the Board of Directors for each participant.
Mr. Carmody, who retired on June 30, 1996, is entitled to and is receiving
benefits of $175,000 per year under the plan. Benefit payments of $43,750 under
the SRIP attributable to the period January 1, 1998 through March 30, 1998,
during which Mr. Carmody served as Interim President and Chief Executive Officer
of the Company are included in "Table 1: Summary Compensation Table." Expenses
incurred by the Company in fiscal 1998 for the benefit of Mr. Carmody were
$128,183. None of the other named executive officers participates in or has any
vested benefit under the SRIP.
Deferred Compensation Investment Plan (Executives). The Deferred
Compensation Investment Plan (Executives) is a nonqualified plan that permitted
certain executives to make a one-time election to defer a specified amount of
his 1985 annual compensation. The maximum annual amount of benefit payable to a
fully vested participant is specified in the participant's joiner agreement with
the Company but may be reduced due to certain adverse changes in federal income
tax provisions. A participant's vested benefit will never fall below the amount
of the deferral, plus interest compounded at an annual rate of 12%.
Mr. Carmody, who retired on June 30, 1996, is entitled to and is receiving
his maximum benefit of $55,800 per year under the plan. Benefits of $13,950
attributable to the period January 1, 1998 through March 30, 1998, during which
Mr. Carmody served as Interim President and Chief Executive Officer of the
Company are included in "Table 1: Summary Compensation Table." Expenses incurred
by the Company for
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<PAGE> 9
the benefit of Mr. Carmody in fiscal 1998 were $40,875. None of the other named
executive officers participates in or has any vested benefit under this plan.
EMPLOYMENT AND OTHER AGREEMENTS
Larry L. Gellerstedt, III. In its offer of employment to Mr. Gellerstedt,
the Company agreed to provide certain compensation and benefits to him, in
addition to certain signing incentives. The signing incentives are reported in
other portions of this proxy. In addition to establishing his base salary and a
minimum annual bonus for 1998, the Company agreed to develop a long-term
incentive program for Mr. Gellerstedt upon the acceptance of his strategic plan
for the Company. It was the Board's intent that this long-term incentive
arrangement would, over time, provide potential ownership opportunities for Mr.
Gellerstedt of up to two to two and one-half percent of the outstanding shares
of the Company. In addition, the Company agreed to provide certain perquisites
to Mr. Gellerstedt, including an automobile allowance. Mr. Gellerstedt is
eligible to participate in the Company's employee benefit plans pursuant to the
eligibility provisions of those plans. The salary and signing incentives
provided to Mr. Gellerstedt are more fully described in the "Compensation and
Nominating Committee Report -- Chief Executive Officer Compensation."
Also, pursuant to the offer letter, if the Company terminates Mr.
Gellerstedt's employment without cause (as defined in the offer letter) during
the first two years of his employment, or if Mr. Gellerstedt voluntarily
terminates during that period for good reason (as defined in the offer letter),
the Company would continue his base salary plus the amount of his most recent
bonus under the Bonus Plan and group health insurance for 12 months. Further, in
the event of his termination of employment by the Company (or his voluntary
termination for good reason) within two years following a change in control of
the Company, the Company will pay Mr. Gellerstedt three times the sum of his
base salary then in effect plus the amount of his most recent bonus under the
Bonus Plan and will continue his group health insurance coverage for 36 months.
Payments made to Mr. Gellerstedt under the change in control provisions will be
limited or reduced to avoid the imposition of the golden parachute excise taxes.
Prior to payment of any severance or change in control benefits, Mr. Gellerstedt
agrees to sign a restrictive covenant containing noncompete, nonsolicitation and
nondisclosure provisions to protect the Company for a period of one year
following his termination.
On February 25, 1999, the Company established the terms of Mr.
Gellerstedt's compensation for 1999 and the details of the long-term incentive
arrangement provided for in his offer of employment. For 1999, Mr. Gellerstedt's
base salary will remain at $450,000. He will participate in the Bonus Plan for
1999 (discussed in more detail in the Compensation Committee Report) on the same
basis as the Company's other senior executives, except that his annual target
award will be 65% of his base salary. Under the long-term incentive arrangement,
Mr. Gellerstedt was granted 232,000 stock options with an exercise price equal
to the fair market value of the Company's stock on the date of grant. These
options become exercisable in 25% increments on each of the first four
anniversaries of the grant and have a ten-year term. Mr. Gellerstedt also was
granted 131,000 shares of performance-based restricted stock that may vest in
part or in full, or may be forfeited, based on the Company's growth in earnings
per share over the next three years. The grants of stock options and
performance-based restricted stock were made under the terms of the Company's
1999 Incentive Compensation Plan, contingent on the approval by shareholders of
that plan, which is sought under Proposal 2 of this proxy statement.
The Company and Mr. Gellerstedt have entered into discussions concerning
the provisions of a formal employment agreement. It is the intention of both
parties to finalize this agreement in early 1999.
9
<PAGE> 10
Thomas R. Carmody. Effective November 7, 1997, the Company entered into an
agreement with Thomas R. Carmody pursuant to which Mr. Carmody served as the
Company's Interim President and Chief Executive Officer until March 30, 1998,
the effective date of Mr. Gellerstedt's appointment as President and Chief
Executive Officer of the Company. In exchange for his service, Mr. Carmody
received a salary of $142,252 for the period from January 1, 1998 through March
30, 1998. Mr. Carmody was also paid regular nonemployee director fees for the
period from January 1, 1997 through May 8, 1998. See "Table 1: Summary
Compensation Table."
Richard G. Smith. The Company entered into an agreement with Richard G.
Smith, dated July 25, 1995, pursuant to which Mr. Smith serves as Vice President
and Chief Financial Officer of the Company, specifying the terms of his
employment. The Company also entered into a separation agreement with Mr. Smith
dated February 14, 1998, which superseded and revoked the separation provisions
in the July 25, 1995 agreement. The separation agreement provides that, upon the
involuntary termination of Mr. Smith's employment by the Company without cause
(as defined in the separation agreement) within five years following the date of
the separation agreement, the Company will pay Mr. Smith severance pay equal to
$18,333.33 a month for a period of 18 months. In addition, the separation
agreement provides that upon a termination without cause, the committee
administering the 1991 Stock Incentive Plan (or a successor plan) will
immediately accelerate the vesting of any outstanding stock options held by Mr.
Smith on the date of his termination and will extend the term of exercisability
of those options until 12 months following the date of his termination.
Raymond J. Wilson. The Company entered into an agreement with Raymond J.
Wilson, dated May 8, 1997, pursuant to which Mr. Wilson serves as Corporate
Controller of the Company. Under that agreement, Mr. Wilson is entitled to
participate in the Company's management bonus plan. Mr. Wilson is also entitled
to participate in the Company's stock option plan. If the Company terminates Mr.
Wilson's employment without cause, the Company must provide Mr. Wilson with nine
months of salary.
John H. Karr. The Company entered into an agreement with John H. Karr
dated June 26, 1997, pursuant to which Mr. Karr serves as Treasurer of the
Company. Under that agreement, Mr. Karr is entitled to participate in the
Company's management bonus plan. Mr. Karr is also entitled to participate in the
Company's stock option plan, and was provided a special payment of $25,000 to
defray the expense of relocation. That payment must be repaid on a prorated
basis if Mr. Karr's employment with the Company is terminated within 25 months
of July 15, 1997. If the Company terminates Mr. Karr's employment without cause,
the Company must provide Mr. Karr with nine months of salary, outplacement
services at a cost of not more than $15,000, and, at the Company's election,
either fully vest any Company contributions on Mr. Karr's behalf in the
Company's Profit Sharing Plan and Employee Savings Plan or provide an additional
severance amount equal to the amount of any unvested contributions.
Christopher R. Williams. The Company entered into an agreement with
Christopher R. Williams, dated March 24, 1998, pursuant to which Mr. Williams
serves as Chief Information Officer for the Company. Under that agreement, Mr.
Williams is guaranteed to receive a minimum bonus for fiscal year 1998 of 35
percent of his 1998 earned salary. In addition, the agreement provided that
management would recommend a grant of 5,000 stock options to Mr. Williams for
1998. If the Company terminates Mr. Williams' employment without cause, the
Company must provide him with nine months of base salary plus outplacement
services at a cost of $15,000.
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<PAGE> 11
COMPENSATION AND NOMINATING COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended December 31, 1998, the members of the
Compensation Committee were Messrs. Huie (Chairman), Ackerman, Harris and
Stokely, and Mr. Miller replaced Mr. Ackerman on January 1, 1999. None of them
is or has ever been an officer or employee of the Company. There were no
interlocking relationships between any executive officers of the Company and any
entity whose directors or executive officers served on the Company's
Compensation Committee. The arrangement pursuant to which payments were made to
Mr. Northrop for certain services rendered by him is described above in
"Director Compensation." None of the other members of the Compensation Committee
engaged in transactions or had relationships requiring disclosure under Item 404
of Regulation S-K in the fiscal year ended December 31, 1998.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The arrangement pursuant to which payments were made to Mr. Northrop for
certain services rendered by him is described above in "Director Compensation."
There were no other transactions or relationships requiring disclosure under
Item 404 of Regulation S-K for the fiscal year ended December 31, 1998.
COMPENSATION AND NOMINATING COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
This report by the Compensation Committee of the Board of Directors
discusses the strategy and objectives according to which the Compensation
Committee makes decisions about compensation for the Company's executive
officers. The Compensation Committee is composed entirely of independent,
nonemployee directors.
COMPENSATION STRATEGY AND OBJECTIVES
As part of its annual duties and particularly in conjunction with the
Company's selection and employment of a new Chief Executive Officer, the
Compensation Committee reviewed the overall executive compensation program. The
Compensation Committee's main focus in structuring the compensation program for
the Company's executive officers is to enhance shareholder value. The
Compensation Committee views the executive compensation program as one of the
key means by which this goal will be accomplished.
The underlying objectives of the program support the development of a
capable and highly-qualified senior executive team. As a starting point, the
Compensation Committee believes it is critical to have a compensation program
that enables the Company to attract and retain talented executives. For this
reason, the Compensation Committee has adopted a philosophy of providing target
annual cash compensation opportunities at the median of the comparison group,
and in order to more effectively emphasize long-term performance for 1999, by
providing target long-term incentive compensation opportunities at the 75th
percentile of the comparison group. This approach supports the Committee's
determination that a significant portion of total compensation should consist of
short-term and long-term incentive pay that will only be received if aggressive
business and financial results are achieved. Further, it is the Compensation
Committee's view that the interests of executives should be more closely aligned
with those of shareholders, and that providing stock-based compensation is an
appropriate means of reaching this objective.
To ensure that the overall executive program is competitive and supports
the objectives outlined, the Compensation Committee believes it is important to
consider pay levels and practices at the companies with
11
<PAGE> 12
whom the Company competes for talented executives. Each year, the Compensation
Committee compares the components of the Company's executive pay program with
those in place at a group of companies that manufacture durable goods (both
within and outside the industry). Once the companies are identified for the
comparison group, the applicable information relative to those companies is
adjusted for size differentials. The Compensation Committee relies upon the
assistance of professional consultants in the preparation of the comparison
group information. The Compensation Committee believes this comparison group
represents the Company's competitors for hiring executives, and recognizes that
the executive talent market is broader than either its direct competitors or the
companies included in the stock performance graph peer group.
The three primary components of executive pay -- base salary, annual
incentive compensation and long-term incentive compensation -- are discussed in
more detail in the following sections of this report.
EXECUTIVE OFFICER COMPENSATION
Base Salaries. For both the 1998 and 1999 fiscal years, the Compensation
Committee targeted base salaries for executive officers at the 50th percentile
of pay levels for comparable positions at the companies in the comparison group.
The Compensation Committee determines base salaries for executive officers after
considering the recommendations of the Chief Executive Officer. The Compensation
Committee recommends a base salary for the Chief Executive Officer to the Board
of Directors for its approval.
Salary levels are based on market pay levels and other relevant factors,
such as the Company's performance and the individual executive's performance,
experience, responsibilities and contribution potential. Salary levels may vary
above or below the market pay levels when all these factors are considered,
based on the Compensation Committee's subjective assessment of the factors
listed above.
In December 1998, the Compensation Committee reviewed market salary levels
for executive officers. The results of that analysis showed that the salaries
paid for 1998 were somewhat below the Company's 50th percentile objective of
that comparison group. Based on this analysis, the Compensation Committee
approved the Chief Executive Officer's recommendations to increase base salaries
for selected executives for fiscal year 1999. After considering these increases,
base salaries for the executive officers as a whole should be closer to, but
remain slightly below, the market 50th percentile.
Short-Term Incentive Compensation. Under the Company's Annual Management
Incentive Bonus Plan (the "Bonus Plan"), the Company's executive officers and
other key employees have the opportunity to earn annual cash bonuses based on
the degree to which specified performance goals are met. The goals established
for this program are consistent with the Company's business objectives for the
year. In this manner, the Bonus Plan clearly and directly links executive pay to
performance results achieved.
Under the Bonus Plan for 1998, the specific performance goals for the
Company were recommended by the Chief Executive Officer and approved by the
Compensation Committee. For the Chief Executive Officer and the Chief Financial
Officer, earnings per share was the sole basis for any awards that could be
earned for the year. For other executive officers, awards were weighted 75% on
company financial performance (actual adjusted income before interest and taxes)
and 25% on individual objectives.
The Compensation Committee established performance measures at "threshold",
"target" and "maximum" performance levels for each performance measure. Once the
threshold goals are met, awards earned may range from 5% to 100% of base salary
for the Chief Executive Officer, from 5% to 80% of base salary for the Chief
Financial Officer, and from 5% to 70% of base salary for other executives, based
on how actual
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<PAGE> 13
results compare to the goals set. In addition, performance between designated
levels is recognized by straight-line interpolation.
In determining the results achieved for 1998, the Compensation Committee
concluded that income or expense items stemming from any unusual and significant
activities, or that resulted from business unit consolidations, should be
excluded for purposes of calculating bonuses. The Compensation Committee also
believed it would be in the best interests of the shareholders to set a
threshold corporate performance level below which no bonuses would be earned
(regardless of other corporate or individual performance). For 1998, the
Compensation Committee established this performance threshold at a 12% return on
shareholders' equity, calculated after considering any adjustments described
above.
Actual results for 1998 were slightly above target levels for the
performance measures. Based on this, bonuses earned based on financial
performance were paid at slightly above target levels. Bonuses paid for the
individual portion of awards varied by executive, with all but one achieving
results that earned payments for this portion of the award that were between
target and maximum levels. Bonuses earned by named executive officers under the
Bonus Plan of 1998 are disclosed in "Table 1: Summary Compensation Table."
Several executive officers hired during 1997 and 1998 negotiated guaranteed
minimum bonuses for the 1998 year as one of the terms of their employment.
Actual amounts earned by each of these executives under the Bonus Plan, based on
the Company's results for the year as well as their individual performance,
exceeded the guaranteed amounts.
In developing the provisions of the Bonus Plan for 1999, the Compensation
Committee determined to make certain changes to the program. Awards for 1999
performance will be based solely on corporate and/or operating company financial
results achieved, rather than having a portion based on individual performance.
The Compensation Committee believes this change will more closely link executive
rewards with the results achieved for shareholders, particularly for senior
executives whose responsibilities should be focused on meeting shareholder
expectations.
Performance measures for 1999 awards will include economic profit in
addition to continuing the prior focus on revenues and earnings per share. For
this purpose, economic profit is the excess of after tax income before financing
costs over the cost of the invested capital used to generate that income,
assuming a weighted average cost of capital of 10% after taxes. Minor
adjustments to income are made to reverse goodwill amortization and other
noncash expense. The term "invested capital" means total assets less excess
cash, intercompany notes receivable, certain deferred tax assets and
interest-free current liabilities, plus adjustments to include the value of
significant leased assets and to state goodwill at cost. The inclusion of the
economic profit measure is intended to help ensure that executives' actions are
directed towards increasing shareholder value in each business unit.
Threshold, target and maximum levels of performance measures will be
established. Based on the level of achievement of the performance measures,
participants may earn a threshold, target or maximum award, based on a
percentage of base salary or stated dollar amount. To enhance the overall
competitiveness of the program, target awards were increased so they approximate
the 50th percentile of the market for all executive officers. Finally, the
Compensation Committee determined that it would be appropriate to strengthen the
performance aspects of the plan. To do so, awards for 1999 may vary from 20% of
target awards when a threshold level of performance is achieved to a maximum
award of 250%, which can only be earned if aggressive business goals are met.
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<PAGE> 14
Long-Term Incentive Compensation. The Compensation Committee strongly
believes that a significant portion of executive pay should be provided through
longer-term incentive compensation that promotes stock ownership and aligns the
interests of executives with those of shareholders.
Historically, the long-term incentive compensation program for executive
officers has been based primarily on grants of stock options. As part of its
overall review of the executive compensation program, the Compensation Committee
approved changes in the long-term incentive portion of the program. To further
improve the competitiveness of the overall program, and to emphasize the
importance of achieving long-term results, the Compensation Committee approved
the setting of target long-term incentive award opportunities for executives at
the 75th percentile for comparable positions at the companies in the comparison
group, as discussed earlier in this report. In addition to granting stock
options in December 1998, the Compensation Committee approved a program to begin
in 1999 that provides for cash payments to participants based on the extent to
which specified goals for economic profit are met in three-year performance
periods. For this plan, the term "economic profit" has the same meaning as
described in the Bonus Plan for 1999 under "Short Term Incentive Compensation"
above.
This new program is intended to reinforce the Company's strategic goal of
increasing shareholder value. It will require Company and operating unit
executives to meet aggressive economic profit goals to earn rewards. Specific
performance levels -- at threshold, target and maximum -- will be set for the
Company as a whole and for individual business units. As under the short-term
incentive plan, payments are highly leveraged and may vary significantly based
on the degree to which the established performance goals are met. Threshold
level performance will result in awards at 20% of target, whereas maximum level
performance will yield awards that are equal to 250% of target. To phase in the
plan, two partial performance periods and one full period began on January 1,
1999. The partial periods cover one and two-year performance cycles, and the
full period covers a three-year time period. On an ongoing basis, a new
three-year performance period will begin each year.
To determine the number of options to grant to each participant and the
size of each participant's target long-term cash incentive award, the
Compensation Committee has established award size guidelines or targets that
vary by level of responsibility. Each year, the target annualized long-term
award opportunities generally will be more heavily weighted toward stock options
and less to cash performance awards, although this mix may change from year to
year at the Compensation Committee's discretion. Actual awards also may vary
somewhat based on the Compensation Committee's judgment as to individual
performance and overall Company success, among other factors.
In December 1998, the Compensation Committee granted stock options to
executive officers and other key employees as permitted under the 1991 Stock
Incentive Plan. This plan provides that the Compensation Committee may make
grants of incentive or nonqualified stock options to selected key employees. The
stock options granted have a term of ten years, and most become exercisable in
25% increments annually beginning on the first anniversary of the grant. Stock
options also were granted to selected named executives who were hired during
1998 pursuant to those executives' starting compensation packages. Stock options
granted to named executive officers during the fiscal year ended December 31,
1998 and year-end option values are reflected in "Executive
Compensation -- Table 2: Options Grants in Last Fiscal Year" and "Executive
Compensation -- Table 3: Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Values." The 1991 Stock Incentive Plan also permits the award of
restricted stock to key employees. No restricted stock grants were made to named
executive officers (other than the Chief Executive Officer, as discussed below)
during 1998.
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<PAGE> 15
CHIEF EXECUTIVE OFFICER COMPENSATION
Two individuals served in the Chief Executive Officer position for the
Company during 1998. As indicated in the Summary Compensation Table, Mr. Carmody
(a retired Chief Executive Officer of the Company) provided services as Interim
Chief Executive Officer until March 30, 1998. Mr. Carmody performed these
services at the specific request of the Board of Directors, and details of his
compensation for the period of service were negotiated between the Compensation
Committee and Mr. Carmody. See "Executive Compensation -- Employment and Other
Agreements."
Mr. Gellerstedt joined the Company as President and Chief Executive Officer
on March 30, 1998. Upon hire, the Compensation Committee agreed to pay Mr.
Gellerstedt an annual base salary of $400,000 (which increased to $450,000 in
May 1998 upon his election as Chairman of the Board of Directors) and a minimum
guaranteed short-term incentive payment of $100,000 for 1998. Mr. Gellerstedt's
package also included signing incentives in the form of (1) an award of 11,142
shares of restricted stock (with value of approximately $250,000 and which
became vested and transferable as of December 31, 1998), and (2) a grant of
50,000 stock options with an exercise price of $22.4375 which became immediately
exercisable and have a term of 10 years. The Compensation Committee believes the
signing incentives awarded to Mr. Gellerstedt were competitive with those being
offered to newly-hired chief executive officers in comparable situations.
In October 1998, before any amounts under the Company's Bonus Plan were
earned or calculable, Mr. Gellerstedt recommended to the Compensation Committee
that his bonus for 1998 be limited to $100,000 and that any excess over $100,000
that the Compensation Committee might otherwise have considered granting to him
under the Bonus Plan formula be used, at the discretion of the Compensation
Committee, for merit bonuses to other employees. The Compensation Committee, in
exercising its sole right to determine bonuses, honored Mr. Gellerstedt's
recommendation and set his 1998 bonus under the Plan at $100,000. At the end of
the performance period, the actual bonus formula resulted in an excess of
$135,000, which the Compensation Committee granted as discretionary bonuses (in
addition to any bonuses earned under the 1998 Bonus Plan) to selected executives
based on their efforts during 1998 and contributions to overall results that
were viewed as substantial. The bonuses paid to the named executive officers are
disclosed in "Table 1: Summary Compensation Table."
As part of his offer of employment, the Compensation Committee agreed to
develop a long-term incentive arrangement for Mr. Gellerstedt designed to
increase his ownership in the Company upon the Board of Directors' acceptance of
his strategic plan for the Company. Mr. Gellerstedt's strategic plan was
approved by the Board of Directors in late 1998. In recognition of this
accomplishment, the Committee and the Board established the elements of Mr.
Gellerstedt's 1999 compensation package, and developed a long-term arrangement
designed to increase his ownership in the Company. The details of his 1999
compensation, and his long-term incentive arrangement, are discussed in the
Employment and Other Agreements section of this proxy statement.
CODE SECTION 162(M) POLICY
It is the responsibility of the Compensation Committee to address issues
raised by Section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"). That section limits the Company's ability to deduct annual compensation
in excess of $1,000,000 paid to its chief executive officer and/or the next four
most highly compensated executives. Certain compensation that qualifies as
"performance-based" may be exempt from the Code Section 162(m) limit. It is the
Compensation Committee's intent to preserve the
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<PAGE> 16
maximum deductions for the Company; however, the Compensation Committee reserves
the right to authorize nondeductible compensation if it believes that it is in
the Company's best interest.
The Compensation Committee wishes to extend its sincere appreciation to F.
Duane Ackerman, who provided keen insight and significant knowledge in his
service on the Compensation Committee, particularly in the 1998 fiscal year. Mr.
Ackerman resigned from the Board of Directors as of December 31, 1998, due to
other commitments. Mr. Miller has been appointed to fill Mr. Ackerman's position
on the Compensation Committee.
W. Stell Huie (Chairman)
Hollis L. Harris
C. Douglas Miller
William B. Stokely, III
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PROPOSAL 2 -- APPROVAL AND ADOPTION OF THE
AMERICAN BUSINESS PRODUCTS, INC. 1999 INCENTIVE COMPENSATION PLAN
GENERAL
In December 1998, the Company's Board of Directors adopted the American
Business Products, Inc. 1999 Incentive Compensation Plan (the "ICP") to become
effective as of February 15, 1999, subject to the approval of our shareholders
at the Annual Shareholder Meeting.
The ICP is designed to replace the Company's existing 1991 Stock Incentive
Plan and 1993 Directors Stock Incentive Plan. In order to avoid further
shareholder dilution, the Company is not seeking additional new shares for the
ICP, but instead any shares authorized under those plans, as well as any shares
authorized under the Company's prior 1981 Stock Option Plan, that remain
available for issuance will be "transferred" to the ICP. In addition, any shares
previously granted as options and/or restricted stock under those plans that
become available again due to forfeiture or cancellation of those rights will
also become available for issuance under the ICP.
The purpose of the ICP is to encourage and enable eligible employees and
nonemployee directors to obtain a proprietary interest in the Company by
acquiring the Common Stock. The Company believes that the ICP will provide
eligible employees and nonemployee directors with an added incentive to
stimulate their efforts in promoting the growth, efficiency and profitability of
the Company and its related companies and to encourage them to continue in the
employ of the Company and its related companies. The ICP may also help to
attract outstanding employees and outside directors to the service of the
Company and its related companies.
The ICP has been designed to permit the Compensation Committee to provide
"performance-based" compensation to the Company's key employees in various
forms. In its discretion, the Compensation Committee may make awards under the
ICP based on the performance measures or combination of performance measures
described in the ICP. It is the Company's intent that this type of
performance-based award be exempt from the provisions of Section 162(m) of the
Code, which limit the amount of the Company's deductions for compensation in
excess of $1,000,000 to each of the top five executive officers. Shareholder
approval of the ICP is necessary for these awards to be exempt from those
provisions.
The following is a brief summary of the principal features of the ICP.
TYPES OF AWARDS
The ICP provides for the following types of awards:
- stock options;
- restricted stock;
- performance shares; and
- performance-based cash awards.
Stock options granted under the ICP may be incentive stock options ("ISOs"),
nonqualified stock options ("NSOs") and reload options. The Company intends that
ISOs granted under the ICP qualify as incentive stock options under Section 422
of the Code. NSOs are stock options that do not qualify as ISOs. Restricted
stock is an award of shares, often subject to vesting or trading restrictions.
Performance shares are generally
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phantom shares of stock, often subject to vesting restrictions.
Performance-based cash awards may be short-term or long-term incentive awards,
payable in cash. Stock options, restricted stock, performance shares and
performance-based cash awards are collectively referred to hereunder as
"Awards."
ADMINISTRATION
The Compensation Committee of the Company's Board of Directors (the
"Committee") will administer the ICP. The Committee will have full discretionary
authority to decide to whom and when to grant an Award, the type of Award
granted, the number of shares of the Common Stock covered by the Award and the
terms, conditions, performance criteria, restrictions and other provisions of
the Award. The Committee will decide whether and to what extent Awards to key
employees will be structured to conform with Code sec.162(m) requirements
applicable to performance-based compensation. The Committee will interpret the
provisions of the ICP, establish and rescind any rules and regulations relating
to the ICP, decide the terms and provisions of any agreements made under the ICP
and determine how to administer the ICP. All decisions of the Committee and its
actions with respect to the ICP are final, binding and conclusive.
SHARES AVAILABLE
Initially, the maximum number of shares that may be issued under the ICP
will be 609,076 shares of the Common Stock. This number has been reached by
consolidating the shares that currently remain available under the Company's
existing 1981 Stock Incentive Plan, 1991 Stock Incentive Plan, and 1993
Directors Stock Incentive Plan. Of this number, a maximum of 600,000 shares may
be issued as ISOs and a maximum of 400,000 shares may be issued as restricted
stock. The Board determined that no further grants or awards will be made under
the prior plans after February 14, 1999, and the remaining available stock under
those plans would be made available only under the new ICP, subject to
shareholder approval. If the shareholders should fail to approve this proposal,
the existing plans shall continue in operation. This use of existing available
stock does not create any additional dilution for the shareholders of the Common
Stock.
The number of shares available under the ICP will be adjusted by shares of
the Common Stock subject to Awards under the ICP that are forfeited, canceled or
expired without the issuance of the Common Stock, shares of the Common Stock
tendered to the Company in payment of the exercise price of a stock option
and/or in satisfaction of income tax or other withholding obligations under the
ICP or the three prior plans, shares of Common Stock subject to option grants
(but not restricted stock awards) under the prior plans that are forfeited,
canceled or expired without the issuance of Common Stock, and shares of Common
Stock, to the extent authorized by the Company's Board of Directors for purposes
of the ICP, repurchased by the Company in the open market or in a private
transaction.
As of the record date (March 1, 1999), the fair market value of the Common
Stock that would be subject to Awards under the ICP was $18.25 per share.
ELIGIBILITY
Key employees and nonemployee directors of the Company and its related
companies are eligible to participate in the ICP. As of the record date (March
1, 1999), approximately 80 key employees and 10 nonemployee directors were
eligible to participate in the ICP.
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STOCK OPTIONS
Grant and Transferability of Stock Options. Stock options granted under
the ICP represent rights to purchase shares of the Common Stock within a fixed
period of time and at a specified price per share (the "exercise price"). The
Committee is authorized in its sole discretion to grant ISOs, NSOs or both for
the purchase of the Company's Common Stock. Only key employees may receive ISOs.
Unless the Committee specifies otherwise, an optionee may transfer a stock
option only by will or by the laws of descent and distribution. A maximum of
500,000 shares may be granted as stock options to any individual during any one
calendar year.
Exercise Price. An optionee does not pay any consideration for the grant
of a stock option. The exercise price of each stock option will be the fair
market value of the Common Stock on the date of grant (110% of the fair market
value of the Common Stock for an ISO optionee who owns more than 10% of the
voting power of all classes of stock of either the Company or any "parent" or
"subsidiary" of the Company as defined in Code sec.424). For purposes of
granting stock options, the term "fair market value" shall mean the closing
price on the date of grant. Notwithstanding any other provision of the ICP other
than the provisions related to adjustments due to corporate transactions, the
exercise price of a stock option may not be changed after its date of grant,
either by amendment, replacement, cancellation, regrant or any other method
which would have the effect of a repricing of the stock option.
Exercise of Stock Options. Each stock option granted under the ICP may be
exercised on such dates, during such periods and for such number of shares as
may be determined by the Committee. The Committee will specify in a stock option
agreement the manner in which stock options will become exercisable, as well as
any conditions, restrictions and contingencies to which the stock option may be
subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. However, upon an optionee's death, disability, or retirement
after age 60, any outstanding stock option will become immediately exercisable
for the full number of shares subject to the stock option. In the event of a
change of control of the Company (as defined in the ICP), all stock options
become immediately exercisable for the full number of shares. In addition, the
Committee always has the power to accelerate the exercisability of any stock
option granted under the ICP.
Upon the exercise of a stock option, the optionee must pay the exercise
price of the stock option. The exercise price may be paid in cash, by the
transfer to the Company of unrestricted shares of the Common Stock previously
acquired by the optionee, by broker-assisted cashless exercise, by any
combination of the foregoing methods or by any other form of payment permitted
by the Committee. An optionee will first have ownership rights as a shareholder
of the Company only when the optionee has paid the exercise price of the stock
option in full and the shares have been issued to the optionee.
Expiration Date. Although the Committee will decide the term of each stock
option, the term may generally not exceed ten years from the date of grant (or
five years from the date of grant for an ISO optionee who owns more than 10% of
the voting power of all classes of stock of either the Company or any "parent"
or "subsidiary" of the Company as defined in Code sec.424). The expiration date
of any stock option is the earliest to occur of:
- the tenth anniversary of the date of grant;
- the date three months following the date of the optionee's termination of
employment with the Company and all of its related companies for any
reason other than dismissal for cause, death, disability or retirement
after age 60;
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- the two-year anniversary of the optionee's termination of employment with
the Company and its related companies due to death, disability or
retirement after age 60; or
- the date of the optionee's termination of employment with the Company and
all of its related companies due to dismissal for cause (as defined in
the ICP).
If all or part of an ISO is not exercised within three months of the optionee's
termination of employment for any reason other than death or disability, to the
extent the option remains exercisable, the unexercised portion thereof will be
treated as an NSO. If all or part of an ISO is not exercised within one year
following the optionee's termination of employment due to death or disability,
to the extent the option remains exercisable, the unexercised portion thereof
will be treated as an NSO. The Committee at all times retains the authority to
extend the expiration date of a stock option as long as the extended expiration
date is not later than the tenth anniversary of the date of grant.
Reload Options. Unless the Committee specifies otherwise, each stock
option will be accompanied by one reload option. Reload options may be granted
only to individuals who are actively employed by the Company or a related
company at the time the grant is to be made. A reload option is a stock option
that is granted to an optionee who pays for all or part of a stock option with
shares of the Common Stock. A reload option is subject to all of the same terms
and conditions as the original stock option, except that the exercise price for
the reload option will be the fair market value of the Common Stock as of the
date of grant of such reload option.
RESTRICTED STOCK
The Committee may award restricted stock to key employees and nonemployee
directors in its discretion. Unless otherwise specified by the Committee,
restricted stock will generally become vested on the fourth anniversary of the
date of the Award. The Committee will specify in a restriction agreement the
manner in which restricted stock will vest and become nonforfeitable, as well as
any conditions, restrictions and contingencies to which the restricted stock may
be subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. A recipient of restricted stock will have immediate rights of
ownership in the shares of restricted stock, including the right to vote the
shares and the right to receive dividends with respect to the shares. However,
unless otherwise specified by the Committee, a recipient may not transfer shares
of restricted stock while such shares are still subject to restriction. Any
individual may not receive more than 250,000 shares of restricted stock in any
one calendar year.
Awards of restricted stock that remain subject to time-based vesting
schedules at the time of a recipient's death, disability or retirement after age
60 or upon a change in control of the Company (as defined in the ICP) will
become immediately vested and nonforfeitable. Awards of restricted stock that
remain subject to any other type of vesting schedule (such as satisfaction of
certain performance requirements) will become proportionately vested and
nonforfeitable, based on the portion of the performance period completed with
target level performance being deemed achieved as of the date of the recipient's
death, disability, or retirement after age 60, or the date of a change in
control of the Company (as defined in the ICP). If an Award does not have a
designated target level of performance, the performance level which, if met,
would result in the vesting of the lowest number of shares will be considered
the target level. If a recipient of a restricted stock Award terminates
employment for any reason other than death, disability or retirement after age
60, then any Awards of restricted stock that remain subject to restriction will
be forfeited. The Committee will always have the right to accelerate the vesting
of any restricted stock awarded under the ICP.
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The Committee will make Awards of restricted stock to nonemployee directors
of the Company in accordance with the following formula: upon initial election
to the Board of Directors, 200 shares; as of the first day of each year for
which the director is reelected or continues to serve as a director, 100 shares;
and as of the date of the annual shareholders meeting which follows an employee
director's retirement and continuance as a director, 200 shares. A nonemployee
director may not receive more than a total of 2,000 shares. The restricted stock
granted to nonemployee directors will not vest until the first anniversary of
the date of the Award, but the vesting will accelerate upon a director's
becoming disabled, reaching age 70 and retiring from the Board of Directors,
dying or ceasing to serve on the Board of Directors for any reason or upon a
change in control of the Company (as defined in the ICP). These provisions
related to nonemployee directors are a continuation of the provisions of the
1993 Directors Stock Incentive Plan, which previously was approved by the
shareholders.
PERFORMANCE SHARES
The Committee may award performance shares to key employees and nonemployee
directors in its sole discretion. A performance share is the right, subject to
such conditions, restrictions and contingencies as the Committee determines and
specifies in the performance share agreement, to receive one share of the Common
Stock in the future. When the Committee awards a performance share, it will
establish a bookkeeping account for the recipient to reflect the number of
performance shares awarded to the recipient. On each date that a dividend is
distributed by the Company on the Common Stock, the recipient's performance
share account will be credited with an additional whole or fractional number of
performance shares. The number of additional performance shares to be credited
will be determined by dividing the product of the dividend value times the
number of performance shares standing in the recipient's account on the dividend
record date by the fair market value of the Common Stock on the date of dividend
distribution. Any individual may not receive an Award of more than 250,000
shares of performance shares in any one calendar year.
The Committee will specify in a performance share agreement the manner in
which performance shares will vest and become nonforfeitable, as well as any
conditions, restrictions and contingencies to which the performance shares may
be subject. Such conditions, restrictions and contingencies may consist of a
requirement of continuous service and/or the satisfaction of one or more
performance goals. Unless otherwise specified by the Committee, a recipient may
not transfer performance shares, and all performance shares will be forfeited as
of the date of the optionee's termination of employment for any reason. When
performance shares vest, the participant will receive the same number of shares
of the Common Stock as the number of performance shares standing in the
participant's account.
Awards of performance shares that remain subject to any type of vesting
schedule (such as satisfaction of certain performance requirements) will become
proportionately vested and nonforfeitable, based on the portion of the
performance period completed with target level performance being deemed achieved
as of the date of the recipient's death, disability, or retirement after age 60
or the date of a change in control of the Company (as defined in the ICP). If an
Award does not have a designated target level of performance, the performance
level which, if met, would result in the vesting of the lowest number of shares
will be considered the target level. If a recipient of a performance share Award
terminates employment for any reason other than death, disability or retirement
after age 60, then any Awards of performance shares that remain subject to
restriction will be forfeited. The Committee will always have the right to
accelerate the vesting of any restricted stock awarded under the ICP.
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PERFORMANCE-BASED CASH AWARDS
The Committee may award performance-based cash awards to key employees and
nonemployee directors in its sole discretion. A performance-based cash award is
the right, subject to such conditions, restrictions and contingencies as the
Committee determines and specifies in the cash award agreement, to receive a
specified amount (or possible range of amounts) of cash in the future. An
individual may not receive payment (determined at the end of the applicable
performance period) of more than $2,500,000 in performance-based cash awards in
any one calendar year.
The Committee will specify in a performance-based cash award agreement (or
other documents communicating the award to the recipient) the performance
requirements, the time period on which the performance will be measured, and any
other conditions, restrictions and contingencies on the award. Conditions,
restrictions and contingencies may consist of a requirement of continuous
service and any other requirements as may be specified by the Committee. The
conditions may be based on short-term or long-term performance periods. A
recipient may not transfer performance-based cash awards.
In the event of a recipient's death, disability or retirement after age 60,
any Awards of performance-based cash awards that remain subject to any type of
vesting schedule (such as satisfaction of certain performance requirements), but
the performance period for which ends during the year, may become
proportionately vested and nonforfeitable, based on the portion of the
performance period completed, but only if performance measures have been met, as
measured at the end of the performance period. If a performance-based cash award
remains subject to a restriction, but the performance period for that Award does
not end during the year of the recipient's death, disability or retirement after
age 60, then such Award will be forfeited. Upon a change in control of the
Company (as defined in the ICP), any performance-based cash Awards that remain
subject to any type of vesting schedule (such as satisfaction of certain
performance requirements) but the performance period for which ends during the
year, will become proportionately vested and nonforfeitable, based on the
portion of the performance period completed with target level performance being
deemed achieved as of the date of the change in control of the Company. If an
Award does not have a designated target level of performance, the performance
level which, if met, would result in the vesting of the lowest cash amount will
be considered the target level. If a performance-based cash award remains
subject to a restriction upon a change in control, but the performance period
for that Award does not end during the year of the change in control, then such
Award will be forfeited. If a recipient of a performance-based cash Award
terminates employment for any reason other than death, disability or retirement
after age 60, then any performance-based cash Awards that remain subject to
restriction will be forfeited. The Committee will always have the right to
accelerate the vesting of any performance-based cash award under the ICP.
Within a reasonable period following the completion of the performance
period, the participant will receive a single sum cash payment of any
performance-based cash award earned for that period.
PERFORMANCE MEASURES.
It is the Company's intent that Awards made under the ICP may be structured
to comply with the "performance-based" compensation provisions of Code Section
162(m), at the Committee's discretion. Therefore, amounts payable with respect
to grants of options and/or awards of restricted stock, performance shares or
performance-based cash awards may be determined based on the attainment of
written performance goals approved by the Committee for a performance period
established by the Committee no more than 90 days after the commencement of the
performance period or, if less, the number of days which is equal to 25% of the
relevant performance period.
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The performance goals, which must be objective, will be based upon one or
more of the following performance measures: (i) earnings per share; (ii)
consolidated earnings before or after interest, taxes, depreciation and/or
amortization; (iii) net operating profit before or after interest, taxes,
depreciation and/or amortization; (iv) net operating income; (v) book value per
share; (vi) return on shareholders' equity; (vii) return on assets; (viii)
return on capital; (ix) capital structure; (x) profitability of an identifiable
business unit or product; (xi) maintenance or improvement of profit margins;
(xii) stock price; (xiii) market share; (xiv) gross or net revenues or sales;
(xv) costs; (xvi) cash flow; (xvii) working capital; (xviii) gross or net
profit; (xix) expense management; or (xx) economic profit. The foregoing
criteria may relate to the Company, one or more of its subsidiaries, one or more
of its divisions or units or any combination of the foregoing and may be applied
on an absolute basis, growth or decline basis, or be relative to one or more
peer group companies or indices, or any combination thereof, all as the
Committee determines. To the degree consistent with Code sec.162(m), the
performance goals may be calculated without regard to extraordinary items.
If the Committee elects to subject Awards to restrictions based on
performance measures, the ICP and Awards made under the ICP will meet the Code
sec.162(m) requirements for the exemption of performance-based compensation. If
at any time the membership of the Committee does not meet the requirements for
Code sec.162(m) compliance, a subcommittee may be formed to make certain
determinations and take actions on behalf of the Committee in order to meet the
requirements for compliance. Any payment of compensation with respect to an
Award which is intended to be performance-based compensation will be subject to
the written certification of the Committee that the performance measures were
satisfied. Shareholder approval of the ICP is necessary for the Awards to meet
the Code sec.162(m) exemption.
TERMINATION AND AMENDMENT
Generally, the ICP will remain in effect for ten years; however, the Board
of Directors may terminate or amend the ICP at any earlier time. The ICP will
remain in effect as long as any awards are outstanding. If the Board amends the
ICP, the amendment will not adversely affect the rights of individuals who have
outstanding awards unless such individuals agree to such amendment. The
Committee may amend any agreement under the ICP if the amended agreement is
signed by the Company and the applicable participant.
ADJUSTMENTS
If the Company is involved in a corporate transaction (including but not
limited to any recapitalization, reclassification, merger, consolidation,
split-up, spin-off, or combination/exchange of shares) which constitutes a
change in control of the Company under the ICP, then the Committee will make an
appropriate and equitable adjustment to the number and kind of shares that are
issuable under the ICP, will take action to adjust the number and kind of shares
of Stock subject to outstanding Awards, will take action to adjust the exercise
price of outstanding stock options, and will make any other equitable
adjustments.
Additionally, if the Company is involved in a corporate transaction which
does not constitute a change in control under the ICP, but which requires
shareholder approval, the Committee may make certain decisions regarding the
stock to which outstanding Awards pertain, the number of resulting Awards, and
the vesting and/or exercisability of the Awards.
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FEDERAL INCOME TAX CONSEQUENCES
The following is a brief general description of the consequences under the
Code of the receipt or exercise of awards under the ICP:
Incentive Stock Options. An optionee has no tax consequences upon grant
or, generally, upon exercise of an ISO. An optionee will recognize income when
he or she sells or exchanges the shares acquired upon exercise of an ISO. This
income will be taxed at the applicable capital gains rate if the sale or
exchange occurs after the expiration of the requisite holding periods.
Generally, the requisite holding periods expire two years after the date of
grant of the ISO and one year after the date of acquisition of the Common Stock
pursuant to the exercise of the ISO.
If an optionee disposes of the Common Stock acquired pursuant to exercise
of an ISO before the expiration of the requisite holding periods, the optionee
will recognize compensation income in an amount equal to the difference between
the exercise price and the lesser of (i) the fair market value of the shares on
the date of exercise and (ii) the price at which the shares are sold. This
amount will be taxed at ordinary income rates. If the sale price of the shares
is greater than the fair market value on the date of exercise, the difference
will be recognized as gain by the optionee and taxed at the applicable capital
gains rate. If the sale price of the shares is less than the exercise price, the
optionee will recognize a capital loss equal to the excess of the exercise price
over the sale price.
An optionee may have tax consequences upon exercise of an ISO if the
aggregate fair market value of shares of the Common Stock subject to ISOs which
first become exercisable by an optionee in any one calendar year exceeds
$100,000. If this occurs, the excess shares will be treated as though they are
subject to an NSO instead of an ISO. Upon exercise of an option with respect to
these shares, the optionee will have the tax consequences described below with
respect to the exercise of NSOs.
Finally, except to the extent that an optionee has recognized income with
respect to the exercise of an ISO (as described in the preceding paragraphs),
the amount by which the fair market value of a share of the Common Stock at the
time of exercise of the ISO exceeds the exercise price will be included in
determining an optionee's alternative minimum taxable income, and may cause the
optionee to incur an alternative minimum tax liability in the year of exercise.
There will be no tax consequences to the Company upon issuance or,
generally, upon exercise of an ISO. However, to the extent that an optionee
recognizes ordinary income upon exercise, as described above, the Company
generally will have a deduction in the same amount.
Nonqualified Stock Options. Neither the Company nor the optionee has
income tax consequences from the grant of NSOs. Generally, in the tax year when
an optionee exercises NSOs, the optionee recognizes ordinary income in the
amount by which the fair market value of the shares at the time of exercise
exceeds the exercise price for such shares. The Company generally will have a
deduction in the same amount as the ordinary income recognized by the optionee
in the Company's tax year in which or with which the optionee's tax year (of
exercise) ends.
Restricted Stock. A holder of restricted stock will recognize income upon
its receipt, but generally only to the extent that it is not subject to a
substantial risk of forfeiture. If the restricted stock is subject to
restrictions that lapse over a period of time, so that the holder becomes vested
in a portion of the shares as the restrictions lapse, the holder will recognize
income in any tax year only with respect to the shares that become
nonforfeitable during that year. The income recognized will be equal to the fair
market value of those shares, determined as of the time that the restrictions on
those shares lapse. That income generally will be taxable at
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ordinary income tax rates. The Company generally will be entitled to a deduction
in an amount equal to the amount of ordinary income recognized by the holder of
the restricted stock.
A holder of restricted stock may elect instead to recognize ordinary income
for the taxable year in which he or she receives an award of restricted stock in
an amount equal to the fair market value of all shares of restricted stock
awarded to him or her (even if the shares are subject to forfeiture). That
income will be taxable at ordinary income tax rates. Any such election must be
made within 30 days after the transfer of the restricted stock to the holder. At
the time of disposition of the shares, a holder who has made such an election
will recognize gain in an amount equal to the difference between the sales price
and the fair market value of the shares at the time of the award. Such gain will
be taxable at the applicable capital gains rate. The Company will generally be
entitled to a deduction in an amount equal to the amount of ordinary income
recognized by the holder at the time of his election.
Performance Shares. A recipient of performance shares will not recognize
income upon grant of the performance shares, as long as they are subject to a
substantial risk of forfeiture. If the performance shares are subject to
restrictions that lapse in increments over a period of time, so that the holder
becomes vested in a portion of the shares as the restrictions lapse, the holder
will recognize income in any tax year only with respect to the shares that
become nonforfeitable (and for which shares of the Common Stock are issued)
during that year. The income recognized will be equal to the fair market value
of the shares issued as determined at the time of share issuance. That income
generally will be taxable at ordinary income tax rates. The Company generally
will be entitled to a deduction in an amount equal to the amount of ordinary
income recognized by the holder of the performance shares.
Performance-Based Cash Awards. A recipient of a performance-based cash
award will not have any tax consequences upon grant of the award. At the close
of the performance period, payments under performance-based cash awards under
the ICP are made in cash. Therefore, the recipient will receive ordinary income
in the amount of the payment in the year in which the cash is paid.
Code Section 162(m) Limitation on Company Deductions. No federal income
tax deduction is allowed for compensation paid to a "covered employee" in any
taxable year of the Company to the extent that such compensation exceeds
$1,000,000. For this purpose, "covered employees" are generally the chief
executive officer of the Company and the four next most highly compensated
officers of the Company, and the term "compensation" generally includes gross
income, including taxable amounts resulting from the exercise of stock options
or stock appreciation rights or the receipt of restricted stock. This deduction
limitation does not apply to compensation that is (1) commission-based
compensation, (2) performance-based compensation, (3) compensation which would
not be includable in an employee's gross income, and (4) compensation payable
under a written binding contract in existence on February 17, 1993, and not
materially modified thereafter.
ERISA. The ICP is not, and is not intended to be, an employee benefit plan
or tax-qualified retirement plan. The ICP is not, therefore, subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or Code
Section 401(a).
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR"
THE PROPOSAL TO APPROVE AND ADOPT THE 1999 INCENTIVE COMPENSATION PLAN.
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EXHIBIT 5
(LOGO)
American Business Products, Inc.
POST OFFICE BOX 105684 ATLANTA, GEORGIA 30348
(770) 953-8300
January 21, 2000
To the Shareholders of
American Business Products, Inc.:
On January 13, 2000, American Business Products, Inc. (the "Company")
entered into an Agreement and Plan of Merger (the "Merger Agreement") with
Mail-Well, Inc., a Colorado corporation ("Mail-Well"), and its wholly-owned
indirect subsidiary Sherman Acquisition Corporation, a Georgia corporation
("Purchaser"), that provides for the acquisition of all of the common stock, par
value $2.00 per share, of the Company (the "Shares" or, individually, a "Share")
by Purchaser at a price of $20.00 per Share net to the seller in cash. Under the
terms of the proposed transaction, Purchaser has commenced a tender offer (the
"Offer") for all outstanding Shares at a price of $20.00 per Share net to the
seller in cash. The Offer is currently scheduled to expire at 12:00 midnight,
Eastern Standard Time, on February 18, 2000, unless extended.
Following the successful completion of the Offer and upon approval by the
affirmative vote of holders of a majority of the Shares, if required, Purchaser
will be merged with and into the Company (the "Merger") and all Shares not
purchased in the Offer, other than Shares held by the Company, Mail-Well, or any
of their respective subsidiaries or Shares as to which appraisal rights have
been exercised, will be converted into the right to receive, without interest,
an amount in cash equal to $20.00 per Share.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED THEREBY AND DETERMINED THAT THE MERGER AGREEMENT
AND THE TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE MERGER,
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S SHAREHOLDERS. THE BOARD
OF DIRECTORS RECOMMENDS THAT THE COMPANY'S SHAREHOLDERS ACCEPT THE OFFER AND
TENDER THEIR SHARES PURSUANT TO THE OFFER.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company
with the Securities and Exchange Commission. The Board of Directors of the
Company has received an opinion of Goldman Sachs & Co., financial advisor to the
Company, to the effect that, as of the date of such opinion and based on and
subject to the matters stated in such opinion, the $20.00 per Share in cash to
be received by holders of Shares in the Offer and the Merger is fair, from a
financial point of view, to such holders. A copy of such opinion setting forth
the assumptions made, procedures followed, matters considered, and limits on the
review undertaken is attached as Annex A to the Schedule 14D-9, and shareholders
are urged to read such opinion in its entirety.
Please refer to the Offer to Purchase and related materials of Purchaser,
including a Letter of Transmittal sent to you under separate cover, for use in
tendering Shares. These documents set forth the terms and conditions of the
Offer and provide instructions as to how to tender your Shares. If you have any
questions regarding these instructions, please call Morrow & Co., Inc. at (800)
566-9061.
WE URGE YOU TO READ THE ENCLOSED DOCUMENTS CAREFULLY.
The management and directors of the Company thank you for the support you
have given the Company.
Sincerely,
/s/ HAROLD R. SMETHILLS
Harold R. Smethills
Chief Executive Officer
<PAGE> 1
EXHIBIT 7
PERSONAL AND CONFIDENTIAL
November 4, 1999
Mail-Well, Incorporated
23 Inverness Way East - Suite 160
Englewood, CO 80112
Attention: Mr. V. Bruce Thompson
Senior Vice President - Corporate Development
Gentlemen:
In connection with your consideration of a possible transaction with American
Business Products (the "Company"), you have requested information concerning the
Company. As a condition to your being furnished such information, you agree to
treat all written, oral or visual information concerning the Company (whether
prepared by the Company, its advisors or otherwise) which is furnished to you by
or on behalf of the Company (herein collectively referred to as the "Evaluation
Material") in accordance with the provisions of this letter and to take or
abstain from taking certain other actions herein set forth. The term "Evaluation
Material" does not include information which (i) is already in your possession,
provided that such information is not known by you to be subject to another
confidentiality agreement with or other obligation of secrecy to the Company or
another party, or (ii) becomes generally available to the public other than as a
result of a disclosure by you or your directors, officers, employees, agents or
advisors, for (iii) becomes available to you on a non-confidential basis from a
source other than the Company or its advisors, provided that such source is not
known by you to be bound by a confidentiality agreement with or other obligation
of secrecy to the Company or another party.
You hereby agree that the Evaluation Material will be used solely for the
purpose of evaluating a possible transaction between the Company and you, and
that such information will be kept confidential by you and your advisors;
provided, however, that (i) any of such information may be disclosed to your
directors, officers and employees and representatives of your advisors who need
to know such information for the purpose of evaluating any such possible
transaction between the Company and you (it being understood that such
directors, officers, employees and representatives shall be informed by you of
the confidential nature of such information and shall be directed by you to
treat such information confidentially), and (ii)
<PAGE> 2
Mr. V. Bruce Thompson
Mail-Well, Incorporated
November 4, 1999
Page Two
any disclosure of such information may be made to which the Company consents in
writing. You will be responsible for any unauthorized disclosure of the
Evaluation Material by any of your directors, officers, employees and
representatives.
You hereby acknowledge that you are aware, and that you will advise such
directors, officers, employees and representatives who are informed as to the
matters which are the subject of this letter, that the United States securities
laws prohibit any person who has received from an issuer material, non-public
information concerning the matters which are the subject of this letter from
purchasing or selling securities of such issuer or from communicating such
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
In addition, without the prior written consent of the Company, you will not, and
will direct such directors, officers, employees and representatives not to,
disclose to any person either the fact that discussions or negotiations are
taking place concerning a possible transaction between the Company and you or
any of the terms, conditions or other facts with respect to any such possible
transaction, including the status thereof.
You hereby acknowledge that the Evaluation Material is being furnished to you in
consideration of your agreement that you will not propose to the Company or any
other person any transaction between you and the Company and/or its security
holders or involving any of its securities or security holders unless the
Company shall have requested in writing that you make such a proposal, and that
you will not acquire, or assist, advise or encourage any other persons in
acquiring, directly or indirectly, control of the Company or any of the
Company's securities, businesses or assets for a period of eighteen months from
the date of this letter unless the Company shall have consented in advance in
writing to such acquisition. You also hereby agree not to seek a waiver of any
of the provisions of this paragraph or otherwise seek permission from the
Company to engage in any of the actions prohibited by this paragraph.
Without the prior written consent of the Company, (i) neither you nor those of
your directors, officers, employees, agents or advisors who are aware of the
Evaluation Material and/or the possibility of a transaction between you and the
Company will initiate or cause to be initiated (other than through Goldman
Sachs) any communications with any employee of the Company concerning the
Evaluation Material or any possible transaction between you and the Company and
(ii) none of your directors, officers, employees, agents or advisors who are
aware of the Evaluation Material and/or the possibility of a transaction between
you and the Company will, for the eighteen month period from the date of this
letter, solicit or cause to be solicited the employment of or hire any employee
of the Company; provided, however, that
<PAGE> 3
Mr. V. Bruce Thompson
Mail-Well, Incorporated
November 4, 1999
Page Three
this sentence shall not be construed to prohibit you from placing general
advertisements for employees in newspapers, periodicals or other media of
general circulation.
Although the Company has endeavored to include in the Evaluation Material
information known to it which it believes to be relevant for the purpose of your
investigation, you understand that neither the Company nor any of its
representatives or advisors have made or make any representation or warranty as
to the accuracy or completeness of the Evaluation Material. You agree that
neither the Company nor its representatives or advisors shall have any liability
to you or any of your representatives or advisors resulting from the use of the
Evaluation Material.
In the event that you do not proceed with the transaction which is the subject
of this letter within a reasonable time, you shall promptly redeliver to the
Company all written Evaluation Material and any other written material
containing or reflecting any information in the Evaluation Material (whether
prepared by the Company, its advisors or otherwise) and will not retain any
copies, extracts or other reproductions in whole or in part of such written
material. All documents, memoranda, notes and other writings whatsoever prepared
by you or your advisors based on the information in the Evaluation Material
shall be destroyed, and such destruction shall be certified in writing to the
Company by an authorized officer supervising such destruction. Unless otherwise
specified herein, your obligation hereunder and this agreement shall expire two
years from the date hereof or upon the consummation of the transaction
contemplated hereby, whichever shall first occur.
You agree that unless and until a definitive agreement between the Company and
you with respect to any transaction referred to in the first paragraph of this
letter has been executed and delivered, neither the Company nor you will be
under any legal obligation of any kind whatsoever with respect to such a
transaction by virtue of this or any written or oral expression with respect to
such a transaction by any of its directors, officers, employees, agents or any
other representatives or its advisors or representatives thereof except, in the
case of this letter, for the matters specifically agreed to herein.
The agreements set forth in this letter may be modified or waived only by a
separate writing by the Company and you, expressly so modifying or waiving any
agreements. You also agree that the Company shall be entitled to equitable
relief, including injunction, in the event of any breach of the provisions of
this letter.
<PAGE> 4
Mr. V. Bruce Thompson
Mail-Well, Incorporated
November 4, 1999
Page Four
This letter shall be governed by, and construed in accordance with, the laws of
the State of Georgia.
Very truly yours,
AMERICAN BUSINESS PRODUCTS
By: /s/ Goldman, Sachs & Co.
----------------------------------------------
Goldman, Sachs & Co.
on behalf of American Business Products
Confirmed and Agreed to:
Mail-Well, Incorporated
By: /s/ V. Bruce Thompson
----------------------------------------------
Date: 11/4/99
--------------------------------------------
<PAGE> 1
EXHIBIT 8
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is entered into and effective
as of this 30th day of June, 1999, by and between AMERICAN BUSINESS
PRODUCTS, INC. (the "Company") and RAYMOND J. WILSON (the "Executive").
WHEREAS, Executive is presently employed by the Company in a key
management capacity; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company and its shareholders to
reinforce and assure the continued attention and dedication of certain key
executives of the Company to their duties of employment without personal
distraction or conflict of interest as a result of the possibility or
occurrence of a change in control of the Company; and
WHEREAS, the Company has previously entered into an agreement with the
Executive providing for certain severance benefits, and the Company desires to
combine the existing agreement with an agreement to provide protection to the
Executive in the event of a termination of his employment following a Change in
Control; and
WHEREAS, the Company's Board of Directors has authorized the Company
to enter into protective agreements with designated key executives of the
Company, one of whom is the Executive;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration including, but not limited to,
Executive's continuing employment with the Company, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1
DEFINITIONS
1.1 "Affiliate" shall mean any parent, brother-sister or subsidiary
corporation of the Company, any joint venture in which the Company owns at
least a 50 percent interest, and any partnership, limited liability partnership
or limited liability corporation in which the Company or any of its
wholly-owned subsidiaries owns at least a 50 percent interest.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Cause" shall mean (i) the Executive's willful and continued
failure to perform any substantial duty of his position with the Company and
its Affiliates (other than any such failure resulting from incapacity due to
Disability), within fifteen (15) days after a written demand for substantial
performance to the Executive which specifically identifies the manner in which
he has not substantially
<PAGE> 2
performed his duties; (ii) the Executive's willful engagement in any illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company; or (iii) the Executive's engagement in any activity that is in
conflict of interest or competitive with the Company or its Affiliates (other
than any isolated, insubstantial and inadvertent action not taken in bad faith
and which is promptly remedied by the Executive upon notice).
1.4 "Change in Control" shall have the definition contained in the
American Business Products, Inc. 1999 Incentive Compensation Plan.
1.5 "Company" shall mean American Business Products, Inc.
1.6 "Disability" shall mean, for purposes of this Agreement, a
physical or mental impairment that prohibits the Executive from performing the
essential duties of his position, which is expected to be of a long and
continued duration, and for which he becomes eligible to receive benefits under
the Company's long-term disability plan.
1.7 "Effective Date" shall mean July 1, 1999.
1.8 "Good Reason" shall mean (i) the assignment of duties
inconsistent with the Executive's position, or any action by the Company which
results in diminution of the Executive's position, authority, duties or
responsibilities as in effect on the Effective Date (other than any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
promptly remedied by the Company upon notice by the Executive); (ii) a
reduction in the Executive's base salary or benefits (unless such reduction in
benefits applies to all officers of the Company); (iii) a material breach by
the Company of its obligations hereunder; (iv) the Company requiring the
Executive to have his office based at a location other than the metropolitan
Atlanta area; or (v) any failure by a successor to the Company to assume and
agree to perform the Company's obligations hereunder.
1.9 "Proprietary Information" shall mean information that meets the
definition of "trade secret" under the laws of the State of Georgia (i.e., the
Uniform Trade Secrets Act, O.C.G.A. ss.10-1-760, et seq.), as well as any
scientific or technical information, design, process, procedure, formula or
improvement that is secret and of value, information that the Company takes
reasonable efforts to protect from disclosure and from which the Company
derives actual or potential economic value due to its confidential nature,
including, but not limited to, technical or nontechnical data, formulas,
complications, programs, devices, methods, techniques, drawings, processes,
financial data, lists of actual or potential customers, price lists, business
plans, customer and vendor records, training and operations materials and
memoranda, personnel records, financial information relating to the business of
the Company, accounts, customers, vendors, employees and affairs of the
Company, and any information marked "confidential" by the Company.
1.10 "Qualifying Termination" shall mean (a) the termination of
Executive's employment by the Company without Cause, or (b) the Executive's
termination of his employment for Good Reason. A Qualifying Termination shall
not include a termination of Executive's employment by reason of the
Executive's death, the Executive's Disability, the Executive's voluntary
termination of employment without Good Reason, or the termination of the
Executive's employment for Cause.
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<PAGE> 3
SECTION 2
TERM OF AGREEMENT
2.1 Term of Agreement. This Agreement shall commence on the
Effective Date and shall continue in effect until the second anniversary of
that date (the "Initial Term"). This Agreement shall automatically be extended
for one additional year at the end of the Initial Term, and then for successive
one-year periods (each such one-year extension following the Initial Term shall
be a "Successive Period"). However, either party may terminate this Agreement
at the end of the Initial Term, or at the end of any Successive Period, by
giving the other party written notice of intent not to renew, delivered at
least sixty (60) calendar days prior to the end of such Initial Term or
Successive Period; provided, however, that any such termination of this
Agreement by the Company, which was to become effective within sixty (60) days
prior to the date of a Change in Control, shall be ineffective and shall be
deemed to be a Qualifying Termination.
2.2 Extension of Term Upon Change in Control. In the event that a
Change in Control occurs during the Initial Term or any Successive Period, the
term of this Agreement shall automatically and irrevocably become a term ending
on the first anniversary of the effective date of the Change in Control. This
Agreement shall be assigned to, and shall be assumed by, any successor to the
Company subsequent to such Change in Control.
SECTION 3
SEVERANCE BENEFITS
3.1 Entitlement to Benefits. If, for any reason constituting a
Qualifying Termination, the Executive's employment terminates during the period
beginning on the Effective Date of this Agreement and ending on the first
anniversary of the effective date of a Change in Control of the Company, the
Company shall provide to the Executive the benefits described in either Section
3.2 or Section 3.3 below, as applicable.
3.2 Severance Benefits. In the event of a Qualifying Termination
prior to a Change in Control of the Company, the Company shall pay and provide
to Executive each of the following benefits, subject to Executive's entitlement
to such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practical
following such a Qualifying Termination, but no later than 10 business
days following such Qualifying Termination, the Company shall provide
the Executive with a lump sum cash payment equal to Executive's earned
but unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum cash payment equal to one times the Executive's annual
rate of base salary in effect upon the date of the Qualifying
Termination.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination,
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<PAGE> 4
the Company shall provide the Executive with continued medical,
dental, basic life insurance, officer life insurance, and accidental
death and dismemberment insurance benefits for the Executive and/or
the Executive's covered dependents at least equal to those which would
have been provided to them if the Executive's employment had not been
terminated, with the Company paying 100% of the cost of such benefits
during such period; provided, that such twelve-month period shall
offset any period of continuation coverage provided under COBRA
applicable to such benefits; provided further, however, that if the
Executive becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another employer-
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of continued eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but
which has not been paid) for a performance period that has been
completed prior to a Qualifying Termination shall be immediately
payable upon the Qualifying Termination. Any outstanding rights to (i)
any cash bonus that would by its terms be payable for or expire in the
current year (whether short-term or long-term), or (ii) a performance
share award or a performance-based restricted stock award for a
performance period which has not been completed, shall become
immediately vested in the same proportion as the proportion of the
current year (or applicable performance period for long-term cash
bonuses, performance share awards or performance-based restricted
stock awards) which has been completed, with performance deemed to
have been met at target level, and the vested portion shall be
immediately payable or nonforfeitable (as applicable) upon the
Qualifying Termination. Any outstanding stock options or restricted
stock awards (with only time-based restrictions) of the Executive
shall immediately become exercisable or nonforfeitable (as applicable)
upon the Qualifying Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the
Qualifying Termination. In addition, the Company shall pay the
Executive the amount of any benefit he forfeits under any nonqualified
retirement plan sponsored by the Company due to the Qualifying
Termination. Any payment under this provision shall be made from the
general assets of the Company and not from the trust fund of any
tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not
be eligible for rollover treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
3.3 Change in Control Severance Benefits. In the event of a
Qualifying Termination following a Change in Control of the Company, in lieu of
the benefits described in Section 3.2, the Company shall pay and provide to
Executive each of the following benefits, subject to Executive's entitlement to
such benefits pursuant to Section 3.1 hereof:
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<PAGE> 5
(a) Accrued Pay and Benefits. As soon as practical following such
a Qualifying Termination, but no later than 10 business days following such
qualifying Termination, the Company shall provide the Executive with a lump sum
cash payment equal to Executive's earned but unpaid base salary, earned and
unpaid vacation pay, and any unreimbursed business expenses. Such payment shall
constitute full satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following such
Qualifying Termination, the Company shall provide the Executive with a lump sum
cash payment equal to two (2) times the Executive's annual rate of base salary
in effect upon the date of the Qualifying Termination.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with continued
medical, dental, basic life insurance, officer life insurance, and accidental
death and dismemberment insurance benefits for the Executive and/or the
Executive's covered dependents at least equal to those which would have been
provided to them if the Executive's employment had not been terminated, with
the Company paying 100% of the cost of such benefits during such period;
provided, that such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided further,
however, that if the Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of continued eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but which has
not been paid) for a performance period that has been completed prior to a
Qualifying Termination shall be immediately payable upon the Qualifying
Termination. Any outstanding rights to (i) any cash bonus that would by its
terms be payable for or expire in the current year (whether short-term or
long-term), or (ii) a performance share award or performance-based restricted
stock award for a performance period which has not been completed, shall become
immediately vested with performance deemed to have been met at target level,
and two (2) times the vested amount shall be immediately payable or
nonforfeitable (as applicable) upon the Qualifying Termination. Any outstanding
stock options or restricted stock awards (with only time-based restrictions) of
the Executive shall immediately become exercisable or nonforfeitable (as
applicable) upon the Qualifying Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his account in
the Profit Sharing Retirement Plan and his Matching Contributions Account in
the Employee Savings Plan. Due to that forfeiture, as soon as practicable, but
no later than thirty (30) days following the Qualifying Termination, the
Company shall pay the Executive a single sum cash payment in an amount
equivalent to the forfeited portion of his account in the Profit Sharing
Retirement Plan and his Matching Contributions Account in the Employee Savings
Plan, determined as of the most recent valuation date prior to the Qualifying
Termination. In addition, the Company shall pay the Executive the amount of
any benefit he forfeits under any nonqualified retirement plan sponsored by the
Company due to the Qualifying Termination. Any payment under this provision
shall be made from the general assets of the Company and not from the trust
fund of any tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not be
eligible for rollover treatment.
-5-
<PAGE> 6
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
SECTION 4
EXCISE TAX
4.1 Gross-Up Payment for Excise Taxes. In the event that any
payment or distribution by the Company to or for the benefit of the Executive
due to a Qualifying Termination under the provisions of this Agreement (a
"Payment") is determined (without regard to any additional payments required
under this Section 4.1) to be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the 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 the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
4.2 Determination of Gross-Up Payment. All determinations required
to be made under Section 4.1, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the Company's
regular independent accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid
by the Company to the Executive within 15 days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the 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 the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the 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 the Company to or for the benefit of the Executive.
-6-
<PAGE> 7
SECTION 5
SUCCESSORS AND ASSIGNMENT
5.1 Successors. The Company shall require any successor (whether
via a Change in Control, direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the stock or assets
of the Company to expressly assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place.
5.2 Assignment by Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive's executors or administrators or
heirs. If Executive should die while any amount would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to Executive's estate or designated beneficiary. Executive's rights hereunder
shall not otherwise be assignable.
SECTION 6
CONFIDENTIALITY OF COMPANY INFORMATION; NONSOLICITATION
6.1 Nonsolicitation of Customers, Clients and Suppliers. Executive
agrees that during the term of this Agreement and for twelve (12) calendar
months following his Qualifying Termination, he will not, directly or
indirectly, without the Company's prior written consent, contact any customer,
client or supplier of the Company or any of its Affiliates for business
purposes unrelated to furthering the business of the Company or its Affiliates.
Executive further agrees that for a period of twelve (12) calendar months
following the date of his Qualifying Termination, he will not directly or
indirectly, (i) contact, solicit or divert, or attempt to contact, solicit,
divert or take away, any customer, client or supplier of the Company or its
Affiliates for purposes of, or with respect to, providing a customer, client or
supplier to a competing business; or (ii) take any affirmative action with a
customer, client or supplier of the Company or its Affiliates for purposes of
providing a customer, client or supplier to a business competing with the
Company or its Affiliates. The prohibitions of the preceding sentence shall
apply only to customers, clients and suppliers of the Company with whom the
Executive had Material Contact on the Company's behalf during the twelve months
immediately preceding the Qualifying Termination. For purposes of this
Agreement, the Executive had "Material Contact" with a customer, client or
supplier if (a) he had business dealings with the customer, client or supplier
on the Company's behalf; (b) he was responsible for supervising or coordinating
the dealings between the Company and the customer, client or supplier; or (c)
he obtained Proprietary Information about the customer, client or supplier as a
result of his association with the Company.
6.2 Nonsolicitation of Employees. The Executive agrees that during
his employment with the Company and for twelve (12) calendar months after his
Qualifying Termination, the Executive will not, directly or indirectly, solicit
or attempt to recruit or hire any employees of the Company or its Affiliates
who were employed by the Company or its Affiliates at any time during the last
year of the Executive's employment with the Company and who are actively
employed by the Company or its Affiliates at the time of the solicitation or
attempted solicitation, to provide services similar to those performed by the
employee for the Company on behalf of, or for the purpose of engaging in
employment with, a competitor of the Company.
6.3 Nondisclosure of Trade Secrets and Proprietary Information.
Except to the extent
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<PAGE> 8
reasonably necessary for Executive to perform his duties for the Company, the
Executive shall not, directly or indirectly, furnish or disclose to any person,
or use in any way, any trade secrets of the Company or its Affiliates, for so
long as such trade secrets remain "trade secrets" under applicable state law.
Except to the extent reasonably necessary for Executive to perform his duties
for the Company, Executive shall not, during the term of this Agreement and for
a period of twelve (12) calendar months following the Executive's Qualifying
Termination, directly or indirectly, furnish or disclose to any person, or use
in any way, for personal benefit or the benefit of others, any Proprietary
Information of the Company or its Affiliates.
6.4 Reasonableness. Executive has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies conferred
on the Company under this Agreement, and Executive hereby acknowledges and
agrees that: (i) the restrictions and covenants contained herein, and the
rights and remedies conferred upon the Company, are necessary to protect the
goodwill and other value of the business of the Company; (ii) the restrictions
places upon Executive hereunder are fair and reasonable in time, will not
prevent him from earning a livelihood, and place no greater restraint upon the
Executive than is reasonably necessary to secure the business and goodwill of
the Company; (iii) the Company is relying upon the restrictions and covenants
contained herein in continuing to make available to Executive information
concerning the business of the Company; (iv) the Executive's employment
hereunder places him in a position of confidence and trust with the Company and
its employees, customers and suppliers; and (v) the provisions of this section
shall be interpreted so as to protect the Proprietary Information, and to
secure for the Company the exclusive benefits of the work performed on behalf
of the Company by the Executive under this Agreement, and not to unreasonably
limit his ability to engage in employment and consulting activities in
noncompetitive areas which do not endanger the Company's legitimate interests
expressed in this Agreement.
6.5 Remedy for Breach. Executive acknowledges and agrees that his
breach of any of the covenants contained in this Article of this Agreement will
cause irreparable injury to the Company and that remedies at law available to
the Company for any actual or threatened breach by the Executive of such
covenants will be inadequate and that the Company shall be entitled to specific
performance of the covenants in this Article or injunctive relief against
activities in violation of this Article by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, without the necessity or
proving actual damages. This provision with respect to injunctive relief shall
not diminish the right of the Company to claim and recover monetary damages
against the Executive for any breach of this Agreement, in addition to
injunctive relief. The Executive acknowledges and agrees that the covenants
contained in this Article shall be construed as agreements independent of any
other provision of this or any other contract between the parties hereto, and
that the existence of any claim or cause of action by the Executive against the
Company, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by the Company of said covenants.
Further, the Executive agrees that upon his violation of any of the
restrictions in Agreement, the Company may immediately cease any payments or
benefits provided hereunder to the Executive or his dependents.
SECTION 7
MISCELLANEOUS
7.1 Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
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conform with such laws) of any provision hereof shall not render unenforceable
or impair the remainder of this Agreement which shall be deemed amended to
delete or modify, as necessary, the invalid or unenforceable provisions. The
parties further agree to alter the balance of this Agreement in order to render
the same valid and enforceable. The terms of the restrictive covenant
provisions of this Agreement shall be deemed modified to the extent necessary
to be enforceable and, specifically, without limiting the foregoing, if the
term of the applicable restrictive covenant is too long to be enforceable, it
shall be modified to encompass the longest term which is enforceable and, if
the scope of the geographic area of the applicable restrictive covenant is too
great to be enforceable, it shall be modified to encompass the greatest area
that is enforceable.
7.2 Costs of Enforcement. In any action taken in good faith
relating to the enforcement of this Agreement or any provision herein, the
Executive shall be entitled to be paid any and all costs and expenses incurred
by him in enforcing or establishing his rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in arbitration, trial, bankruptcy or appellate
proceedings, but only if the Executive is successful on at least one material
issue raised in the enforcement proceeding; provided, that the total amount of
any and all costs and expenses payable by the Company to the Executive under
this provision shall be limited to $100,000.
7.3 Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Georgia.
7.4 Arbitration. Any claim or dispute arising under this Agreement
shall be subject to arbitration, and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The arbitration
shall be conducted in Atlanta, Georgia, in accordance with the Employment
Dispute Rules of the American Arbitration Association and the Federal
Arbitration Act, 9 U.S.C. ss.1, et. seq. The arbitrator(s) shall be authorized
to award both liquidated and actual damages, in addition to injunctive relief,
but no punitive damages. The arbitrator(s) may also award attorney's fees and
costs, without regard to any restriction on the amount of such award under
Georgia or other applicable law. Such an award shall be binding and conclusive
upon the parties hereto, subject to 9 U.S.C. ss.10. Each party shall have the
right to have the award made the judgment of a court of competent jurisdiction.
7.5 Waiver of Breach. The waiver of a breach of any provision of
this Agreement by a party hereto shall not operate or be construed as a wavier
of any subsequent breach by the other party hereto.
7.6 Successors and Assigns. This Agreement shall inure to the
benefit of the Company and its Affiliates, and their respective successors and
assigns. This Agreement shall inure to the benefit of and be enforceable by the
Executive's estate and/or legal representatives.
7.7 Assignment of Agreement. This Agreement is not assignable by
the Executive, but shall be freely assignable by the Company to any successor
with the written consent of the Executive. 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 assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
7.8 Notices. All notices, demands and other communications
hereunder shall be in writing and shall be delivered in person or deposited in
the United States mail, certified or registered, with return
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receipt requested, as follows:
if to Executive:
Mr. Raymond J. Wilson
5372 Redfield Drive
Dunwoody, GA 30338
if to Company:
AMERICAN BUSINESS PRODUCTS, INC.
Attention: President and Chief Executive Officer
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
7.9 Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to severance benefits. All understanding and
agreements heretofore made between the parties hereto with respect to severance
benefits, including any offer letter or other agreements between the Company
and the Executive, are hereby superseded by this document which alone fully and
completely expresses the agreements of the parties. This Agreement may not be
changed orally but only by an agreement in writing signed by both parties.
7.10 Survival of Provisions. The provisions of Article 4 --
Restrictive Covenants shall survive termination of this Agreement.
7.11 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement, to be effective as of the day and year first written above.
COMPANY:
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. Stell Huie
--------------------------------------------
W. Stell Huie
Chairman of the Compensation Committee of
the Board of Directors
EXECUTIVE:
/s/ Raymond J. Wilson
-----------------------------------------
Raymond J. Wilson
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EXHIBIT 9
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is entered into and effective
as of this 30th day of June, 1999, by and between AMERICAN BUSINESS
PRODUCTS, INC. (the "Company") and JOHN H. KARR (the "Executive").
WHEREAS, Executive is presently employed by the Company in a key
management capacity; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company and its shareholders to
reinforce and assure the continued attention and dedication of certain key
executives of the Company to their duties of employment without personal
distraction or conflict of interest as a result of the possibility or
occurrence of a change in control of the Company; and
WHEREAS, the Company has previously entered into an agreement with the
Executive providing for certain severance benefits, and the Company desires to
combine the existing agreement with an agreement to provide protection to the
Executive in the event of a termination of his employment following a Change in
Control; and
WHEREAS, the Company's Board of Directors has authorized the Company
to enter into protective agreements with designated key executives of the
Company, one of whom is the Executive;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration including, but not limited to,
Executive's continuing employment with the Company, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto, intending to be legally
bound, agree as follows:
SECTION 1
DEFINITIONS
1.1 "Affiliate" shall mean any parent, brother-sister or subsidiary
corporation of the Company, any joint venture in which the Company owns at
least a 50 percent interest, and any partnership, limited liability partnership
or limited liability corporation in which the Company or any of its
wholly-owned subsidiaries owns at least a 50 percent interest.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Cause" shall mean (i) the Executive's willful and continued
failure to perform any substantial duty of his position with the Company and
its Affiliates (other than any such failure resulting from incapacity due to
Disability), within fifteen (15) days after a written demand for substantial
performance to the Executive which specifically identifies the manner in which
he has not substantially
<PAGE> 2
performed his duties; (ii) the Executive's willful engagement in any illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company; or (iii) the Executive's engagement in any activity that is in
conflict of interest or competitive with the Company or its Affiliates (other
than any isolated, insubstantial and inadvertent action not taken in bad faith
and which is promptly remedied by the Executive upon notice).
1.4 "Change in Control" shall have the definition contained in the
American Business Products, Inc. 1999 Incentive Compensation Plan.
1.5 "Company" shall mean American Business Products, Inc.
1.6 "Disability" shall mean, for purposes of this Agreement, a
physical or mental impairment that prohibits the Executive from performing the
essential duties of his position, which is expected to be of a long and
continued duration, and for which he becomes eligible to receive benefits under
the Company's long-term disability plan.
1.7 "Effective Date" shall mean July 1, 1999.
1.8 "Good Reason" shall mean (i) the assignment of duties
inconsistent with the Executive's position, or any action by the Company which
results in diminution of the Executive's position, authority, duties or
responsibilities as in effect on the Effective Date (other than any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
promptly remedied by the Company upon notice by the Executive); (ii) a
reduction in the Executive's base salary or benefits (unless such reduction in
benefits applies to all officers of the Company); (iii) a material breach by
the Company of its obligations hereunder; (iv) the Company requiring the
Executive to have his office based at a location other than the metropolitan
Atlanta area; or (v) any failure by a successor to the Company to assume and
agree to perform the Company's obligations hereunder.
1.9 "Proprietary Information" shall mean information that meets the
definition of "trade secret" under the laws of the State of Georgia (i.e., the
Uniform Trade Secrets Act, O.C.G.A. ss.10-1-760, et seq.), as well as any
scientific or technical information, design, process, procedure, formula or
improvement that is secret and of value, information that the Company takes
reasonable efforts to protect from disclosure and from which the Company
derives actual or potential economic value due to its confidential nature,
including, but not limited to, technical or nontechnical data, formulas,
complications, programs, devices, methods, techniques, drawings, processes,
financial data, lists of actual or potential customers, price lists, business
plans, customer and vendor records, training and operations materials and
memoranda, personnel records, financial information relating to the business of
the Company, accounts, customers, vendors, employees and affairs of the
Company, and any information marked "confidential" by the Company.
1.10 "Qualifying Termination" shall mean (a) the termination of
Executive's employment by the Company without Cause, or (b) the Executive's
termination of his employment for Good Reason. A Qualifying Termination shall
not include a termination of Executive's employment by reason of the
Executive's death, the Executive's Disability, the Executive's voluntary
termination of employment without Good Reason, or the termination of the
Executive's employment for Cause.
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SECTION 2
TERM OF AGREEMENT
2.1 Term of Agreement. This Agreement shall commence on the
Effective Date and shall continue in effect until the second anniversary of
that date (the "Initial Term"). This Agreement shall automatically be extended
for one additional year at the end of the Initial Term, and then for successive
one-year periods (each such one-year extension following the Initial Term shall
be a "Successive Period"). However, either party may terminate this Agreement
at the end of the Initial Term, or at the end of any Successive Period, by
giving the other party written notice of intent not to renew, delivered at
least sixty (60) calendar days prior to the end of such Initial Term or
Successive Period; provided, however, that any such termination of this
Agreement by the Company, which was to become effective within sixty (60) days
prior to the date of a Change in Control, shall be ineffective and shall be
deemed to be a Qualifying Termination.
2.2 Extension of Term Upon Change in Control. In the event that a
Change in Control occurs during the Initial Term or any Successive Period, the
term of this Agreement shall automatically and irrevocably become a term ending
on the first anniversary of the effective date of the Change in Control. This
Agreement shall be assigned to, and shall be assumed by, any successor to the
Company subsequent to such Change in Control.
SECTION 3
SEVERANCE BENEFITS
3.1 Entitlement to Benefits. If, for any reason constituting a
Qualifying Termination, the Executive's employment terminates during the period
beginning on the Effective Date of this Agreement and ending on the first
anniversary of the effective date of a Change in Control of the Company, the
Company shall provide to the Executive the benefits described in either Section
3.2 or Section 3.3 below, as applicable.
3.2 Severance Benefits. In the event of a Qualifying Termination
prior to a Change in Control of the Company, the Company shall pay and provide
to Executive each of the following benefits, subject to Executive's entitlement
to such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practical following
such a Qualifying Termination, but no later than 10 business days
following such Qualifying Termination, the Company shall provide the
Executive with a lump sum cash payment equal to Executive's earned but
unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum cash payment equal to one times the Executive's annual
rate of base salary in effect upon the date of the Qualifying
Termination.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination,
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the Company shall provide the Executive with continued medical,
dental, basic life insurance, officer life insurance, and accidental
death and dismemberment insurance benefits for the Executive and/or
the Executive's covered dependents at least equal to those which would
have been provided to them if the Executive's employment had not been
terminated, with the Company paying 100% of the cost of such benefits
during such period; provided, that such twelve-month period shall
offset any period of continuation coverage provided under COBRA
applicable to such benefits; provided further, however, that if the
Executive becomes employed with another employer and is eligible to
receive medical or other welfare benefits under another employer-
provided plan, the medical and other welfare benefits described herein
shall be secondary to those provided under such other plan during such
applicable period of continued eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but
which has not been paid) for a performance period that has been
completed prior to a Qualifying Termination shall be immediately
payable upon the Qualifying Termination. Any outstanding rights to (i)
any cash bonus that would by its terms be payable for or expire in the
current year (whether short-term or long-term), or (ii) a performance
share award or a performance-based restricted stock award for a
performance period which has not been completed, shall become
immediately vested in the same proportion as the proportion of the
current year (or applicable performance period for long-term cash
bonuses, performance share awards or performance-based restricted
stock awards) which has been completed, with performance deemed to
have been met at target level, and the vested portion shall be
immediately payable or nonforfeitable (as applicable) upon the
Qualifying Termination. Any outstanding stock options or restricted
stock awards (with only time-based restrictions) of the Executive
shall immediately become exercisable or nonforfeitable (as applicable)
upon the Qualifying Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the
Qualifying Termination. In addition, the Company shall pay the
Executive the amount of any benefit he forfeits under any nonqualified
retirement plan sponsored by the Company due to the Qualifying
Termination. Any payment under this provision shall be made from the
general assets of the Company and not from the trust fund of any
tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not
be eligible for rollover treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
3.3 Change in Control Severance Benefits. In the event of a
Qualifying Termination following a Change in Control of the Company, in lieu of
the benefits described in Section 3.2, the Company shall pay and provide to
Executive each of the following benefits, subject to Executive's entitlement to
such benefits pursuant to Section 3.1 hereof:
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<PAGE> 5
(a) Accrued Pay and Benefits. As soon as practical following
such a Qualifying Termination, but no later than 10 business days
following such Qualifying Termination, the Company shall provide the
Executive with a lump sum cash payment equal to Executive's earned but
unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum cash payment equal to two (2) times the Executive's
annual rate of base salary in effect upon the date of the Qualifying
Termination
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with
continued medical, dental, basic life insurance, officer life
insurance, and accidental death and dismemberment insurance benefits
for the Executive and/or the Executive's covered dependents at least
equal to those which would have been provided to them if the
Executive's employment had not been terminated, with the Company
paying 100% of the cost of such benefits during such period; provided,
that such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with another
employer and is eligible to receive medical or other welfare benefits
under another employer- provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of continued
eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but
which has not been paid) for a performance period that has been
completed prior to a Qualifying Termination shall be immediately
payable upon the Qualifying Termination. Any outstanding rights to (i)
any cash bonus that would by its terms be payable for or expire in the
current year (whether short-term or long-term), or (ii) a performance
share award or performance-based restricted stock award for a
performance period which has not been completed, shall become
immediately vested with performance deemed to have been met at target
level, and two (2) times the vested amount shall be immediately
payable or nonforfeitable (as applicable) upon the Qualifying
Termination. Any outstanding stock options or restricted stock awards
(with only time-based restrictions) of the Executive shall immediately
become exercisable or nonforfeitable (as applicable) upon the
Qualifying Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the
Qualifying Termination. In addition, the Company shall pay the
Executive the amount of any benefit he forfeits under any nonqualified
retirement plan sponsored by the Company due to the Qualifying
Termination. Any payment under this provision shall be made from the
general assets of the Company and not from the trust fund of any
tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not
be eligible for rollover treatment.
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(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
SECTION 4
EXCISE TAX
4.1 Gross-Up Payment for Excise Taxes. In the event that any
payment or distribution by the Company to or for the benefit of the Executive
due to a Qualifying Termination under the provisions of this Agreement (a
"Payment") is determined (without regard to any additional payments required
under this Section 4.1) to be subject to the excise tax imposed by Section 4999
of the Code or any interest or penalties are incurred by the 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 the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
4.2 Determination of Gross-Up Payment. All determinations required
to be made under Section 4.1, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the Company's
regular independent accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, the Executive
shall appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment shall be paid
by the Company to the Executive within 15 days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the 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 the Company should have been made
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the 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 the Company to or for the benefit of the Executive.
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SECTION 5
SUCCESSORS AND ASSIGNMENT
5.1 Successors. The Company shall require any successor (whether
via a Change in Control, direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the stock or assets
of the Company to expressly assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place.
5.2 Assignment by Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive's executors or administrators or
heirs. If Executive should die while any amount would be payable to Executive
hereunder had Executive continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement
to Executive's estate or designated beneficiary. Executive's rights hereunder
shall not otherwise be assignable.
SECTION 6
CONFIDENTIALITY OF COMPANY INFORMATION; NONSOLICITATION
6.1 Nonsolicitation of Customers, Clients and Suppliers. Executive
agrees that during the term of this Agreement and for twelve (12) calendar
months following his Qualifying Termination, he will not, directly or
indirectly, without the Company's prior written consent, contact any customer,
client or supplier of the Company or any of its Affiliates for business
purposes unrelated to furthering the business of the Company or its Affiliates.
Executive further agrees that for a period of twelve (12) calendar months
following the date of his Qualifying Termination, he will not directly or
indirectly, (i) contact, solicit or divert, or attempt to contact, solicit,
divert or take away, any customer, client or supplier of the Company or its
Affiliates for purposes of, or with respect to, providing a customer, client or
supplier to a competing business; or (ii) take any affirmative action with a
customer, client or supplier of the Company or its Affiliates for purposes of
providing a customer, client or supplier to a business competing with the
Company or its Affiliates. The prohibitions of the preceding sentence shall
apply only to customers, clients and suppliers of the Company with whom the
Executive had Material Contact on the Company's behalf during the twelve months
immediately preceding the Qualifying Termination. For purposes of this
Agreement, the Executive had "Material Contact" with a customer, client or
supplier if (a) he had business dealings with the customer, client or supplier
on the Company's behalf; (b) he was responsible for supervising or coordinating
the dealings between the Company and the customer, client or supplier; or (c)
he obtained Proprietary Information about the customer, client or supplier as a
result of his association with the Company.
6.2 Nonsolicitation of Employees. The Executive agrees that during
his employment with the Company and for twelve (12) calendar months after his
Qualifying Termination, the Executive will not, directly or indirectly, solicit
or attempt to recruit or hire any employees of the Company or its Affiliates
who were employed by the Company or its Affiliates at any time during the last
year of the Executive's employment with the Company and who are actively
employed by the Company or its Affiliates at the time of the solicitation or
attempted solicitation, to provide services similar to those performed by the
employee for the Company on behalf of, or for the purpose of engaging in
employment with, a competitor of the Company.
6.3 Nondisclosure of Trade Secrets and Proprietary Information.
Except to the extent
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reasonably necessary for Executive to perform his duties for the Company, the
Executive shall not, directly or indirectly, furnish or disclose to any person,
or use in any way, any trade secrets of the Company or its Affiliates, for so
long as such trade secrets remain "trade secrets" under applicable state law.
Except to the extent reasonably necessary for Executive to perform his duties
for the Company, Executive shall not, during the term of this Agreement and for
a period of twelve (12) calendar months following the Executive's Qualifying
Termination, directly or indirectly, furnish or disclose to any person, or use
in any way, for personal benefit or the benefit of others, any Proprietary
Information of the Company or its Affiliates.
6.4 Reasonableness. Executive has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies conferred
on the Company under this Agreement, and Executive hereby acknowledges and
agrees that: (i) the restrictions and covenants contained herein, and the
rights and remedies conferred upon the Company, are necessary to protect the
goodwill and other value of the business of the Company; (ii) the restrictions
places upon Executive hereunder are fair and reasonable in time, will not
prevent him from earning a livelihood, and place no greater restraint upon the
Executive than is reasonably necessary to secure the business and goodwill of
the Company; (iii) the Company is relying upon the restrictions and covenants
contained herein in continuing to make available to Executive information
concerning the business of the Company; (iv) the Executive's employment
hereunder places him in a position of confidence and trust with the Company and
its employees, customers and suppliers; and (v) the provisions of this section
shall be interpreted so as to protect the Proprietary Information, and to
secure for the Company the exclusive benefits of the work performed on behalf
of the Company by the Executive under this Agreement, and not to unreasonably
limit his ability to engage in employment and consulting activities in
noncompetitive areas which do not endanger the Company's legitimate interests
expressed in this Agreement.
6.5 Remedy for Breach. Executive acknowledges and agrees that his
breach of any of the covenants contained in this Article of this Agreement will
cause irreparable injury to the Company and that remedies at law available to
the Company for any actual or threatened breach by the Executive of such
covenants will be inadequate and that the Company shall be entitled to specific
performance of the covenants in this Article or injunctive relief against
activities in violation of this Article by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, without the necessity or
proving actual damages. This provision with respect to injunctive relief shall
not diminish the right of the Company to claim and recover monetary damages
against the Executive for any breach of this Agreement, in addition to
injunctive relief. The Executive acknowledges and agrees that the covenants
contained in this Article shall be construed as agreements independent of any
other provision of this or any other contract between the parties hereto, and
that the existence of any claim or cause of action by the Executive against the
Company, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by the Company of said covenants.
Further, the Executive agrees that upon his violation of any of the
restrictions in Agreement, the Company may immediately cease any payments or
benefits provided hereunder to the Executive or his dependents.
SECTION 7
MISCELLANEOUS
7.1 Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
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conform with such laws) of any provision hereof shall not render unenforceable
or impair the remainder of this Agreement which shall be deemed amended to
delete or modify, as necessary, the invalid or unenforceable provisions. The
parties further agree to alter the balance of this Agreement in order to render
the same valid and enforceable. The terms of the restrictive covenant
provisions of this Agreement shall be deemed modified to the extent necessary
to be enforceable and, specifically, without limiting the foregoing, if the
term of the applicable restrictive covenant is too long to be enforceable, it
shall be modified to encompass the longest term which is enforceable and, if
the scope of the geographic area of the applicable restrictive covenant is too
great to be enforceable, it shall be modified to encompass the greatest area
that is enforceable.
7.2 Costs of Enforcement. In any action taken in good faith
relating to the enforcement of this Agreement or any provision herein, the
Executive shall be entitled to be paid any and all costs and expenses incurred
by him in enforcing or establishing his rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in arbitration, trial, bankruptcy or appellate
proceedings, but only if the Executive is successful on at least one material
issue raised in the enforcement proceeding; provided, that the total amount of
any and all costs and expenses payable by the Company to the Executive under
this provision shall be limited to $100,000.
7.3 Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Georgia.
7.4 Arbitration. Any claim or dispute arising under this Agreement
shall be subject to arbitration, and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The arbitration
shall be conducted in Atlanta, Georgia, in accordance with the Employment
Dispute Rules of the American Arbitration Association and the Federal
Arbitration Act, 9 U.S.C. ss.1, et. seq. The arbitrator(s) shall be authorized
to award both liquidated and actual damages, in addition to injunctive relief,
but no punitive damages. The arbitrator(s) may also award attorney's fees and
costs, without regard to any restriction on the amount of such award under
Georgia or other applicable law. Such an award shall be binding and conclusive
upon the parties hereto, subject to 9 U.S.C. ss.10. Each party shall have the
right to have the award made the judgment of a court of competent jurisdiction.
7.5 Waiver of Breach. The waiver of a breach of any provision of
this Agreement by a party hereto shall not operate or be construed as a wavier
of any subsequent breach by the other party hereto.
7.6 Successors and Assigns. This Agreement shall inure to the
benefit of the Company and its Affiliates, and their respective successors and
assigns. This Agreement shall inure to the benefit of and be enforceable by the
Executive's estate and/or legal representatives.
7.7 Assignment of Agreement. This Agreement is not assignable by
the Executive, but shall be freely assignable by the Company to any successor
with the written consent of the Executive. 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 assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
7.8 Notices. All notices, demands and other communications
hereunder shall be in writing and shall be delivered in person or deposited in
the United States mail, certified or registered, with return
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receipt requested, as follows:
if to Executive:
Mr. John H. Karr
1689 Kanawha Drive
Stone Mountain, GA 30087
if to Company:
AMERICAN BUSINESS PRODUCTS, INC.
Attention: President and Chief Executive Officer
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
7.9 Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to severance benefits. All understanding and
agreements heretofore made between the parties hereto with respect to severance
benefits, including any offer letter or other agreements between the Company
and the Executive, are hereby superseded by this document which alone fully and
completely expresses the agreements of the parties. This Agreement may not be
changed orally but only by an agreement in writing signed by both parties.
7.10 Survival of Provisions. The provisions of Article 4 "Restrictive
Covenants" shall survive termination of this Agreement.
7.11 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement, to be effective as of the day and year first written above.
COMPANY:
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. STELL HUIE
---------------------------------------------
W. Stell Huie
Chairman of the Compensation Committee of the
Board of Directors
EXECUTIVE:
/s/ JOHN H. KARR
---------------------------------------------
John H. Karr
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EXHIBIT 10
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is entered into and effective as
of this 30th day of June, 1999, by and between AMERICAN BUSINESS PRODUCTS,
INC. (the "Company") and RICHARD G. SMITH (the "Executive").
WHEREAS, Executive is presently employed by the Company in a key
management capacity; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company and its shareholders to
reinforce and assure the continued attention and dedication of certain key
executives of the Company to their duties of employment without personal
distraction or conflict of interest as a result of the possibility or occurrence
of a change in control of the Company; and
WHEREAS, the Company has previously entered into an agreement with the
Executive providing for certain severance benefits, and the Company desires to
combine the existing agreement with an agreement to provide protection to the
Executive in the event of a termination of his employment following a Change in
Control; and
WHEREAS, the Company's Board of Directors has authorized the Company to
enter into protective agreements with designated key executives of the Company,
one of whom is the Executive;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration including, but not limited to, Executive's
continuing employment with the Company, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
SECTION 1
DEFINITIONS
1.1 "Affiliate" shall mean any parent, brother-sister or subsidiary
corporation of the Company, any joint venture in which the Company owns at least
a 50 percent interest, and any partnership, limited liability partnership or
limited liability corporation in which the Company or any of its wholly-owned
subsidiaries owns at least a 50 percent interest.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Cause" shall mean (i) the Executive's willful and continued
failure to perform any substantial duty of his position with the Company and its
Affiliates (other than any such failure resulting from incapacity due to
Disability), within fifteen (15) days after a written demand for substantial
performance to the Executive which specifically identifies the manner in which
he has not substantially
<PAGE> 2
performed his duties; (ii) the Executive's willful engagement in any illegal
conduct or gross misconduct which is materially and demonstrably injurious to
the Company; or (iii) the Executive's engagement in any activity that is in
conflict of interest or competitive with the Company or its Affiliates (other
than any isolated, insubstantial and inadvertent action not taken in bad faith
and which is promptly remedied by the Executive upon notice).
1.4 "Change in Control" shall have the definition contained in the
American Business Products, Inc. 1999 Incentive Compensation Plan.
1.5 "Company" shall mean American Business Products, Inc.
1.6 "Disability" shall mean, for purposes of this Agreement, a
physical or mental impairment that prohibits the Executive from performing the
essential duties of his position, which is expected to be of a long and
continued duration, and for which he becomes eligible to receive benefits under
the Company's long-term disability plan.
1.7 "Effective Date" shall mean July 1, 1999.
1.8 "Good Reason" shall mean (i) the assignment of duties inconsistent
with the Executive's position, or any action by the Company which results in
diminution of the Executive's position, authority, duties or responsibilities as
in effect on the Effective Date (other than any isolated, insubstantial and
inadvertent action not taken in bad faith and which is promptly remedied by the
Company upon notice by the Executive); (ii) a reduction in the Executive's base
salary or benefits (unless such reduction in benefits applies to all officers of
the Company); (iii) a material breach by the Company of its obligations
hereunder; (iv) the Company requiring the Executive to have his office based at
a location other than the metropolitan Atlanta area; or (v) any failure by a
successor to the Company to assume and agree to perform the Company's
obligations hereunder.
1.9 "Proprietary Information" shall mean information that meets the
definition of "trade secret" under the laws of the State of Georgia (i.e., the
Uniform Trade Secrets Act, O.C.G.A. ss.10-1-760, et seq.), as well as any
scientific or technical information, design, process, procedure, formula or
improvement that is secret and of value, information that the Company takes
reasonable efforts to protect from disclosure and from which the Company derives
actual or potential economic value due to its confidential nature, including,
but not limited to, technical or nontechnical data, formulas, complications,
programs, devices, methods, techniques, drawings, processes, financial data,
lists of actual or potential customers, price lists, business plans, customer
and vendor records, training and operations materials and memoranda, personnel
records, financial information relating to the business of the Company,
accounts, customers, vendors, employees and affairs of the Company, and any
information marked "confidential" by the Company.
1.10 "Qualifying Termination" shall mean (a) the termination of
Executive's employment by the Company without Cause, or (b) the Executive's
termination of his employment for Good Reason. A Qualifying Termination shall
not include a termination of Executive's employment by reason of the Executive's
death, the Executive's Disability, the Executive's voluntary termination of
employment without Good Reason, or the termination of the Executive's employment
for Cause.
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SECTION 2
TERM OF AGREEMENT
2.1 Term of Agreement. This Agreement shall commence on the Effective
Date and shall continue in effect until the fourth anniversary of that date (the
"Initial Term"). This Agreement may be extended for additional one-year periods
upon written agreement by the parties (each one-year extension shall be referred
to as a "Successive Period").
2.2 Extension of Term Upon Change in Control. In the event that a
Change in Control occurs during the Initial Term of this Agreement, the term of
this Agreement shall automatically and irrevocably continue through the end of
the Initial Term; provided, that if the remainder of the Initial Term is less
than one year, the term of the Agreement shall be for a term ending on the first
anniversary of the effective date of the Change in Control. In the event that a
Change in Control occurs during any Successive Period, the term of this
Agreement shall automatically and irrevocably become a term ending on the first
anniversary of the effective date of the Change in Control. This Agreement shall
be assigned to, and shall be assumed by, any successor to the Company subsequent
to such Change in Control.
SECTION 3
SEVERANCE BENEFITS
3.1 Entitlement to Benefits. If, for any reason constituting a
Qualifying Termination, the Executive's employment terminates during the period
beginning on the Effective Date of this Agreement and ending on the first
anniversary of the effective date of a Change in Control of the Company, the
Company shall provide to the Executive the benefits described in either Section
3.2 or Section 3.3 below, as applicable.
3.2 Severance Benefits. In the event of a Qualifying Termination prior
to a Change in Control of the Company, the Company shall pay and provide to
Executive each of the following benefits, subject to Executive's entitlement to
such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practical following
such a Qualifying Termination, but no later than 10 business days
following such Qualifying Termination, the Company shall provide the
Executive with a lump sum cash payment equal to Executive's earned but
unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum payment of $330,000.00.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with
continued medical, dental, basic life insurance, officer life
insurance, and accidental death and dismemberment insurance benefits
for the Executive and/or the Executive's covered dependents at least
equal to those which would have been provided to them if the
Executive's employment had not been terminated, with the Company paying
100% of the cost of such benefits during such period; provided, that
such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with another
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employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of continued eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but which
has not been paid) for a performance period that has been completed
prior to a Qualifying Termination shall be immediately payable upon the
Qualifying Termination. Any outstanding rights to (i) any cash bonus
that would by its terms be payable for or expire in the current year
(whether short-term or long-term), or (ii) a performance share award or
a performance-based restricted stock award for a performance period
which has not been completed, shall become immediately vested in the
same proportion as the proportion of the current year (or applicable
performance period for long-term cash bonuses, performance share awards
or performance-based restricted stock awards) which has been completed,
with performance deemed to have been met at target level, and the
vested portion shall be immediately payable or nonforfeitable (as
applicable) upon the Qualifying Termination. Any outstanding stock
options or restricted stock awards (with only time-based restrictions)
of the Executive shall immediately become exercisable or nonforfeitable
(as applicable) upon the Qualifying Termination and shall remain
exercisable for a period of twelve (12) months following the Qualifying
Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the Qualifying
Termination. In addition, the Company shall pay the Executive the
amount of any benefit he forfeits under any nonqualified retirement
plan sponsored by the Company due to the Qualifying Termination. Any
payment under this provision shall be made from the general assets of
the Company and not from the trust fund of any tax-qualified retirement
plan. The Executive acknowledges that this payment will be subject to
taxes at the time of payment and will not be eligible for rollover
treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
3.3 Change in Control Severance Benefits. In the event of a Qualifying
Termination following a Change in Control of the Company, in lieu of the
benefits described in Section 3.2, the Company shall pay and provide to
Executive each of the following benefits, subject to Executive's entitlement to
such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practical following
such a Qualifying Termination, but no later than 10 business days
following such Qualifying Termination, the Company shall provide the
Executive with a lump sum cash payment equal to Executive's earned but
unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practical following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall
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<PAGE> 5
provide the Executive with a lump sum cash payment equal to two (2)
times the Executive's annual rate of base salary in effect upon the
date of the Qualifying Termination
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with
continued medical, dental, basic life insurance, officer life
insurance, and accidental death and dismemberment insurance benefits
for the Executive and/or the Executive's covered dependents at least
equal to those which would have been provided to them if the
Executive's employment had not been terminated, with the Company paying
100% of the cost of such benefits during such period; provided, that
such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with another
employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of continued eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but which
has not been paid) for a performance period that has been completed
prior to a Qualifying Termination shall be immediately payable upon the
Qualifying Termination. Any outstanding rights to (i) any cash bonus
that would by its terms be payable for or expire in the current year
(whether short-term or long-term), or (ii) a performance share award or
performance-based restricted stock award for a performance period which
has not been completed, shall become immediately vested with
performance deemed to have been met at target level, and two (2) times
the vested amount shall be immediately payable or nonforfeitable (as
applicable) upon the Qualifying Termination. Any outstanding stock
options or restricted stock awards (with only time-based restrictions)
of the Executive shall immediately become exercisable or nonforfeitable
(as applicable) upon the Qualifying Termination and shall remain
exercisable for a period of twelve (12) months following the Qualifying
Termination.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the Qualifying
Termination. In addition, the Company shall pay the Executive the
amount of any benefit he forfeits under any nonqualified retirement
plan sponsored by the Company due to the Qualifying Termination. Any
payment under this provision shall be made from the general assets of
the Company and not from the trust fund of any tax-qualified retirement
plan. The Executive acknowledges that this payment will be subject to
taxes at the time of payment and will not be eligible for rollover
treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
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SECTION 4
EXCISE TAX
4.1 Gross-Up Payment for Excise Taxes. In the event that any payment or
distribution by the Company to or for the benefit of the Executive due to a
Qualifying Termination under the provisions of this Agreement (a "Payment") is
determined (without regard to any additional payments required under this
Section 4.1) to be subject to the excise tax imposed by Section 4999 of the Code
or any interest or penalties are incurred by the 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 the Executive
shall be entitled to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including any income
taxes (and any interest and penalties imposed with respect thereto) and Excise
Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments.
4.2 Determination of Gross-Up Payment. All determinations required to
be made under Section 4.1, including whether and when a Gross-Up Payment is
required, the amount of such Gross-Up Payment and the assumptions to be utilized
in arriving at such determination, shall be made by the Company's regular
independent accounting firm (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 15 business
days of the receipt of notice from the Executive that there has been a Payment,
or such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual, entity
or group effecting the Change in Control, the Executive shall appoint another
nationally recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the Accounting
Firm hereunder). All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment shall be paid by the Company to the
Executive within 15 days of the receipt of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the 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 the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the 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 the Company to or for the benefit of the
Executive.
SECTION 5
SUCCESSORS AND ASSIGNMENT
5.1 Successors. The Company shall require any successor (whether via a
Change in Control, direct or indirect, by purchase, merger, consolidation, or
otherwise) to all or substantially all of the stock or assets of the Company to
expressly assume and agree to perform the Company's obligations under this
Agreement, in the same manner and to the same extent that the Company would be
required to perform them if no such succession had taken place.
5.2 Assignment by Executive. This Agreement shall inure to the benefit
of and be enforceable by Executive's executors or administrators or heirs. If
Executive should die while any
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amount would be payable to Executive hereunder had Executive continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to Executive's estate or designated
beneficiary. Executive's rights hereunder shall not otherwise be assignable.
SECTION 6
CONFIDENTIALITY OF COMPANY INFORMATION; NONSOLICITATION
6.1 Nonsolicitation of Customers, Clients and Suppliers. Executive
agrees that during the term of this Agreement and for twelve (12) calendar
months following his Qualifying Termination, he will not, directly or
indirectly, without the Company's prior written consent, contact any customer,
client or supplier of the Company or any of its Affiliates for business purposes
unrelated to furthering the business of the Company or its Affiliates. Executive
further agrees that for a period of twelve (12) calendar months following the
date of his Qualifying Termination, he will not directly or indirectly, (i)
contact, solicit or divert, or attempt to contact, solicit, divert or take away,
any customer, client or supplier of the Company or its Affiliates for purposes
of, or with respect to, providing a customer, client or supplier to a competing
business; or (ii) take any affirmative action with a customer, client or
supplier of the Company or its Affiliates for purposes of providing a customer,
client or supplier to a business competing with the Company or its Affiliates.
The prohibitions of the preceding sentence shall apply only to customers,
clients and suppliers of the Company with whom the Executive had Material
Contact on the Company's behalf during the twelve months immediately preceding
the Qualifying Termination. For purposes of this Agreement, the Executive had
"Material Contact" with a customer, client or supplier if (a) he had business
dealings with the customer, client or supplier on the Company's behalf; (b) he
was responsible for supervising or coordinating the dealings between the Company
and the customer, client or supplier; or (c) he obtained Proprietary Information
about the customer, client or supplier as a result of his association with the
Company.
6.2 Nonsolicitation of Employees. The Executive agrees that during his
employment with the Company and for twelve (12) calendar months after his
Qualifying Termination, the Executive will not, directly or indirectly, solicit
or attempt to recruit or hire any employees of the Company or its Affiliates who
were employed by the Company or its Affiliates at any time during the last year
of the Executive's employment with the Company and who are actively employed by
the Company or its Affiliates at the time of the solicitation or attempted
solicitation, to provide services similar to those performed by the employee for
the Company on behalf of, or for the purpose of engaging in employment with, a
competitor of the Company.
6.3 Nondisclosure of Trade Secrets and Proprietary Information. Except
to the extent reasonably necessary for Executive to perform his duties for the
Company, the Executive shall not, directly or indirectly, furnish or disclose to
any person, or use in any way, any trade secrets of the Company or its
Affiliates, for so long as such trade secrets remain "trade secrets" under
applicable state law. Except to the extent reasonably necessary for Executive to
perform his duties for the Company, Executive shall not, during the term of this
Agreement and for a period of twelve (12) calendar months following the
Executive's Qualifying Termination, directly or indirectly, furnish or disclose
to any person, or use in any way, for personal benefit or the benefit of others,
any Proprietary Information of the Company or its Affiliates.
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<PAGE> 8
6.4 Reasonableness. Executive has carefully considered the nature and
extent of the restrictions upon him and the rights and remedies conferred on the
Company under this Agreement, and Executive hereby acknowledges and agrees that:
(i) the restrictions and covenants contained herein, and the rights and remedies
conferred upon the Company, are necessary to protect the goodwill and other
value of the business of the Company; (ii) the restrictions places upon
Executive hereunder are fair and reasonable in time, will not prevent him from
earning a livelihood, and place no greater restraint upon the Executive than is
reasonably necessary to secure the business and goodwill of the Company; (iii)
the Company is relying upon the restrictions and covenants contained herein in
continuing to make available to Executive information concerning the business of
the Company; (iv) the Executive's employment hereunder places him in a position
of confidence and trust with the Company and its employees, customers and
suppliers; and (v) the provisions of this section shall be interpreted so as to
protect the Proprietary Information, and to secure for the Company the exclusive
benefits of the work performed on behalf of the Company by the Executive under
this Agreement, and not to unreasonably limit his ability to engage in
employment and consulting activities in noncompetitive areas which do not
endanger the Company's legitimate interests expressed in this Agreement.
6.5 Remedy for Breach. Executive acknowledges and agrees that his
breach of any of the covenants contained in this Article of this Agreement will
cause irreparable injury to the Company and that remedies at law available to
the Company for any actual or threatened breach by the Executive of such
covenants will be inadequate and that the Company shall be entitled to specific
performance of the covenants in this Article or injunctive relief against
activities in violation of this Article by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, without the necessity or
proving actual damages. This provision with respect to injunctive relief shall
not diminish the right of the Company to claim and recover monetary damages
against the Executive for any breach of this Agreement, in addition to
injunctive relief. The Executive acknowledges and agrees that the covenants
contained in this Article shall be construed as agreements independent of any
other provision of this or any other contract between the parties hereto, and
that the existence of any claim or cause of action by the Executive against the
Company, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by the Company of said covenants.
Further, the Executive agrees that upon his violation of any of the restrictions
in Agreement, the Company may immediately cease any payments or benefits
provided hereunder to the Executive or his dependents.
SECTION 7
MISCELLANEOUS
7.1 Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
conform with such laws) of any provision hereof shall not render unenforceable
or impair the remainder of this Agreement which shall be deemed amended to
delete or modify, as necessary, the invalid or unenforceable provisions. The
parties further agree to alter the balance of this Agreement in order to render
the same valid and enforceable. The terms of the restrictive covenant provisions
of this Agreement shall be deemed modified to the extent necessary to be
enforceable and, specifically, without limiting the foregoing, if the term of
the applicable restrictive covenant is too long to be enforceable, it shall be
modified to encompass the longest term which is enforceable and, if the scope of
the geographic area of the applicable restrictive covenant is too great to be
enforceable, it shall be modified to encompass the greatest area that is
enforceable.
-8-
<PAGE> 9
7.2 Costs of Enforcement. In any action taken in good faith relating to
the enforcement of this Agreement or any provision herein, the Executive shall
be entitled to be paid any and all costs and expenses incurred by him in
enforcing or establishing his rights thereunder, including, without limitation,
reasonable attorneys' fees, whether suit be brought or not, and whether or not
incurred in arbitration, trial, bankruptcy or appellate proceedings, but only if
the Executive is successful on at least one material issue raised in the
enforcement proceeding; provided, that the total amount of any and all costs and
expenses payable by the Company to the Executive under this provision shall be
limited to $100,000.
7.3 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
7.4 Arbitration. Any claim or dispute arising under this Agreement
shall be subject to arbitration, and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The arbitration shall
be conducted in Atlanta, Georgia, in accordance with the Employment Dispute
Rules of the American Arbitration Association and the Federal Arbitration Act, 9
U.S.C. ss.1, et. seq. The arbitrator(s) shall be authorized to award both
liquidated and actual damages, in addition to injunctive relief, but no punitive
damages. The arbitrator(s) may also award attorney's fees and costs, without
regard to any restriction on the amount of such award under Georgia or other
applicable law. Such an award shall be binding and conclusive upon the parties
hereto, subject to 9 U.S.C. ss.10. Each party shall have the right to have the
award made the judgment of a court of competent jurisdiction.
7.5 Waiver of Breach. The waiver of a breach of any provision of this
Agreement by a party hereto shall not operate or be construed as a wavier of any
subsequent breach by the other party hereto.
7.6 Successors and Assigns. This Agreement shall inure to the benefit
of the Company and its Affiliates, and their respective successors and assigns.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's estate and/or legal representatives.
7.7 Assignment of Agreement. This Agreement is not assignable by the
Executive, but shall be freely assignable by the Company to any successor with
the written consent of the Executive. 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 assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
7.8 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be delivered in person or deposited in the United
States mail, certified or registered, with return receipt requested, as follows:
if to Executive:
Mr. Richard G. Smith
303 Chase Lane
Marietta, GA 30068
-9-
<PAGE> 10
if to Company:
AMERICAN BUSINESS PRODUCTS, INC.
Attention: President and Chief Executive Officer
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
7.9 Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to severance benefits. All understanding and agreements
heretofore made between the parties hereto with respect to severance benefits,
including any offer letter or other agreements between the Company and the
Executive, are hereby superseded by this document which alone fully and
completely expresses the agreements of the parties. This Agreement may not be
changed orally but only by an agreement in writing signed by both parties.
7.10 Survival of Provisions. The provisions of Article 4 - Restrictive
Covenants shall survive termination of this Agreement.
7.11 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement, to be effective as of the day and year first written above.
COMPANY:
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. STELL HUIE
-------------------------------------------
W. Stell Huie
Chairman of the Compensation Committee of
the Board of Directors
EXECUTIVE:
/s/ RICHARD G. SMITH
-------------------------------------------
Richard G. Smith
-10-
<PAGE> 1
EXHIBIT 11
SEVERANCE AGREEMENT
This Severance Agreement ("Agreement") is entered into and effective
as of this 15th day of October, 1999, by and between AMERICAN BUSINESS
PRODUCTS, INC. (the "Company") and GEOFFREY L. GREULICH (the "Executive").
WHEREAS, Executive is presently employed by a subsidiary of the
Company in a key management capacity; and
WHEREAS, the Company's Board of Directors has determined that it is
appropriate and in the best interests of the Company and its shareholders to
reinforce and assure the continued attention and dedication of the Executive to
his duties of employment without personal distraction or conflict of interest
as a result of the possibility or occurrence of a change in control of the
Company; and
WHEREAS, the Company's Board of Directors has authorized the Company
to enter into this Agreement with the Executive;
NOW THEREFORE, in consideration of the foregoing, and of the mutual
covenants and agreements of the parties set forth in this Agreement, and of
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree
as follows:
SECTION 1
DEFINITIONS
1.1 "Affiliate" shall mean any parent, brother-sister or subsidiary
corporation of the Company, any joint venture in which the Company owns at
least a 50 percent interest, and any partnership, limited liability partnership
or limited liability corporation in which the Company or any of its
wholly-owned subsidiaries owns at least a 50 percent interest.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Cause" shall mean (i) the Executive's willful and continued
failure to perform any substantial duty of his position with the Company and
its Affiliates (other than any such failure resulting from incapacity due to
Disability), within fifteen (15) days after a written demand for substantial
performance to the Executive which specifically identifies the manner in which
he has not substantially performed his duties; (ii) the Executive's willful
engagement in any illegal conduct or gross misconduct which is materially and
demonstrably injurious to the Company; or (iii) the Executive's engagement in
any activity that is in conflict of interest or competitive with the Company or
its Affiliates (other than any isolated, insubstantial and inadvertent action
not taken in bad faith and which is promptly remedied by the Executive upon
notice).
1.4 "Change in Control" shall have the definition contained in the
American Business
<PAGE> 2
Products, Inc. 1999 Incentive Compensation Plan.
1.5 "Code" shall mean the Internal Revenue Code of 1986, as
amended.
1.6 "Company" shall mean American Business Products, Inc.
1.7 "Disability" shall mean, for purposes of this Agreement, a
physical or mental impairment that prohibits the Executive from performing the
essential duties of his position, which is expected to be of a long and
continued duration, and which would meet the definition of disability under the
Company's long-term disability plan.
1.8 "Effective Date" shall mean October 15, 1999.
1.9 "Good Reason" shall mean (i) the assignment of duties
inconsistent with the Executive's position, or any action by the Company which
results in diminution of the Executive's position, authority, duties or
responsibilities as in effect on the Effective Date (other than any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
promptly remedied by the Company upon notice by the Executive); (ii) a
reduction in the Executive's base salary or benefits (unless such reduction in
benefits applies to all officers of the Company); (iii) a material breach by
the Company of its obligations hereunder; (iv) the Company requiring the
Executive to have his office based at a location more than 30 miles from the
location of his office on the Effective Date; or (v) any failure by a successor
to the Company to assume and agree to perform the Company's obligations
hereunder.
1.10 "Proprietary Information" shall mean information that meets the
definition of "trade secret" under the laws of the State of Georgia (i.e., the
Uniform Trade Secrets Act, O.C.G.A. ss.10-1-760, et seq.), as well as any
scientific or technical information, design, process, procedure, formula or
improvement that is secret and of value, information that the Company takes
reasonable efforts to protect from disclosure and from which the Company
derives actual or potential economic value due to its confidential nature,
including, but not limited to, technical or nontechnical data, formulas,
complications, programs, devices, methods, techniques, drawings, processes,
financial data, lists of actual or potential customers, price lists, business
plans, customer and vendor records, training and operations materials and
memoranda, personnel records, financial information relating to the business of
the Company, accounts, customers, vendors, employees and affairs of the
Company, and any information marked "confidential" by the Company.
1.11 "Qualifying Termination" shall mean (a) the termination of
Executive's employment by the Company without Cause, or (b) the Executive's
termination of his employment for Good Reason. A Qualifying Termination shall
not include a termination of Executive's employment by reason of the
Executive's death, the Executive's Disability, the Executive's voluntary
termination of employment without Good Reason, or the termination of the
Executive's employment for Cause.
SECTION 2
TERM OF AGREEMENT
2.1 Term of Agreement. This Agreement shall commence on the
Effective Date and shall
<PAGE> 3
continue in effect until June 30, 2001 (the "Initial Term"). This Agreement
shall automatically be extended for one additional year at the end of the
Initial Term, and then for successive one-year periods (each such one-year
extension following the Initial Term shall be a "Successive Period"). However,
either party may terminate this Agreement at the end of the Initial Term, or at
the end of any Successive Period, by giving the other party written notice of
intent not to renew, delivered at least sixty (60) calendar days prior to the
end of such Initial Term or Successive Period; provided, however, that any such
termination of this Agreement by the Company, which was to become effective
within sixty (60) days prior to the date of a Change in Control, shall be
ineffective and shall be deemed to be a Qualifying Termination.
2.2 Extension of Term Upon Change in Control. In the event that a
Change in Control occurs during the Initial Term or any Successive Period, the
term of this Agreement shall automatically and irrevocably become a term ending
on the first anniversary of the effective date of the Change in Control. This
Agreement shall be assigned to, and shall be assumed by, any successor to the
Company subsequent to such Change in Control.
SECTION 3
SEVERANCE BENEFITS
3.1 Entitlement to Benefits. If, for any reason constituting a
Qualifying Termination, the Executive's employment terminates during the period
beginning on the Effective Date of this Agreement and ending on the first
anniversary of the effective date of a Change in Control of the Company, the
Company shall provide to the Executive the benefits described in either Section
3.2 or Section 3.3 below, as applicable.
3.2 Severance Benefits. In the event of a Qualifying Termination
prior to a Change in Control of the Company, the Company shall pay and provide
to Executive each of the following benefits, subject to Executive's entitlement
to such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practicable
following such a Qualifying Termination, but no later than 10 business
days following such Qualifying Termination, the Company shall provide
the Executive with a lump sum cash payment equal to Executive's earned
but unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
(b) Severance Pay. As soon as practicable following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum cash payment equal to one times the Executive's annual
rate of base salary in effect upon the date of the Qualifying
Termination.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with
continued medical, dental, basic life insurance, officer life
insurance, and accidental death and dismemberment insurance benefits
for the Executive and/or the Executive's covered dependents at least
equal to those which would have been provided to them if the
Executive's employment had not been terminated, with the Company
<PAGE> 4
paying 100% of the cost of such benefits during such period; provided,
that such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with another
employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of continued
eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but
which has not been paid) for a performance period that has been
completed prior to a Qualifying Termination shall be immediately
payable upon the Qualifying Termination. Any outstanding rights to (i)
any cash bonus that would by its terms be payable for or expire in the
current year (whether short-term or long-term), or (ii) a performance
share award or a performance-based restricted stock award for a
performance period which has not been completed, shall be governed by
the applicable provisions of the plan under which such cash bonus,
performance share award or performance-based restricted stock award
was granted. Any outstanding stock options or restricted stock awards
of the Executive shall be governed by the applicable provisions of the
plan under which such stock options or restricted stock awards were
granted.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the
Qualifying Termination. In addition, the Company shall pay the
Executive the amount of any benefit he forfeits under any nonqualified
retirement plan sponsored by the Company due to the Qualifying
Termination. Any payment under this provision shall be made from the
general assets of the Company and not from the trust fund of any
tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not
be eligible for rollover treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
3.3 Change in Control Severance Benefits. In the event of a
Qualifying Termination following a Change in Control of the Company, in lieu of
the benefits described in Section 3.2, the Company shall pay and provide to
Executive each of the following benefits, subject to Executive's entitlement to
such benefits pursuant to Section 3.1 hereof:
(a) Accrued Pay and Benefits. As soon as practicable
following such a Qualifying Termination, but no later than 10 business
days following such Qualifying Termination, the Company shall provide
the Executive with a lump sum cash payment equal to Executive's earned
but unpaid base salary, earned and unpaid vacation pay, and any
unreimbursed business expenses. Such payment shall constitute full
satisfaction for these amounts owed to Executive.
<PAGE> 5
(b) Severance Pay. As soon as practicable following such a
Qualifying Termination, but no later than 10 business days following
such Qualifying Termination, the Company shall provide the Executive
with a lump sum cash payment equal to two (2) times the Executive's
annual rate of base salary in effect upon the date of the Qualifying
Termination.
(c) Welfare Benefits. For twelve (12) months following a
Qualifying Termination, the Company shall provide the Executive with
continued medical, dental, basic life insurance, officer life
insurance, and accidental death and dismemberment insurance benefits
for the Executive and/or the Executive's covered dependents at least
equal to those which would have been provided to them if the
Executive's employment had not been terminated, with the Company
paying 100% of the cost of such benefits during such period; provided,
that such twelve-month period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with another
employer and is eligible to receive medical or other welfare benefits
under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under
such other plan during such applicable period of continued
eligibility.
(d) Bonuses and Stock Rights. Any cash bonus earned (but
which has not been paid) for a performance period that has been
completed prior to a Qualifying Termination shall be immediately
payable upon the Qualifying Termination. Any outstanding rights to any
cash bonus that would by its terms be payable for or expire in the
current year (whether short-term or long-term) shall become 100
percent vested (without proration) with performance deemed to have
been met at target level, and two (2) times the vested amount shall be
immediately payable to the Executive upon the Qualifying Termination.
Any outstanding stock options, restricted stock awards or performance
share awards of the Executive shall be governed by the applicable
provisions of the plan under which such stock options, restricted
stock awards or performance share awards were granted.
(e) Retirement Benefits. Upon the date of the Qualifying
Termination, the Executive shall forfeit the unvested portion of his
account in the Profit Sharing Retirement Plan and his Matching
Contributions Account in the Employee Savings Plan. Due to that
forfeiture, as soon as practicable, but no later than thirty (30) days
following the Qualifying Termination, the Company shall pay the
Executive a single sum cash payment in an amount equivalent to the
forfeited portion of his account in the Profit Sharing Retirement Plan
and his Matching Contributions Account in the Employee Savings Plan,
determined as of the most recent valuation date prior to the
Qualifying Termination. In addition, the Company shall pay the
Executive the amount of any benefit he forfeits under any nonqualified
retirement plan sponsored by the Company due to the Qualifying
Termination. Any payment under this provision shall be made from the
general assets of the Company and not from the trust fund of any
tax-qualified retirement plan. The Executive acknowledges that this
payment will be subject to taxes at the time of payment and will not
be eligible for rollover treatment.
(f) Outplacement Benefits. The Company shall provide
outplacement services for the Executive at a cost of up to Fifteen
Thousand Dollars ($15,000.00). The Company agrees to pay such amount
directly to an outplacement company of the Executive's choice.
<PAGE> 6
SECTION 4
EXCISE TAX
4.1 Limitation on Payment. If the benefits provided to the
Executive under this Agreement or under any other agreement with, or plan of,
the Company (in the aggregate, the "Total Payment") constitute a payment so
that an excise tax (the "Excise Tax") is due under Section 280G, Section 4999
or other provision of the Code, then the benefits provided under this Agreement
shall be limited to the Reduced Amount. The "Reduced Amount" shall be the
largest amount that could be received by the Executive under this Agreement
such that no part of the Total Payment provided to the Executive shall be
subject to the Excise Tax. The Reduced Amount shall be calculated by a
nationally recognized benefits consulting firm or accounting firm, and such
amount shall be presented to the Executive for review and approval. If the
amount payable to the Executive is limited to the Reduced Amount, Executive
shall have the right, in the Executive's sole discretion, to designate the
portion of the Total Payment that should be reduced or eliminated so as to
avoid having the benefits provided to the Executive under this Agreement be
subject to the Excise Tax.
4.2 Notification. If the Internal Revenue Service claims in writing
that any benefit received under this Agreement constitutes an "excess parachute
payment" under Section 280G of the Code, the Executive shall notify the Company
in writing of such claim within 10 business days of the claim. The Executive
shall apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such claim
prior to the expiration of the 30-day period following the date on which the
Executive provides notice of the claim to the Company (or such shorter period
ending on the date that any payment of taxes with respect to the claim is due).
If the Company notifies the Executive in writing prior to the expiration of
such period that it desires to contest such claim, the Executive shall (i) give
the Company any information reasonably requested by the Company relating to
such claim; (ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time; (iii)
cooperate with the Company in good faith in order to effectively contest such
claim; and (iv) permit the Company to participate in any proceedings relating
to such claim; provided, however, that the Company shall bear and pay directly
all costs and expenses (including, but not limited to, additional interest and
penalties and related legal, consulting or similar fees) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or other tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses.
4.3 Excise Tax Refund. If, after the receipt by the Executive of an
amount advanced by the Company in connection with the contest of the Excise Tax
claim, the Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto); provided, however, that if the amount of that refund
exceeds the amount advanced by the Company or it is otherwise determined for
any reason that additional amounts could be paid to the Executive without
incurring any Excise Tax, any such amount will be promptly paid by the Company
to the Executive. If, after the receipt of an amount advanced by the Company in
connection with an Excise Tax claim, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest the denial of
such refund
<PAGE> 7
prior to the expiration of 30 days after such determination, such advance shall
be forgiven and shall not be required to be repaid and shall be deemed to be in
consideration for services rendered after the date of the Qualified
Termination.
SECTION 5
SUCCESSORS AND ASSIGNMENT
5.1 Successors. The Company shall require any successor (whether
via a Change in Control, direct or indirect, by purchase, merger,
consolidation, or otherwise) to all or substantially all of the stock or assets
of the Company to expressly assume and agree to perform the Company's
obligations under this Agreement, in the same manner and to the same extent
that the Company would be required to perform them if no such succession had
taken place.
5.2 Assignment by Executive. This Agreement shall inure to the
benefit of and be enforceable by Executive's executors or administrators or
heirs. If Executive should die after any amount has become payable to Executive
hereunder but prior to payment, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to
Executive's estate or designated beneficiary. Executive's rights hereunder shall
not otherwise be assignable.
SECTION 6
CONFIDENTIALITY OF COMPANY INFORMATION; NONSOLICITATION
6.1 Nonsolicitation of Customers, Clients and Suppliers. Executive
agrees that during the term of this Agreement and for twelve (12) calendar
months following his Qualifying Termination, he will not, directly or
indirectly, without the Company's prior written consent, contact any customer,
client or supplier of the Company or any of its Affiliates for business
purposes unrelated to furthering the business of the Company or its Affiliates.
Executive further agrees that for a period of twelve (12) calendar months
following the date of his Qualifying Termination, he will not directly or
indirectly, (i) contact, solicit or divert, or attempt to contact, solicit,
divert or take away, any customer, client or supplier of the Company or its
Affiliates for purposes of, or with respect to, providing a customer, client or
supplier to a competing business; or (ii) take any affirmative action with a
customer, client or supplier of the Company or its Affiliates for purposes of
providing a customer, client or supplier to a business competing with the
Company or its Affiliates. The prohibitions of the preceding sentence shall
apply only to customers, clients and suppliers of the Company with whom the
Executive had Material Contact on the Company's behalf during the twelve months
immediately preceding the Qualifying Termination. For purposes of this
Agreement, the Executive had "Material Contact" with a customer, client or
supplier if (a) he had business dealings with the customer, client or supplier
on the Company's behalf; (b) he was responsible for supervising or coordinating
the dealings between the Company and the customer, client or supplier; or (c)
he obtained Proprietary Information about the customer, client or supplier as a
result of his association with the Company.
6.2 Nonsolicitation of Employees. The Executive agrees that during
his employment with the Company and for twelve (12) calendar months after his
Qualifying Termination, the Executive will not, directly or indirectly, solicit
or attempt to recruit or hire any employees of the Company or its Affiliates
<PAGE> 8
who were employed by the Company or its Affiliates at any time during the last
year of the Executive's employment with the Company and who are actively
employed by the Company or its Affiliates at the time of the solicitation or
attempted solicitation, to provide services similar to those performed by the
employee for the Company on behalf of, or for the purpose of engaging in
employment with, a competitor of the Company.
6.3 Nondisclosure of Trade Secrets and Proprietary Information.
Except to the extent reasonably necessary for Executive to perform his duties
for the Company, the Executive shall not, directly or indirectly, furnish or
disclose to any person, or use in any way, any trade secrets of the Company or
its Affiliates, for so long as such trade secrets remain "trade secrets" under
applicable state law. Except to the extent reasonably necessary for Executive
to perform his duties for the Company, Executive shall not, during the term of
this Agreement and for a period of twelve (12) calendar months following the
Executive's Qualifying Termination, directly or indirectly, furnish or disclose
to any person, or use in any way, for personal benefit or the benefit of
others, any Proprietary Information of the Company or its Affiliates.
6.4 Reasonableness. Executive has carefully considered the nature
and extent of the restrictions upon him and the rights and remedies conferred
on the Company under this Agreement, and Executive hereby acknowledges and
agrees that: (i) the restrictions and covenants contained herein, and the
rights and remedies conferred upon the Company, are necessary to protect the
goodwill and other value of the business of the Company; (ii) the restrictions
places upon Executive hereunder are fair and reasonable in time, will not
prevent him from earning a livelihood, and place no greater restraint upon the
Executive than is reasonably necessary to secure the business and goodwill of
the Company; (iii) the Company is relying upon the restrictions and covenants
contained herein in continuing to make available to Executive information
concerning the business of the Company; (iv) the Executive's employment
hereunder places him in a position of confidence and trust with the Company and
its employees, customers and suppliers; and (v) the provisions of this section
shall be interpreted so as to protect the Proprietary Information, and to
secure for the Company the exclusive benefits of the work performed on behalf
of the Company by the Executive under this Agreement, and not to unreasonably
limit his ability to engage in employment and consulting activities in
noncompetitive areas which do not endanger the Company's legitimate interests
expressed in this Agreement.
6.5 Remedy for Breach. Executive acknowledges and agrees that his
breach of any of the covenants contained in this Article of this Agreement will
cause irreparable injury to the Company and that remedies at law available to
the Company for any actual or threatened breach by the Executive of such
covenants will be inadequate and that the Company shall be entitled to specific
performance of the covenants in this Article or injunctive relief against
activities in violation of this Article by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, without the necessity or
proving actual damages. This provision with respect to injunctive relief shall
not diminish the right of the Company to claim and recover monetary damages
against the Executive for any breach of this Agreement, in addition to
injunctive relief. The Executive acknowledges and agrees that the covenants
contained in this Article shall be construed as agreements independent of any
other provision of this or any other contract between the parties hereto, and
that the existence of any claim or cause of action by the Executive against the
Company, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by the Company of said covenants.
Further, the Executive agrees that upon his violation of any of the
restrictions in Agreement, the Company may immediately cease any payments or
benefits provided hereunder to the Executive or his dependents.
<PAGE> 9
SECTION 7
MISCELLANEOUS
7.1 Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
conform with such laws) of any provision hereof shall not render unenforceable
or impair the remainder of this Agreement which shall be deemed amended to
delete or modify, as necessary, the invalid or unenforceable provisions. The
parties further agree to alter the balance of this Agreement in order to render
the same valid and enforceable. The terms of the restrictive covenant
provisions of this Agreement shall be deemed modified to the extent necessary
to be enforceable and, specifically, without limiting the foregoing, if the
term of the applicable restrictive covenant is too long to be enforceable, it
shall be modified to encompass the longest term which is enforceable and, if
the scope of the geographic area of the applicable restrictive covenant is too
great to be enforceable, it shall be modified to encompass the greatest area
that is enforceable.
7.2 Costs of Enforcement. In any action taken in good faith
relating to the enforcement of this Agreement or any provision herein, the
Executive shall be entitled to be paid any and all costs and expenses incurred
by him in enforcing or establishing his rights thereunder, including, without
limitation, reasonable attorneys' fees, whether suit be brought or not, and
whether or not incurred in arbitration, trial, bankruptcy or appellate
proceedings, but only if the Executive is successful on at least one material
issue raised in the enforcement proceeding; provided, that the total amount of
any and all costs and expenses payable by the Company to the Executive under
this provision shall be limited to $100,000.
7.3 Applicable Law. This Agreement shall be construed and enforced
in accordance with the laws of the State of Georgia.
7.4 Arbitration. Any claim or dispute arising under this Agreement
shall be subject to arbitration, and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The arbitration
shall be conducted in Atlanta, Georgia, in accordance with the Employment
Dispute Rules of the American Arbitration Association and the Federal
Arbitration Act, 9 U.S.C. ss.1, et. seq. The arbitrator(s) shall be authorized
to award both liquidated and actual damages, in addition to injunctive relief,
but no punitive damages. The arbitrator(s) may also award attorney's fees and
costs, without regard to any restriction on the amount of such award under
Georgia or other applicable law. Such an award shall be binding and conclusive
upon the parties hereto, subject to 9 U.S.C. ss.10. Each party shall have the
right to have the award made the judgment of a court of competent jurisdiction.
7.5 Waiver of Breach. The waiver of a breach of any provision of
this Agreement by a party hereto shall not operate or be construed as a wavier
of any subsequent breach by the other party hereto.
7.6 Successors and Assigns. This Agreement shall inure to the
benefit of the Company and its Affiliates, and their respective successors and
assigns. This Agreement shall inure to the benefit of and
<PAGE> 10
be enforceable by the Executive's estate and/or legal representatives.
7.7 Assignment of Agreement. This Agreement is not assignable by
the Executive, but shall be freely assignable by the Company to any successor
with the written consent of the Executive. 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 assume expressly and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place.
7.8 Notices. All notices, demands and other communications
hereunder shall be in writing and shall be delivered in person or deposited in
the United States mail, certified or registered, with return receipt requested,
as follows:
if to Executive:
Mr. Geoffrey L. Greulich
4265 Wickersham Drive
Atlanta, GA 30327
if to Company:
AMERICAN BUSINESS PRODUCTS, INC.
Attention: President and Chief Executive Officer
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
7.9 Entire Agreement. This Agreement contains the entire agreement
of the parties with respect to severance benefits. All understanding and
agreements heretofore made between the parties hereto with respect to severance
benefits, including any offer letter or other agreements between the Company
and the Executive, are hereby superseded by this document which alone fully and
completely expresses the agreements of the parties. This Agreement may not be
changed orally but only by an agreement in writing signed by both parties.
7.10 Survival of Provisions. The provisions of Article 4 -
Restrictive Covenants shall survive termination of this Agreement.
7.11 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement, to be effective as of the day and year first written above.
<PAGE> 11
COMPANY:
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. Stell Huie
-------------------------------------------
W. Stell Huie
Chairman of the Compensation Committee of the
Board of Directors
EXECUTIVE:
/s/ Geoffrey L. Greulich
----------------------------------------------
Geoffrey L. Greulich
<PAGE> 1
EXHIBIT 12
[ABP LETTERHEAD]
October 15, 1999
Mr. Daniel W. McGlaughlin
- ------------------------
- ------------------------
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Dan:
This letter is to document the recent arrangement entered into between
you and the Board of Directors of American Business Products, Inc. ("ABP").
Upon the resignation of Larry L. Gellerstedt, III as Chairman, Chief Executive
Officer and President of ABP, the Board asked you to serve as Acting Chief
Executive Officer and President of ABP. You have agreed to assume the
responsibilities of Acting Chief Executive Officer and President until such
time as your successor has been elected by the Board.
Pursuant to the arrangement, as approved by the Board at its meeting
on September 16, 1999, you will receive compensation in the amount of $30,000
per month for your services as Acting Chief Executive Officer and President of
ABP. The amount and terms of your compensation under this arrangement will be
reviewed no later than December 31, 1999.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/s/ C. Douglas Miller
------------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ Daniel W. McGlaughlin
- --------------------------
Daniel W. McGlaughlin
Date: 10/15/99
------------------
<PAGE> 2
AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY, SUITE 1200
ATLANTA, GA 30328
December 31, 1999
Mr. Daniel W. McGlaughlin
3001 Island Point Lane #42
Stuart, FL 34996
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Dan:
The purpose of this letter is to terminate that certain letter
agreement dated October 15, 1999, between you and American Business Products,
Inc. ("ABP"), effective as of December 31, 1999.
Upon the resignation of Larry L. Gellerstedt, III as Chairman, Chief
Executive Officer and President of ABP, the Board of Directors of ABP asked you
to serve as Acting Chief Executive Officer and President of ABP. You agreed to
assume the responsibilities of Acting Chief Executive Officer and President and
have served in that position. Upon the Board's hiring Harold Smethills to
assume the position of Chief Executive Officer and President as of December 6,
1999, you ceased to serve in that position on that date.
At the Board's request, you have agreed to act as a consultant to ABP
through January 31, 2000, to assist Mr. Smethills and to effect a smooth
transition of the Chief Executive Officer and President duties. This letter is
to confirm that your compensation under the October 15, 1999 letter agreement
will continue through January 31, 2000.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/s/ C. Douglas Miller
-----------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ Daniel W. McGlaughlin
- -------------------------
Daniel W. McGlaughlin
Date: 12/31/99
--------------
<PAGE> 1
EXHIBIT 13
[ABP LETTERHEAD]
October 15, 1999
Mr. G. Harold Northrop
5253 Highway 354
Pine Mountain, GA 31822
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Hal:
This letter is to document the recent arrangement entered into between
you and the Board of Directors of American Business Products, Inc. ("ABP").
Upon the resignation of Larry L. Gellerstedt, III as Chairman, Chief Executive
Officer and President of ABP, the Board asked you to serve as Acting Chairman
of the Board of ABP. You have agreed to assume the responsibilities of Acting
Chairman of the Board until such time as your successor has been elected by the
Board.
Pursuant to the arrangement, as approved by the Board at its meeting
on September 16, 1999, you will receive compensation in the amount of $30,000
per month for your services as Acting Chairman. The amount and terms of your
compensation under this arrangement will be reviewed no later than December 31,
1999.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/S/ C. Douglas Miller
-----------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ G. Harold Northrop
- -----------------------
G. Harold Northrop
Date: 10/15/99
----------------
<PAGE> 2
AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY, SUITE 1200
ATLANTA, GEORGIA 30328
December 31, 1999
Mr. G. Harold Northrop
5253 Highway 354
Pine Mountain, GA 31822
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Hal:
This purpose of this letter is to extend and amend that certain letter
agreement between you and American Business Products, Inc. ("ABP"), dated
October 15, 1999. Upon the resignation of Larry L. Gellerstedt, III as
Chairman, Chief Executive Officer and President of ABP, the Board of Directors
of ABP asked you to serve as Acting Chairman of the Board of ABP. You agreed to
assume and have assumed the responsibilities of Acting Chairman of the Board.
The Board now desires to amend your agreement to provide that you will continue
to perform the service as Acting Chairman of the Board through June 30, 2000.
Pursuant to the Board's decisions at its meeting on December 8,
1999, you will receive compensation in the amount of $30,000 per month for your
services as Acting Chairman through February 29, 2000; thereafter, you will
receive compensation in the amount of $5,000 per month for your services as
Acting Chairman.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/s/ C. Douglas Miller
------------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ G. Harold Northrop
- ------------------------
G. Harold Northrop
Date: Dec. 31, 1999
-----------------
<PAGE> 1
EXHIBIT 14
AMERICAN BUSINESS PRODUCTS, INC.
2100 RIVEREDGE PARKWAY, SUITE 1200
ATLANTA, GEORGIA 30328
October 15, 1999
Mr. W. Stell Huie
141 Big View Drive
Queens Mountain
Highlands, NC 28741-2469
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Stell:
This letter is to document the recent arrangement entered into between
you and the Board of Directors of American Business Products, Inc. ("ABP").
Upon the resignation of Larry L. Gellerstedt, III as Chairman, Chief Executive
Officer and President of ABP, the Board asked you to serve as of a consultant
to the acting management of ABP with regard to certain executive compensation
and employment issues. You have agreed to assume the responsibilities of this
consulting position until such time as your successor has been elected by the
Board or such earlier time as the Board determines that the position is no
longer needed.
Pursuant to the arrangement, as approved by the Board at its meeting
on September 16, 1999, you will receive compensation in the amount of $400.00
per hour for your services in this consultant capacity. The amount and terms of
your compensation under this arrangement will be reviewed no later than
December 31, 1999.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/s/ C. Douglas Miller
-----------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ W. Stell Huie
- -----------------------
W. Stell Huie
Date: 12/31/99
-----------------
<PAGE> 2
[ABP LETTERHEAD]
December 31, 1999
Mr. W. Stell Huie
141 Big View Drive
Queens Mountain
Highlands, NC 28741-2469
RE: AMERICAN BUSINESS PRODUCTS, INC.
Dear Stell:
The purpose of this letter is to extend and amend that certain letter
agreement between you and American Business Products, Inc. ("ABP"), dated
October 15, 1999. Upon the resignation of Larry L. Gellerstedt, III as
Chairman, Chief Executive Officer and President of ABP, the Board asked you to
serve as of a consultant to the acting management of ABP with regard to certain
executive compensation and employment issues. You have assumed the
responsibilities of this consulting position. This letter is to extend the
period of your service in this role through February 29, 2000.
Pursuant to the previously-agreed to arrangement, you will continue to
receive compensation in the amount of $400.00 per hour for your services in
this consultant capacity.
Please sign this letter as your acknowledgement of the terms of this
arrangement.
Very truly yours,
/s/ C. DOUGLAS MILLER
-----------------------------------------
On Behalf of the ABP Board of Directors
AGREED AND ACKNOWLEDGED:
/s/ W. STELL HUIE
- ------------------------
W. Stell Huie
Date: 12/31/99
------------------
<PAGE> 1
EXHIBIT 15
[AMERICAN BUSINESS PRODUCTS, INC. LETTERHEAD]
December 1, 1999
PERSONAL AND CONFIDENTIAL
Mr. Harold R. Smethills
1546 Cole Boulevard
Suite 227
Golden, CO 80401
Dear Harold:
On behalf of the Board of Directors of American Business Products,
Inc., I am pleased to extend this formal offer of employment to you relative to
the position of Chief Executive Officer and President of American Business
Products, Inc. ("ABP"). Please review the terms outlined below, and if these
terms are satisfactory to you, please sign the acceptance at the end of this
letter and return the original to me. When your acceptance of this offer
becomes effective, for securities laws disclosure purposes, ABP will
immediately issue a press release announcing your employment. This offer will
remain open through 5:00 p.m. on Friday, December 3rd, 1999.
You will begin employment as Chief Executive Officer and President of
ABP effective as of Monday, December 6, 1999. The Executive Committee will
recommend your election as a member of the Board of ABP on or before December
8, 1999. You agree to meet with ABP's Board of Directors, officers and
employees, as well as representatives of the press, at the direction of the
Executive Committee after your acceptance of this offer.
The initial term of your employment shall be three (3) months. The
Board of Directors has directed the Compensation and Nominating Committee of
the Board to initiate negotiations with you for a formal contract of employment
with appropriate cash and equity components.
Below is a general discussion of the various components of the
compensation and benefits package we are offering you in this position:
Base Salary: The Base Salary will be $40,000 per month.
Living Expenses: During the 3-month term of this agreement, you will
continue to maintain your permanent residence in
Denver, Colorado. During the term of the agreement,
the Company agrees to rent an apartment for your use
in Atlanta and agrees to reimburse you for utilities
and other reasonable living expenses for the 3-month
term.
<PAGE> 2
Travel Expenses: During the term of this agreement, the Company
desires for you to spend some time with your family,
either in Denver or Atlanta, and therefore agrees to
pay for coach or economy class, round-trip airline
tickets for you to visit your family in Denver or
for your family to visit with you in Atlanta.
Automobile: ABP will provide you with an automobile allowance of
$1,000.00 per month during the term of this
agreement for your use in obtaining and maintaining
an automobile for your business use.
Employee Benefits
Plans: ABP maintains a broad base of employee benefits
plans, which includes coverages for medical, dental,
group term life insurance, and supplemental life
insurance. In addition, short-term and long-term
disability benefits are available. We understand
that you have an existing disability policy in
force, and if you so direct, the Company agrees to
pay the premium on that policy during the term of
this agreement and to reduce the amount of your Base
Salary under this agreement in the amount of such
premium payment. Further, ABP currently provides a
tax-qualified profit sharing plan and a Code Section
401(k) plan for retirement savings. Your
participation in ABP's employee benefit plans will
be pursuant to the terms of those plans. If you
would like more information or to see copies of any
of the employee benefit plans, we will be happy to
make them available to you.
Incentive Bonus: In the event of a Change in Control of the Company
during the term of this agreement, the Company
agrees to pay you a cash bonus in the amount of
$200,000.00, payable on the date of closing of the
Change in Control transaction. Further, at the end
of the term of this Agreement, if the Company either
has executed a definitive agreement or has engaged
in substantive and substantial negotiations with a
prospective purchaser which results in the Company's
execution of a definitive agreement within ninety
(90) days following the end of the term of this
agreement, then the Company agrees to pay you the
cash bonus described in the first sentence hereof,
with such bonus becoming payable at the time of
closing of the Change in Control transaction. In
addition, the Board of Directors retains the
discretion to increase the amount of the cash bonus
based on its evaluation of your performance. For
purposes of this letter, the term "Change in
Control" shall mean the occurrence of a "Change in
Control" described in Section 2.7 of the ABP 1999
Incentive Compensation Plan.
Termination: During the 3-month term of this agreement, the
Company may not terminate your employment for any
reason except Cause. For purposes of this agreement,
the term "Cause" shall mean (i) your willful and
continued failure to perform any substantial duty of
your position with ABP and its
2
<PAGE> 3
affiliates (other than any such failure resulting
from incapacity due to physical or mental injury or
illness), within fifteen (15) days after a written
demand for substantial performance from the Board to
you which specifically identifies the manner in
which the Board believes that you have not
substantially performed your duties; (ii) your
willful engagement in any illegal conduct or gross
misconduct which is materially and demonstrably
injurious to ABP; or (iii) your engagement in any
activity that is in conflict of interest of or
competitive with ABP or its affiliates (other than
any isolated, insubstantial and inadvertent action
not taken in bad faith and which is promptly
remedied by you upon notice by the Board). During
the term of this agreement, you may not terminate
your employment with the Company. In the event of a
Change in Control during the term of this agreement,
this agreement shall immediately terminate, but any
amounts earned but unpaid under this agreement
through the date of the Change in Control (including
the incentive bonus described above) shall survive
the termination of this agreement.
In the event that you have any outstanding restrictive covenants with
a prior employer or employers, it is not our intention or desire for you to
breach any of those restrictive covenants by accepting or fulfilling your
duties in this position.
The terms and provisions of this offer and agreement are contingent
upon approval by the Executive Committee of the Board of Directors of the
Company at its meeting on or before December 6, 1999.
If these terms are satisfactory, please sign the acceptance below and
return the original of this letter to me by hand or by overnight courier.
Immediately upon approval of this offer and your acceptance by the Executive
Committee, ABP will issue a press release to announce your employment.
All of us, of course, will continue to maintain the strict
confidentiality of our discussions and the terms of this conditional offer
until public disclosure. If you desire more detail on any aspect of the above,
we will be happy to provide it.
Very truly yours,
/s/ W. Stell Huie
W. Stell Huie
On Behalf of the ABP Board of Directors
The above offer is ACCEPTED
on the 1st day of December, 1999
/s/ Harold R. Smethills
- -----------------------
Harold R. Smethills
3
<PAGE> 1
EXHIBIT 16
EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into by and between LARRY L. GELLERSTEDT,
III (the "Executive") and AMERICAN BUSINESS PRODUCTS, INC. (the "Company").
WHEREAS, the Executive is currently employed by the Company, having
been hired under certain terms and conditions set forth in an offer letter
dated February 24, 1998; and
WHEREAS, the Company and the Executive desire to further set forth in
a written agreement the complete terms and conditions pursuant to which the
Executive shall continue to be employed by the Company; and
WHEREAS, the Company and the Executive intend that this Agreement will
supersede any and all previous oral or written employment agreements between
the Company and the Executive, including the offer letter.
NOW, THEREFORE, in consideration of the covenants and agreements
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1.
DEFINITIONS
As used in this Agreement, the following words and/or phrases shall
have the meanings set forth below unless a different meaning plainly is
required by the context:
1.1 Agreement shall mean this Employment Agreement between the
Company and the Executive.
1.2 Affiliate shall mean any parent, brother-sister or subsidiary
corporation of the Company, any joint venture in which the Company owns at
least a 50 percent interest, and any partnership, limited liability partnership
or limited liability corporation in which the Company or any of its
wholly-owned subsidiaries owns at least a 50 percent interest.
1.3 Board shall mean the Board of Directors of the Company.
1.4 Cause shall mean (i) the Executive's willful and continued
failure to perform any substantial duty of his position with the Company and
its affiliates (other than any such failure
<PAGE> 2
resulting from incapacity due to Disability), within fifteen (15) days after a
written demand for substantial performance from the Board to the Executive which
specifically identifies the manner in which the Board believes that he has not
substantially performed his duties; (ii) the Executive's willful engagement in
any illegal conduct or gross misconduct which is materially and demonstrably
injurious to the Company; or (iii) the Executive's engagement in any activity
that is in conflict of interest or competitive with the Company or its
affiliates (other than any isolated, insubstantial and inadvertent action not
taken in bad faith and which is promptly remedied by the Executive upon notice
by the Board). Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the entire membership of the Board (excluding the Executive) at a meeting called
and held for such purpose (after reasonable notice is provided to the Executive
and the Executive is given an opportunity, together with counsel, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in (i), (ii) or (iii) above.
1.5 Change in Control shall mean the occurrence of any one of the
events described in this Section 1.5(a)-(e). The terms used in this Section 1.5
with an initial capital letter shall have the meanings set forth in Section
1.5(f), unless otherwise defined in this Agreement.
(a) The acquisition by a Person, together with
Affiliates and Associates of such Person, whether by purchase, tender
offer, exchange, reclassification, recapitalization, merger or
otherwise, of a sufficient number of shares of Common Stock or Common
Stock Equivalents to constitute the Person an Acquiring Person; or
(b) The acquisition by a Person (other than the Curtis
Investment Company, LLC), together with Affiliates and Associates of
such Person, of a number of shares of Common Stock (but not less than
20 percent of the shares of Common Stock) equal to or greater than the
number of shares of Common Stock held by any Person who or who,
together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 30 percent or more of the shares of Common Stock
as of the Effective Date; or
(c) During any period of two consecutive years,
individuals who at the beginning of such period constitute the Board
cease for any reason to constitute at least a majority thereof, unless
the election of each director who was not a director at the beginning
of such period has been approved in advance by a majority of the
Continuing Directors then in office; or
(d) Any merger or consolidation the result of which is
that less than 70 percent of the common stock, Voting Securities or
other equity interests of the surviving or resulting corporation or
other Person shall be owned in the aggregate by the former
shareholders of the Company, other than Affiliates or Associates of
any party to such
Gellerstedt Employment Agreement
Page 2
<PAGE> 3
merger or consolidation, as the same shall have existed immediately
prior to such merger or consolidation; or
(e) The sale by the Company, in one transaction or a
series of related transactions, whether in liquidation, dissolution or
otherwise, of assets or earning power aggregating more than 50 percent
of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) to any other Person or Persons.
(f) The following definitions shall apply in determining
when a Change in Control has occurred:
(i) "Acquiring Person" shall mean any Person
who or which, together with all Affiliates and Associates of such
Person, shall become the Beneficial Owner of 30 percent or more of the
shares of Common Stock then outstanding, but shall not include the
Company, any Subsidiary of the Company, or any Person who or which,
together with all Affiliates and Associates of such Person, is the
Beneficial Owner of 30 percent or more of the shares of Common Stock
as of the Effective Date, any employee benefit plan of the Company or
of any Subsidiary of the Company (if approved by a majority of the
Continuing Directors), or any Person or entity organized, appointed or
established by the Company for or pursuant to the terms of any such
plan.
(ii) "Affiliate" shall have the meaning ascribed
to such term in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and in effect on the
Effective Date (the "Exchange Act").
(iii) "Associate" shall mean:
(A) Any corporation or organization,
or parent or subsidiary of such corporation or organization,
of which a Person is an officer, director or partner or is,
directly or indirectly, the Beneficial Owner of 10 percent or
more of any class of equity securities;
(B) Any trust or other estate in which
a Person has a beneficial interest of 10 percent or more or
as to which such Person serves as trustee or in a similar
fiduciary capacity; and
(C) Any brother or sister (whether by
whole or half blood), ancestor, lineal descendant or spouse
of a Person, or any such relative of such spouse.
(iv) "Beneficial Owner" shall mean, with respect
to any securities, any Person who, together with such Person's
Affiliates and Associates, directly or indirectly:
(A) Has the right to acquire such
securities (whether such right is exercisable immediately or
only after the passage of time) pursuant to any
Gellerstedt Employment Agreement
Page 3
<PAGE> 4
agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; provided,
a Person shall not be deemed the Beneficial Owner of, or to
Beneficially Own:
(1) Securities acquired by
participation in good faith in a firm commitment
underwriting by a Person engaged in business as an
underwriter of securities until the expiration of 40
days after the date of such acquisition; or
(2) Securities tendered
pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or
Associates until such tendered securities are
accepted for purchase or exchange; or
(3) Securities issuable upon
exercise of rights issued to all shareholders
generally, which rights are only exercisable upon
separation from the Common Stock, or securities
issuable upon exercise of rights that have separated
from the Common Stock upon the occurrence of events
specified in a rights agreement between the Company
and a rights agent;
(B) Has the right to vote or dispose
of or has Beneficial Ownership (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the
Exchange Act) of such securities, including pursuant to any
agreement, arrangement or understanding, whether or not in
writing; provided, a Person shall not be deemed the
Beneficial Owner of, or to Beneficially Own, any security
under this subparagraph (ii) as a result of an agreement,
arrangement or understanding to vote such security if such
agreement, arrangement or understanding:
(1) Arises solely from a
revocable proxy given in response to a public proxy
or consent solicitation made pursuant to, and in
accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange
Act; and
(2) Is not also then
reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor
report); or
(C) With respect to any securities
which are Beneficially Owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof), has any
agreement, arrangement or understanding (whether or not in
writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described herein or
disposing of any voting securities of the Company.
Gellerstedt Employment Agreement
Page 4
<PAGE> 5
(vi) "Common Stock Equivalents" shall mean
preferred stock or other equity securities of the Company having the
right to be converted by the holders thereof into shares of Common
Stock, or having the right to vote generally for the election of
directors and on other matters. For purposes of determining the total
amount of Common Stock and Common Stock Equivalents owned by any
Person, such Common Stock Equivalents shall be equal to the number of
shares into which they may be converted by the holders thereof, or in
the case of securities that are not convertible having the right to
vote, shall be equal to the number of votes they are entitled to cast
in elections for directors.
(vii) "Continuing Director" shall mean:
(A) Any member of the Board who is not
an Acquiring Person, or an Affiliate or Associate of an
Acquiring Person, or a representative of an Acquiring Person
or of any such Affiliate or Associate, and was a member of
the Board prior to the Effective Date; or
(B) Any Person who subsequently
becomes a member of the Board who is not an Acquiring Person,
or an Affiliate or Associate of an Acquiring Person, or a
representative of an Acquiring Person or of any such
Affiliate or Associate, if such Person's nomination for
election or election to the Board is recommended or approved
by a majority of the Continuing Directors.
(viii) "Person" shall mean any individual, firm,
corporation, partnership or other entity.
(ix) "Subsidiary" shall mean any corporation,
partnership, joint venture, trust or other entity more than 50 percent
of the Voting Securities of which are Beneficially Owned, directly or
indirectly, by a Person.
(x) "Voting Securities" shall mean any class of
then outstanding shares of stock or other beneficial interests
entitled to vote in election of directors or other Persons charged
with management of a Person."
1.6 Code shall mean the Internal Revenue Code of 1986, as
amended.
1.7 Company shall mean American Business Products, Inc., its
successors and assigns, and any other corporation, partnership, sole
proprietorship or other type of business entity into which the Company may be
merged, consolidated or otherwise combined.
1.8 Disability shall mean a physical or mental impairment that
prohibits the Executive from performing the essential duties of his position,
is expected to be of a long and continued duration, and for which he becomes
eligible to receive benefits under the Company's long-term disability plan.
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1.9 Effective Date shall mean January 1, 1999.
1.10 Executive shall mean Larry L. Gellerstedt, III.
1.11 ERISA shall mean the Executive Retirement Income Security Act
of 1974, as amended.
1.12 Good Reason shall mean (i) the assignment of duties
inconsistent with the Executive's position as President and Chief Executive
Officer or Chairman of the Board of the Company, or any action by the Company
which results in diminution of the Executive's position, authority, duties or
responsibilities as in effect on the Effective Date (other than any isolated,
insubstantial and inadvertent action not taken in bad faith and which is
promptly remedied by the Company upon notice by the Executive); (ii) a
reduction in the Executive's base salary or benefits (unless such reduction in
benefits applies to all officers of the Company); (iii) a material breach by
the Company of its obligations hereunder; (iv) the Company requiring the
Executive to have his office based at a location other than the metropolitan
Atlanta area; or (v) any failure by a successor to the Company to assume and
agree to perform the Company's obligations hereunder.
1.13 Proprietary Information shall mean information that meets the
definition of "trade secret" under the laws of the State of Georgia (i.e., the
Uniform Trade Secrets Act, O.C.G.A. ss.10-1-760, et seq.), as well as any
scientific or technical information, design, process, procedure, formula or
improvement that is secret and of value, information that the Company takes
reasonable efforts to protect from disclosure and from which the Company
derives actual or potential economic value due to its confidential nature,
including, but not limited to, technical or nontechnical data, formulas,
complications, programs, devices, methods, techniques, drawings, processes,
financial data, lists of actual or potential customers, price lists, business
plans, customer and vendor records, training and operations materials and
memoranda, personnel records, financial information relating to the business of
the Company, accounts, customers, vendors, employees and affairs of the
Company, and any information marked "confidential" by the Company.
1.14 Restricted Territory shall mean the geographic area described
as follows: the continental United States of America.
1.15 Termination Date shall mean the date specified as the
Executive's official termination of employment date.
1.16 Term shall mean the period during which this Agreement is
wholly effective, which shall be the period commencing on the Effective Date
and ending on the Termination Date.
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2.
DUTIES AND AUTHORITY
2.1 Duties and Authority. The Executive is engaged and agrees to
perform services for and on behalf of the Company as its President and Chief
Executive Officer and shall report directly to the Board. The Executive shall
have such duties and authority as may be assigned to him by the Company's
bylaws or by the Board. The Executive agrees to perform such duties diligently
and efficiently and in accordance with the reasonable directions of the Board.
The Executive shall conduct himself at all times in a business-like and
professional manner as appropriate for his position and shall represent the
Company in all respects in compliance with good business and ethical practices.
In addition, the Executive shall be subject to and abide by the policies and
procedures of the Company applicable to personnel of the Company, as may be
adopted from time to time.
2.2 Best Efforts. During the term of this Agreement, the
Executive shall devote his full attention, energies and best efforts to
rendering services on behalf of the Company (or subsidiaries or affiliates
thereof), and shall not engage in any outside employment without the express
written consent of the Board. Notwithstanding the foregoing, the Executive is
not prohibited from investing or trading in stocks, bonds, commodities or other
forms of investment, including real property, so long as the Executive does not
"participate" (within the meaning of Treas. Reg. ss.ss.1.469-5(f) and
1.469-5T(f)) in such investments.
Further, the Executive may pursue personal interests as he may have so
long as such participation does not interfere with the Executive's performance
of his duties hereunder, and the Executive may participate in industry, civic
and charitable activities so long as such activities do not materially
interfere with the performance of his duties hereunder. The Executive may also
participate in any interest or activity which is approved in writing by the
Board. At least once each year during the term of this Agreement, and at any
time upon the Board's request, the Executive shall provide a full disclosure to
the Executive Committee of the Board of his participation in any industry,
civic and charitable activities (including service on corporate or charitable
boards of directors or trustees). Prior to pursuing or accepting any activity
other than those in which he is engaged on the Effective Date, the Executive
agrees to discuss such activity with the Executive Committee of the Board.
2.3 Term. The term of this Agreement shall commence on the
execution date hereof and shall continue until the close of business at the end
of three (3) years from the date hereof, subject to earlier termination as
provided in this Agreement. At least sixty (60) days prior to the end of the
initial term hereof and each subsequent year thereafter, this Agreement shall
be deemed to be extended automatically for an additional one-year term on the
same terms and conditions unless either the Company or the Executive gives
contrary written notice to the other party no less than sixty (60) days prior
to the date on which this Agreement would otherwise be extended.
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3.
COMPENSATION AND BENEFITS
3.1 Annual Base Salary. The Company shall pay to the Executive as
compensation for his services provided hereunder a base salary of $450,000 per
year ("Base Salary"), payable in accordance with the Company's normal payroll
procedures. The Compensation and Nominating Committee of the Board of Directors
of the Company shall review the Executive's Base Salary annually, and in its
sole discretion, subject to approval of the Board of Directors of the Company,
may increase the Executive's Base Salary from year to year. The annual review
of the Executive's salary by the Board will consider, among other things, the
Executive's own performance and the Company's performance.
3.2 Annual Incentive Compensation. The Executive shall
participate in the Company's annual incentive program for executives, which is
subject to change at any time.
3.3 Long-Term Incentives. The Executive shall participate in the
Company's long-term incentive program for executives, which is subject to
change at any time, or in any other long-term incentive arrangement that the
Board may provide for him.
3.4 Employee Benefit Plans and Policies. The Executive shall be
entitled to participate in each employee benefit plan, policy or arrangement
which is sponsored, maintained or contributed to by the Company and in which
current executive officers of the Company may participate, in accordance with
the terms and provisions of such plans. Contributions by the Executive to such
plans shall be required only to the extent required of other executive officers
of the Company.
3.5 Automobile Allowance. The Company shall provide the Executive
with a monthly allowance of $600 for his use in owning or leasing an automobile
for business purposes.
3.6 Vacation. Executive shall be entitled to such paid vacation
time as is generally provided to the Company's executive officers subject to
the rules in effect regarding such leave.
3.7 Expense Reimbursement. The Company shall reimburse the
Executive for reasonable and necessary travel and other business related
expenses, including entertainment expenses, incurred by him in performance of
the business of the Company in accordance with the Company's standard expense
reimbursement practices and policies in existence from time to time, subject to
such dollar limitations and verification and record keeping requirements as may
be established from time to time by the Company.
3.8 Withholding, FICA, FUTA, Etc. Any amount to be paid to the
Executive under the provisions of this Agreement which represents taxable
income to him shall be subject to, and reduced by, any applicable federal,
state or local taxes imposed by law, included, but not limited to, taxes
imposed under Subtitle C of the Code.
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3.9 Club Dues. For general business purposes (and not as
compensation to the Executive), the Company shall pay the Executive's periodic
dues for membership in The Commerce Club, The Capital City Club and the Young
Presidents Organization. The Company shall also pay (or reimburse the Executive
for) all expenses of his participation in the Young Presidents Organization.
4.
RESTRICTIVE COVENANTS
4.1 Use and Return of Documents and Property. Executive
acknowledges that in the course of his employment with the Company, he will
have the opportunity to inspect and use certain property, both tangible and
intangible, of the Company and its Affiliates. All such property shall remain
the exclusive property of the Company and its Affiliates, and Executive has and
shall have no right or interest in such property. Executive shall use Company
property only during employment and only in the performance of his job and to
further the Company's interests, and he will not remove Company property from
the Company's premises except to the extent necessary to perform his duties and
to the extent approved by the Company, either expressly or generally under its
policies. Promptly upon the Executive's Termination Date, Executive shall
return to the Company all of the Company's memoranda, notes, records, data,
books, sketches, computer programs, audio-visual materials, correspondence,
lists, every piece of information recorded in any form, and all other tangible
property.
4.2 New Developments. Any discovery, invention, process or
improvement made or discovered by the Executive during the term of this
Agreement in connection with or in any way affecting or relating to the
business of the Company or any of its Affiliates (as then carried on or under
active consideration) shall forthwith be disclosed to the Company and shall
belong to and be the absolute property of the Company. The preceding sentence
does not apply to any invention for which no equipment, supplies, facility,
trade secret information of the Company was used and which was developed
entirely on the Executive's own time, unless the invention relates directly to
the business of the Company or its Affiliates or to its or their actual or
demonstrably anticipated research or development, or the invention results from
any work performed by the Executive for the Company.
4.3 Covenant Not to Compete. Executive agrees that, during the
term of his employment under this Agreement and for a period of one (1) year
following the Termination Date, regardless of the reasons for the Executive's
termination of employment, Executive will not, directly or indirectly,
expressly or tacitly, for himself or on behalf of any entity anywhere in the
Restricted Territory, (i) act as an officer, manager, advisor, executive,
controlling shareholder, or consultant to any business in which his duties at
or for such business include oversight of or actual involvement in providing
services which are competitive with the services or products being provided or
which are being produced or developed by the Company or its Affiliates, or are
under investigation by the Company or any of its Affiliates on the Termination
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Date, (ii) recruit investors on behalf of an entity which engages in activities
which are competitive with the services or products being provided or which are
being produced or developed by the Company or its Affiliates, or are under
investigation by the Company or any of its Affiliates on the Termination Date,
or (iii) become employed by such an entity in any capacity which would require
Executive to carry out, in whole or in part, the duties Executive has performed
for the Company which are competitive with the services or products being
provided or which are being produced or developed by the Company or any of its
Affiliates, or are under active investigation by the Company or any of its
Affiliates on the Termination Date. This covenant shall apply to any services
or products under investigation by the Company or any of its Affiliates on the
Termination Date only to the extent that the Executive initiated, promoted,
participated in, or otherwise had knowledge of such investigation. Executive
acknowledges that because of the nationwide nature of the Company's (including
its Affiliates) business, this restriction will prevent the Executive from
acting in any of the foregoing capacities for any competing entity wherever
located within the Restricted Territory and that this scope is reasonable in
light of the business of the Company and its Affiliates.
4.4 Nonsolicitation of Customers, Clients and Suppliers.
Executive agrees that during the term of his employment with the Company, he
will not, directly or indirectly, without the Company's prior written consent,
contact any customer, client or supplier of the Company or any of its
Affiliates for business purposes unrelated to furthering the business of the
Company or its Affiliates. Executive further agrees that for a period of one
(1) year following his Termination Date, he will not directly or indirectly,
(i) contact, solicit or divert, or attempt to contact, solicit, divert or take
away, any customer, client or supplier of the Company or its Affiliates for
purposes of, or with respect to, providing a customer, client or supplier to a
competing business; or (ii) take any affirmative action with a customer, client
or supplier of the Company or its Affiliates for purposes of providing a
customer, client or supplier to a business competing with the Company or its
Affiliates. The prohibitions of the preceding sentence shall apply only to
customers, clients and suppliers of the Company with whom the Executive had
Material Contact on the Company's behalf during the twelve months immediately
preceding the Termination Date. For purposes of this Agreement, the Executive
had "Material Contact" with a customer, client or supplier if (a) he had
business dealings with the customer, client or supplier on the Company's
behalf; (b) he was responsible for supervising or coordinating the dealings
between the Company and the customer, client or supplier; or (c) he obtained
Proprietary Information about the customer, client or supplier as a result of
his association with the Company.
4.5 Nonsolicitation of Employees. The Executive agrees that
during his employment with the Company and for one (1) year after his
Termination Date, the Executive will not, directly or indirectly, solicit or
attempt to recruit or hire any employees of the Company or its Affiliates who
were employed by the Company or its Affiliates at any time during the last year
of the Executive's employment with the Company and who are actively employed by
the Company or its Affiliates at the time of the solicitation or attempted
solicitation, to provide services similar to those performed by the employee
for the Company on behalf of, or for the purpose of engaging in employment
with, a competitor of the Company.
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4.6 Nondisclosure of Trade Secrets and Proprietary Information. Except
to the extent reasonably necessary for Executive to perform his duties for the
Company, the Executive shall not, directly or indirectly, furnish or disclose to
any person, or use in any way, any trade secrets of the Company or its
Affiliates, for so long as such trade secrets remain "trade secrets" under
applicable state law. Except to the extent reasonably necessary for Executive to
perform his duties for the Company, Executive shall not, during the term of his
employment with the Company and for a period of one (1) year following the
Executive's Termination Date, directly or indirectly, furnish or disclose to any
person, or use in any way, for personal benefit or the benefit of others, any
Proprietary Information of the Company or its Affiliates.
4.7 Reasonableness. Executive has carefully considered the nature and
extent of the restrictions upon his and the rights and remedies conferred on the
Company under this Agreement, and Executive hereby acknowledges and agrees that:
(a) the restrictions and covenants contained herein, and the rights
and remedies conferred upon the Company, are necessary to protect the
goodwill and other value of the business of the Company;
(b) the restrictions places upon Executive hereunder are fair and
reasonable in time and territory, will not prevent him from earning a
livelihood, and place no greater restraint upon the Executive than is
reasonably necessary to secure the business and goodwill of the
Company;
(c) the Company is relying upon the restrictions and covenants
contained herein in continuing to make available to Executive
information concerning the business of the Company;
(d) Executive's employment hereunder places him in a position of
confidence and trust with the Company and its employees, customers and
suppliers; and
(e) the provisions of this section shall be interpreted so as to
protect the Proprietary Information, and to secure for the Company the
exclusive benefits of the work performed on behalf of the Company by
the Executive under this Agreement, and not to unreasonably limit his
ability to engage in employment and consulting activities in
noncompetitive areas which do not endanger the Company's legitimate
interests expressed in this Agreement.
4.8 Remedy for Breach. Executive acknowledges and agrees that his
breach of any of the covenants contained in this Article of this Agreement will
cause irreparable injury to the Company and that remedies at law available to
the Company for any actual or threatened breach by the Executive of such
covenants will be inadequate and that the Company shall be entitled to specific
performance of the covenants in this Article or injunctive relief against
activities in violation of this Article by temporary or permanent injunction or
other appropriate judicial remedy, writ or order, without the necessity or
proving actual damages. This provision with respect to injunctive relief shall
not diminish the right of the Company to claim and recover
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monetary damages against the Executive for any breach of this Agreement, in
addition to injunctive relief. The Executive acknowledges and agrees that the
covenants contained in this Article shall be construed as agreements independent
of any other provision of this or any other contract between the parties hereto,
and that the existence of any claim or cause of action by the Executive against
the Company, whether predicated upon this or any other contract, shall not
constitute a defense to the enforcement by the Company of said covenants.
5.
TERMINATION OF EMPLOYMENT
It is the intent of the parties that the relationship between the
parties remain one of at-will employment. The Company shall have the right to
terminate the Executive's employment under this Agreement at any time, with or
without Cause, and with or without prior written notice to the Executive. The
Executive shall have the right to voluntarily terminate his employment for any
reason, including Good Reason, at any time, upon 30 days' prior written notice
to the Board.
6.
SEVERANCE BENEFITS
6.1 Severance Obligations as of Termination Date.
(a) Termination by the Company Without Cause or Voluntary
Termination by Executive for Good Reason. In the event the Company
terminates the Executive's employment without Cause or if the Executive
voluntarily terminates his employment for Good Reason, then in
consideration of the Executive's services rendered prior to such
termination:
(i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Termination Date the sum of (1) the
Executive's Base Salary through the Termination Date to the extent
not theretofore paid, and (2) the product of (x) the Executive's
target annual incentive bonus for the year in which the Termination
Date occurs and (y) a fraction, the numerator of which is the
number of days in the current fiscal year through the Termination
Date, and the denominator of which is 365 (the sum of the amounts
described in clauses (1) and (2) shall be hereinafter referred to
as the "Accrued Obligations"); and
(ii) the Company shall pay to the Executive, on a regular
payroll basis during the 24-month period following the Termination
Date, the amount equal to two times the sum of (A) the Executive's
Base Salary in effect as of the
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Termination Date, and (B) the Executive's most recent annual bonus
(the "Severance Payment"); provided, however, that if the
Termination Date occurs within two years after or otherwise in
connection with the occurrence of a Change of Control, the
Severance Payment shall be the amount equal to three times the sum
of the amounts described in clauses (A) and (B) above and such
amount shall be payable in a lump sum in cash within 30 days after
the Termination Date; and
(iii) for two years after the Executive's Termination Date (or
three years in the event that the Termination Date occurs within
two years after or otherwise in connection with a Change of
Control), the Company shall continue medical, dental, life
insurance, and accidental death and dismemberment insurance
benefits to the Executive and/or the Executive's covered dependents
at least equal to those which would have been provided to them if
the Executive's employment had not been terminated; provided, that
such two-year period shall offset any period of continuation
coverage provided under COBRA applicable to such benefits; provided
further, however, that if the Executive becomes employed with
another employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan, the medical
and other welfare benefits described herein shall be secondary to
those provided under such other plan during such applicable period
of continued eligibility; and
(iv) to the extent not theretofore paid or provided, the
Company shall timely pay or provide to the Executive any other
amounts or benefits required to be paid or provided or which the
Executive is eligible to receive under any plan, program, policy or
practice of the Company (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
(b) Termination by Reason of Death or Disability. If the
Executive's employment is terminated by reason of his death or
Disability, this Agreement shall terminate without further obligations
to the Executive, the Executive's estate, heirs or other legal
representatives under this Agreement, other than for payment of Accrued
Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive, the Executive's
estate or designated beneficiary, as applicable, in a lump sum in cash
within 30 days of the Termination Date.
(c) Termination by the Company for Cause or Voluntary Termination
by the Executive without Good Reason. If the Executive's employment
shall be terminated for Cause, or if the Executive voluntarily
terminates employment without Good Reason (other than during the 30-day
window period described in Section 6.1(d) below), this Agreement shall
terminate without further obligations to the Executive, other than for
payment of Accrued Obligations (excluding the pro-rata bonus described
in clause 2 of Section 6.1(a)) and the timely payment or provision of
Other Benefits.
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(d) Voluntary Termination by the Executive During Limited Window
Period. If the Executive voluntarily terminates employment without Good
Reason during the 30-day period beginning on the first anniversary of
a Change in Control of the Company, this Agreement shall terminate
without further obligations to the Executive, other than for the
payment of Accrued Obligations, the timely payment or provision of
Other Benefits and the timely payment or provision of the following
severance benefits:
(i) a lump sum amount, payable in cash within 30 days after the
Termination Date, equal to the sum of (A) the Executive's Base
Salary in effect as of the Termination Date, and (B) the
Executive's most recent annual bonus; and
(ii) for one year after the Executive's Termination Date, the
Company shall continue medical, dental, life insurance, and
accidental death and dismemberment insurance benefits to the
Executive and/or the Executive's covered dependents at least equal
to those which would have been provided to them if the Executive's
employment had not been terminated; provided, that such one-year
period shall offset any period of continuation coverage provided
under COBRA applicable to such benefits; provided further, however,
that if the Executive becomes employed with another employer and is
eligible to receive medical or other welfare benefits under another
employer-provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such
other plan during such one-year period of continued eligibility.
6.2 Certain Additional Payments by the Company.
(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 the Company to or for the benefit of the
Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined
without regard to any additional payments required under this Section
6.2) (a "Payment") would be subject to the excise tax imposed by
Section 4999 of the Code or any interest or penalties are incurred by
the 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 the Executive shall
be entitled to receive an additional payment (a "Gross-Up Payment") in
an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the Payments;
provided, however, that the total amount of the Gross-Up Payment made
by the Company under this provision shall not exceed $1,000,000; and
provided further, that no Gross-Up Payment shall be made by the Company
to the Executive with regard to any payments or benefits provided to
the Executive pursuant to the provisions of Section 6.1(d) hereof.
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(b) All determinations required to be made under this Section 6.2,
including whether and when a Gross-Up Payment is required, the amount
of such Gross-Up Payment and the assumptions to be utilized in arriving
at such determination, shall be made by the Company's regular
independent accounting firm (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive
that there has been a Payment, or such earlier time as is requested by
the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the
Change in Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting
Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 6.2, shall be paid by the Company
to the Executive within 15 days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be
binding upon the Company and the 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 the
Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the
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 the
Company to or for the benefit of the Executive.
6.3 Other Benefits After Termination Date. Except for the payments and
benefits, if any, provided under this Article 6, no other benefits, compensation
or other remuneration of any type, whether taxable or nontaxable, shall be
payable to the Executive after his Termination Date, except as required by law
or by the applicable terms and provisions of any employee benefit plan or
arrangement applicable to the Executive.
7.
MISCELLANEOUS PROVISIONS
7.1 Invalidity of Any Provision. It is the intention of the parties
hereto that the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws of each state and jurisdiction in which such
enforcement is sought, but that the unenforceability (or the modification to
conform with such laws) of any provision hereof shall not render unenforceable
or impair the remainder of this Agreement which shall be deemed amended to
delete or modify, as necessary, the invalid or unenforceable provisions. The
parties further agree to alter the balance of this Agreement in order to render
the same valid and enforceable. The terms of the restrictive covenant provisions
of this Agreement shall be deemed modified to the extent necessary to be
enforceable and, specifically, without limiting the foregoing, if the term of
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the applicable restrictive covenant is too long to be enforceable, it shall be
modified to encompass the longest term which is enforceable and, if the scope of
the geographic area of the applicable restrictive covenant is too great to be
enforceable, it shall be modified to encompass the greatest area that is
enforceable.
7.2 Costs of Enforcement. In any action taken in good faith relating to
the enforcement of this Agreement or any provision herein, the Executive shall
be entitled to be paid any and all costs and expenses incurred by him in
enforcing or establishing his rights thereunder, including, without limitation,
reasonable attorneys' fees, whether suit be brought or not, and whether or not
incurred in arbitration, trial, bankruptcy or appellate proceedings, but only if
the Executive is successful on at least one material issue raised in the
enforcement proceeding; provided, that the total amount of any and all costs and
expenses payable by the Company to the Executive under this provision shall be
limited to $100,000.
7.3 Applicable Law. This Agreement shall be construed and enforced in
accordance with the laws of the State of Georgia.
7.4 Arbitration. Any claim or dispute arising under this Agreement
shall be subject to arbitration, and prior to commencing any court action, the
parties agree that they shall arbitrate all controversies. The arbitration shall
be conducted in Atlanta, Georgia, in accordance with the Employment Dispute
Rules of the American Arbitration Association and the Federal Arbitration Act, 9
U.S.C. ss.1, et. seq. The arbitrator(s) shall be authorized to award both
liquidated and actual damages, in addition to injunctive relief, but no punitive
damages. The arbitrator(s) may also award attorney's fees and costs, without
regard to any restriction on the amount of such award under Georgia or other
applicable law. Such an award shall be binding and conclusive upon the parties
hereto, subject to 9 U.S.C. ss.10. Each party shall have the right to have the
award made the judgment of a court of competent jurisdiction.
7.5 Waiver of Breach. The waiver of a breach of any provision of this
Agreement by a party hereto shall not operate or be construed as a wavier of any
subsequent breach by the other party hereto.
7.6 Successors and Assigns. This Agreement shall inure to the benefit
of the Company and its Affiliates, and their respective successors and assigns.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's estate and/or legal representatives.
7.7 Assignment of Agreement. This Agreement is not assignable by the
Executive, but shall be freely assignable by the Company to any successor with
the written consent of the Executive. 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 assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place.
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7.8 Notices. All notices, demands and other communications hereunder
shall be in writing and shall be delivered in person or deposited in the United
States mail, certified or registered, with return receipt requested, as follows:
(a) if to Executive: Mr. Larry L. Gellerstedt, III
2485 West Wesley Road
Atlanta, GA 30327
(b) if to Company: AMERICAN BUSINESS PRODUCTS, INC.
Attention: Board of Directors
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
(with a copy to the Chairman of each
Board Committee)
7.9 Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to the subject matter hereof. All understanding and
agreements heretofore made between the parties hereto with respect to the
subject matter of this Agreement are merged into this document which alone fully
and completely expresses their agreement. This Agreement may not be changed
orally but only by an agreement in writing signed by both parties.
7.10 Survival of Provisions. The provisions of Article 4 - Restrictive
Covenants shall survive termination of this Agreement.
7.11 Captions. The captions appearing in this Agreement are inserted
only as a matter of convenience and in no way define, limit, construe or
describe the scope or intent of any provisions of this Agreement or in any way
affect this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
under seal as of this 11th day of May, 1999.
EXECUTIVE:
/s/ Larry L. Gellerstedt, III
--------------------------------------
LARRY L. GELLERSTEDT, III
[signatures continued on next page]
Gellerstedt Employment Agreement
Page 17
<PAGE> 18
COMPANY:
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. Stell Huie
--------------------------------------
W. Stell Huie
Title: Chairman, Compensation Committee
[THIS AGREEMENT HAS BEEN EXECUTED IN DUPLICATE.]
Gellerstedt Employment Agreement
Page 18
<PAGE> 1
EXHIBIT 17
SEPARATION AGREEMENT
This SEPARATION AGREEMENT (the "Agreement") is made and entered into
this 19th day of January, 2000 (the "Execution Date"), to become
effective as of the eighth day after the Execution Date (the "Effective Date"),
by and between AMERICAN BUSINESS PRODUCTS, INC., a Georgia corporation ("ABP")
and LARRY L. GELLERSTEDT, III (the "Executive").
WITNESSETH:
WHEREAS, the Executive has been employed as the President and Chief
Executive Officer of ABP, pursuant to that certain Employment Agreement dated
May 11, 1999 (the "Employment Agreement"); and
WHEREAS, ABP and the Executive have mutually agreed to end the
employment relationship and desire to enter into this Separation Agreement to
specify the terms and conditions of the termination of the Executive's
employment and the Employment Agreement;
NOW, THEREFORE, in consideration of the above premises and mutual
covenants and agreements hereinafter set forth, and for other good and valuable
consideration, the receipt of which is hereby acknowledged, the parties hereto
agree as follows:
1. TERMINATION OF THE EXECUTIVE'S EMPLOYMENT.
The Executive and ABP agree and acknowledge that the Executive's
active employment with ABP terminated as of the close of business on December
31, 1999 (the "Resignation Date").
2. RESIGNATION FROM COMPANY POSITIONS.
As of September 16, 1999, the Executive tendered his resignation as
President and Chief Executive Office of ABP, as a member of the Board of
Directors of ABP, and as an officer and director of each of ABP's subsidiaries.
Also, effective as of September 16, 1999, the Executive resigned as a trustee
of ABP's Profit Sharing Retirement Plan, Employee Savings Plan and Group Health
Insurance Trust, and as a trustee, plan administrator and fiduciary for any
other plan, trust or other arrangement in which he held such a position. The
Executive also resigned, as of September 16, 1999, from any and all ABP
positions in which the Executive was elected or appointed, including any and
all positions in which the Executive was charged with fiduciary responsibility.
<PAGE> 2
3. SEPARATION PACKAGE.
In addition to the compensation and benefits to which the Executive would
be entitled based upon his employment with ABP through the Resignation Date,
the Executive shall receive the following as additional consideration, which
the Executive acknowledges is significant and substantial:
a. COMPENSATION.
i. Continuation of Salary. ABP shall continue the salary of the
Executive at a monthly base rate of $37,500.00 (less any
applicable taxes, authorized deductions, and any amounts
owed by Executive to ABP), payable for the period beginning
on January 1, 2000 through June 30, 2000. Payments shall be
made on the regular payroll basis.
Payments shall be made under this provision regardless of
the Executive's obtaining employment elsewhere. However, if
at any time during the period of salary continuation, the
Executive breaches his obligations under this Agreement, ABP
may, upon written notice to the Executive, cease to make any
further payments or provide any continuation of salary.
In the event of the Executive's death during the Severance
Period, payments under this paragraph shall immediately
cease and no further continuation of salary payments shall
be payable hereunder.
ii. Incentive and Bonus Compensation. The Executive shall not be
eligible for consideration for any awards under any annual
or long-term incentive compensation or bonus plan, program
or arrangement of ABP for 1999 or any year thereafter.
iii. Long-term Incentive Compensation. ABP agrees to arrange for
the Committee of the 1999 Incentive Compensation Plan: (i)
to provide that all stock options held by the Executive
shall immediately become exercisable as of the Resignation
Date and shall remain exercisable for a period of two (2)
years following the Resignation Date; and (ii) to provide
that with respect to the restricted stock award of 131,000
shares of ABP Common Stock awarded to the Executive on
February 25, 1999, 29,256 shares shall become immediately
vested and nonforfeitable effective as of the Resignation
Date (with the remaining shares forfeited as of such date).
b. BENEFITS.
The Executive shall cease to be eligible to participate in all employee
benefit plans sponsored by, contributed to or maintained by ABP as of
the Resignation Date, except as may be required by COBRA continuation
coverage provisions or other federal or state
Page 2
<PAGE> 3
law.
4. COOPERATION AFTER RESIGNATION DATE.
The Executive agrees to cooperate fully with ABP and to reasonably
assist ABP on all matters relating to his employment and the conduct of
business, including any litigation, claim or suit in which ABP deems that the
Executive's cooperation is needed.
5. COVENANT NOT TO DISCLOSE COMPANY PROPRIETARY INFORMATION.
During the Executive's employment with ABP, he has had access to and
become familiar with information that the parties acknowledge to be
confidential, valuable or uniquely proprietary information regarding ABP, its
products, customers and employees. For a period of three (3) years from the
date of this Agreement, the Executive shall neither use nor disclose for any
purpose any information relating to the financial condition, prospects, capital
stock, the manner of doing business, customer lists, pricing information,
inventory or any other property of ABP, its officers, customers, or employees,
or any other such confidential, valuable or uniquely proprietary information.
Information in the public domain or information that is commonly known by or
available to the public through ABP's press releases, public documents, annual
reports, SEC filings or other public filings shall not be considered
proprietary or confidential information.
6. RETURN OF COMPANY DOCUMENTS AND PROPERTY.
The Executive hereby represents and warrants that, as of the Execution
Date of this Agreement, he has returned to ABP all documents (including copies
and computer records thereof) of any nature which relate to or contain
proprietary or confidential information concerning ABP, its customers, or
employees, and any and all property of ABP which has been in his possession,
including, except as hereinafter provided, any computers, computer programs or
limited use software licenses in his possession. The Executive confirms that
all confidential information is and shall remain the exclusive property of ABP.
All business records, papers and documents kept or made by the Executive
relating to the business of ABP shall be and remain the property of ABP, except
for such papers customarily deemed to be the personal copies of the Executive.
Information in the public domain or information that is commonly known by or
available to the public through ABP's press releases, public documents, annual
reports, SEC filings or other public filings shall not be considered
proprietary or confidential information.
7. GENERAL RELEASE BY THE EXECUTIVE.
Except as specifically provided in Section 8 hereof, for and in
consideration of the additional consideration to be provided to the Executive
by ABP pursuant to this Agreement,
Page 3
<PAGE> 4
the sufficiency of which is hereby acknowledged, the Executive does hereby, for
and on behalf of himself and his related entities and persons, fully and
finally release, acquit and forever discharge ABP, ABP's related entities and
persons, all employee benefit plans of ABP and all employee benefit plans of
ABP's related entities, and such plans' related entities and persons, of and
from any and all claims, counterclaims, actions, causes of action, demands,
rights, damages, costs, expenses or compensation which the Executive and/or the
Executive's related entities and persons now have, or may have, or may
hereafter claim to have had as of the Execution Date, whether developed or
undeveloped, anticipated or unanticipated, based on any acts, omissions,
transactions or occurrences whatsoever occurring prior to and/or up until the
Execution Date, and specifically, but not by way of limitation, from those
claims which are, or arise by reason of, or are in any way connected with, or
which are or may be based in whole or in part on the employment relationship
which existed between the Executive and ABP and the termination of that
employment relationship, including, without limitation, (i) those claims
arising under any foreign, federal, state, county or municipal fair employment
practices act and/or any law, ordinance or regulation promulgated by any
foreign, federal, state, county, municipality or other state subdivision; (ii)
those claims for breach of duty and/or implied covenant of good faith and fair
dealing; (iii) those claims for interference with and/or breach of contract
(express or implied, in fact or in law, oral or written); (iv) those claims for
retaliatory or wrongful discharge of any kind; (v) those claims for intentional
or negligent infliction of emotional distress or mental anguish; (vi) those
claims for outrageous conduct; (vii) those claims for interference with
business relationships, contractual relationships or employment relationships
of any kind; (viii) those claims for breach of duty, fraud, fraudulent
inducement to contract, breach of right of privacy, libel, slander, or tortious
conduct of any kind; (ix) those claims arising under Title VII of the Civil
Rights Act of 1964 and/or the Civil Rights Act of 1991 and/or 42 U.S.C.
ss.1981; (x) those claims arising under the Age Discrimination in Employment
Act of 1967, the Age Discrimination Claims Assistance Act of 1988 and/or the
Older Workers' Benefit Protection Act; (xi) those claims arising under any
state or federal handicap or disability discrimination law or act, including
but not limited to the Rehabilitation Act of 1973 and the Americans with
Disabilities Act; (xii) those claims arising from any damages suffered at any
time by reason of the effects or continued effects of any alleged or actual
discriminatory or wrongful acts; (xiii) those claims arising under or in
reliance upon any statute, regulation, rule or ordinance (local, state or
federal); (xiv) those claims arising under Employment Retirement Income
Security Act of 1974, as amended, and/or the Family and Medical Leave Act; (xv)
those claims arising under the workers' compensation laws of any state or other
jurisdiction; and (xvi) any and all other claims arising under law or in equity
in the United States of America or in any foreign jurisdiction.
8. LIMITATION OF RELEASE BY THE EXECUTIVE.
Notwithstanding the provisions of Section 7 hereof, it is understood and
agreed that the waiver of benefits and claims contained in Section 7 does not
include a waiver of the right to payment of any vested, nonforfeitable benefits
to which the Executive or a beneficiary of the Executive may be entitled under
the terms and provisions of any employee benefit plan of ABP
Page 4
<PAGE> 5
which have accrued as of the Resignation Date, and does not include a waiver of
the right to benefits and payment of consideration to which the Executive may
be entitled under this Agreement. The Executive acknowledges that he is only
entitled to the additional benefits and compensation set forth in this
Agreement, and that all other claims for any other benefits or compensation are
hereby waived, except those expressly stated in the preceding sentence.
9. KNOWING AND VOLUNTARY WAIVER OF RIGHTS BY THE EXECUTIVE.
The Executive agrees and acknowledges that he has carefully reviewed,
studied and thought over the terms of this Agreement, and that all questions
concerning this Agreement have been answered to his satisfaction. The Executive
does further acknowledge and agree that he has had the opportunity to keep this
Agreement in his possession for at least twenty-one (21) days, and that he has
had the opportunity to consider and reflect upon the terms of this Agreement
before signing it, that he knowingly and voluntarily entered into and signed
this Agreement after deliberate consideration and review of all of its terms and
provisions, that he was not coerced, pressured or forced in any way by ABP or
anyone else to accept the terms of this Agreement, that the decision to accept
the terms of this Agreement was entirely his own, that HE WAS ADVISED IN WRITING
TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTING THIS AGREEMENT AND PRIOR TO THE
EXECUTION DATE OF THIS AGREEMENT, AND THAT HE HAS HAD THE OPPORTUNITY TO CONSULT
WITH AN ATTORNEY THROUGHOUT THE NEGOTIATIONS CONCERNING THIS AGREEMENT. The
Executive also acknowledges that no promises or inducements to enter into and
execute this Agreement have been offered or made except those which are
specifically set out in this Agreement.
10. RIGHT OF REVOCATION BY THE EXECUTIVE.
From the date of execution until the Effective Date, the Executive may
revoke this Agreement by sending written notice of revocation by Registered
Mail within that period to:
Mr. Hal Northrop
American Business Products, Inc.
2100 RiverEdge Parkway
Suite 1200
Atlanta, GA 30328
and, if he does so, this Agreement shall be null and void in its entirety, and
shall be of no force or effect. If not revoked within said period, this
Agreement will become effective, binding and irrevocable as of the Effective
Date.
11. AMENDMENT.
Page 5
<PAGE> 6
It is expressly understood and agreed that this Agreement may not be
altered, amended, modified or otherwise changed in any respect or particular
whatsoever except in writing duly executed by the Executive and an authorized
representative of ABP acting on behalf of ABP.
12. MISCELLANEOUS.
a. BINDING AGREEMENT. This Agreement shall be binding upon both the
Executive and the Executive's related entities and individuals,
and upon ABP and ABP's related entities. Each party hereto
agrees, understands, and acknowledges that each party is
responsible for their own attorneys' fees, costs and all other
expenses arising from, or in any way related to claims released
herein. The undersigned parties, acting through their duly
authorized officers or individually, as the case may be, do
hereby warrant that the signatories hereto have express authority
and have the legal capacity to enter into this Agreement.
b. WAIVER. Failure to insist upon strict compliance with any of the
terms, covenants or conditions hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver
or relinquishment of any right or power hereunder at any time or
times be deemed a waiver or relinquishment of such right or power
any other time or times.
c. CHOICE OF LAW. This Agreement is to be construed in accordance
with the laws of the State of Georgia without regard to any
conflict of law principles of such state.
d. REMEDIES FOR BREACH OF AGREEMENT. In the event of a breach of any
provision of this Agreement or conduct by either the Executive or
any officer or director of ABP, the parties agree that in
addition to all legal remedies to which each may result, the
injured party may also seek equitable relief, including
injunctive relief, as the parties acknowledge that there may be
no adequate remedy at law for such breach(es). In addition, in
the event of a breach of any provision of this Agreement by the
Executive, ABP may immediately cease making any payments
whatsoever hereunder, and may seek to recover from the Executive
all payments made under this Agreement prior to the breach by the
Executive.
e. MEDIATION AND ARBITRATION. The parties hereto agree that any
dispute or controversy arising out of, relating to or in
connection with this Agreement, or the interpretation, validity,
construction, performance, breach or termination thereof, shall
first be submitted to mediation. The mediation shall be conducted
within 45
Page 6
<PAGE> 7
days of either party notifying the other party of a dispute or
controversy regarding this Agreement. ABP and the Executive shall
each pay half of the costs and expenses of the mediation.
In the event the dispute cannot be resolved through mediation,
the parties hereto agree that any dispute or controversy arising
out of, relating to or in connection with this Agreement shall
then be settled by arbitration to be held in Atlanta, Georgia, in
accordance with the Commercial rules of the American Arbitration
Association ("AAA") as then in effect.
Either party may give written notice (by certified mail) to the
other party, demanding arbitration and specifying the issue(s) to
be decided. The demand must be made within 90 days of the date on
which the act or omission giving rise to the demand occurred. The
party demanding arbitration shall request a list of not less than
nine arbitrators to conduct an arbitration hearing from the AAA.
Each party shall have the right to strike a name from the list
until only three names are remaining. The remaining named
arbitrators shall be selected to conduct the arbitration hearing.
Notwithstanding the foregoing, the parties shall make good faith
efforts to agree on a single arbitrator.
After the arbitrators are selected, the arbitrators will notify
all parties and will also specify a date, between 30 and 90 days
from the selection date, for the arbitration hearing. The
timetable for the hearing may be postponed only by agreement, or
to allow for any court proceeding involving this arbitration to
be resolved prior to the arbitration hearing taking place.
The arbitrators shall apply Georgia law to the merits of any
dispute of claim without reference to rules of conflict of law.
The arbitral award will be submitted to the Superior Court of
Fulton County, Georgia for enforcement under O.C.G.A. ss.9-9-1,
et seq. All parties agree to jurisdiction and venue being proper
before that court, and waive all objections each may have to that
jurisdiction and venue. The decision of the arbitrators shall be
final, conclusive and binding on the parties to the arbitration.
f. ENTIRE AGREEMENT BETWEEN PARTIES AND NO INDICATION OF FAULT. This
Agreement constitutes the entire agreement between the Executive
and ABP pertaining to the subjects contained in it and supersedes
any and all prior and/or contemporaneous agreements,
representations, or understandings, written or oral. This
Agreement is intended to fully, completely, and forever resolve
all disputes or potential disputes based upon events, omissions
or acts occurring on or prior to the Resignation Date as well as
all other issues or claims in any way arising out of or connected
with the prior employment of the Executive with ABP or the
termination of that employment, and the signing of this document
is not to be construed as an admission of any liability and/or
fault by ABP or by the Executive.
Page 7
<PAGE> 8
13. EFFECTIVE DATE AND EXECUTION DATE.
For purposes of this Agreement, the "Effective Date" of this Agreement
shall be the date on which this Agreement becomes effective, which shall be the
date which is exactly eight (8) days following the Execution Date, unless this
Agreement has been revoked by the Executive prior to such date in accordance
with the provisions of this Agreement. The Execution Date shall mean that date
on which this Agreement is executed by the parties.
IN WITNESS WHEREOF, the undersigned has executed this Separation
Agreement on the day and year first above written.
EXECUTIVE:
/s/ Larry L. Gellerstedt, III
---------------------------------------
LARRY L. GELLERSTEDT, III
AMERICAN BUSINESS PRODUCTS, INC.
By: /s/ W. Stell Huie
------------------------------------
Title: Chair, Compensation Committee
---------------------------------
[THIS DOCUMENT HAS BEEN EXECUTED IN DUPLICATE.]
Page 8
<PAGE> 1
EXHIBIT 18
(LOGO)
AMERICAN BUSINESS PRODUCTS, INC.
POST OFFICE BOX 105684
ATLANTA, GEORGIA 30348
(770) 953-8300
January 21, 2000
NOTICE TO PARTICIPANTS
IN THE
AMERICAN BUSINESS PRODUCTS, INC. PROFIT SHARING RETIREMENT PLAN
TENDER OFFER TO PURCHASE FOR CASH
BY
SHERMAN ACQUISITION CORPORATION, A WHOLLY OWNED INDIRECT SUBSIDIARY
OF
MAIL-WELL, INC.
To: Participants in the American Business Products, Inc. Profit Sharing
Retirement Plan
Enclosed are materials being sent to all shareholders of American Business
Products, Inc. (the "Company") in connection with the recently announced offer
by Sherman Acquisition Corporation, a Georgia corporation ("Purchaser") and
indirect wholly owned subsidiary of Mail-Well, Inc., a Colorado corporation
("Mail-Well"), to purchase shares of the Company's common stock (the "Shares")
at a price of $20.00 per share upon the terms and conditions set forth in the
Offer to Purchase dated January 21, 2000 (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal").
On January 13, 2000, the Company entered into an Agreement and Plan of
Merger with Mail-Well and Purchaser that provides for the acquisition of all of
the common stock, par value $2.00 per share, of the Company (the "Shares" or,
individually, a "Share") by Purchaser at a price of $20.00 per Share, net to the
seller in cash. Under the terms of the proposed transaction, Purchaser has
commenced a tender offer (the "Offer") for all outstanding Shares at a price of
$20.00 per Share, net to the seller in cash. The Offer is currently scheduled to
expire at 12:00 midnight, Eastern Standard Time, on Friday, February 18, 2000,
unless extended.
Following the successful completion of the Offer and upon approval by the
affirmative vote of holders of a majority of the Shares, if required, Purchaser
will be merged with and into the Company and all Shares not purchased in the
Offer, other than Shares held by the Company, Mail-Well or any of their
respective subsidiaries or Shares as to which appraisal rights have been
exercised, will be converted into the right to receive, without interest, an
amount in cash equal to $20.00 per Share.
TENDER OFFER DISCLOSURES
Enclosed are the following documents for your careful review:
1) Letter from Harold Smethills, Chief Executive Officer of ABP,
announcing the Offer.
2) Offer to Purchase, dated January 21, 2000. This document describes
the terms and conditions of the Offer.
3) Letter of Transmittal. This document is part of the "Offer."
However, this form does not apply to you as a participant in the Company's
Profit Sharing Retirement Plan. This is the form that shareholders with
direct ownership (outside of a plan) will use to tender their shares.
<PAGE> 2
NOTICE TO PARTICIPANTS IN THE ABP PROFIT SHARING RETIREMENT PLAN
January 21, 2000
Page 2
4) The Company's Solicitation/Recommendation Statement on Schedule
14D-9, filed by the Company with the Securities and Exchange Commission.
5) TENDER INSTRUCTION FORM. (Green form). This is the form that you
should complete, sign and mail in the enclosed, pre-addressed, postage
pre-paid envelope.
Please note that if you are a direct shareholder of the Company or if you are a
participant in the American Business Products, Inc. Employee Savings Plan, you
may receive additional packages related to the Offer. IT IS VERY IMPORTANT THAT
YOU FOLLOW THE INSTRUCTIONS IN EACH PACKAGE AND THAT YOU RESPOND TO THE OFFER
WITH REGARD TO EACH PLAN AND THE SHARES YOU MAY DIRECTLY OR BENEFICIALLY OWN.
This may require that you submit several responses and each response should be
returned according to the applicable instructions.
PLAN PROVISIONS REGARDING TENDER OFFERS
As a participant in the American Business Products, Inc. Profit Sharing
Retirement Plan (the "PSP"), you may elect to direct the Trustees of the PSP to
"tender" (or sell) some or all of the Shares (including fractional Shares)
currently allocated to your account in the PSP. The Trustees of the PSP will
follow your directions to the extent they are proper.
The PSP provides that the Trustees will tender Shares for which no
direction has been received in the same proportion as the Shares for which
participants returned their directions. Therefore, it is important that you
indicate your desires with regard to the Shares in your account. There are no
unallocated Shares in the PSP.
The PSP is intended to constitute a plan described in Section 404(c) of the
Employee Retirement Income Security Act and Title 29 of the Code of Federal
Regulations Section 2550.404c-1. The fiduciaries of the PSP may be relieved of
liability for any losses which are the direct and necessary result of investment
instructions given by participants and beneficiaries. For purposes of the tender
vote, each participant (or beneficiary, as applicable) is deemed a fiduciary.
If you direct the Trustees to tender any Shares, the cash that is paid for
them will be reinvested by the Trustees as soon as practicable after the
expiration date of the Offer.
CONFIDENTIALITY
The PSP provides that the Trustees will protect the confidentiality of the
participants' directions with respect to the Plan Administrator and the
management of the Company. For this purpose, the Trustees have engaged EquiServe
to receive the participants' directions. In this role, EquiServe will receive
and calculate the total directions from the PSP participants. After the
calculations are complete, EquiServe will notify the Trustees of the total
number of Shares to be tendered pursuant to participant direction and the
proportion of the remaining (undirected) Shares in the PSP to be tendered. All
instructions received from individual participants will be held in confidence
and will not be divulged to any person, including American Business Products,
Inc., any of its respective affiliates, directors, officers or employees, as
well as the Plan Administrator of the PSP, other than as necessary for the
processing of the tender instructions and the normal operations of the PSP.
TENDER INSTRUCTIONS
A Tender Instruction Form (Green form) is also enclosed for you to use to
direct the PSP Trustees regarding the Offer. Please complete and sign the Tender
Instruction Form and return it as indicated for receipt on or before Monday,
February 14, 2000. Before making a decision, you should read carefully the
materials regarding the Offer and the Tender Instruction Form.
<PAGE> 3
NOTICE TO PARTICIPANTS IN THE ABP PROFIT SHARING RETIREMENT PLAN
January 21, 2000
Page 3
If you have any questions regarding the tender procedures, including the
enclosed Tender Instruction Form, you may call Morrow & Co., Inc. at
1-800-566-9061. DO NOT CALL OR CONTACT YOUR HUMAN RESOURCES DEPARTMENT OR
REPRESENTATIVE, YOUR BENEFITS ADMINISTRATOR, THE PLAN ADMINISTRATOR, THE PLAN
RECORDKEEPER OR THE TRUSTEES -- your instructions may be delivered only by
submitting the Tender Instruction Form.
ANY DISTRIBUTIONS FROM THE PSP THAT MAY BE REQUESTED DURING THE OFFER
PERIOD MAY BE DELAYED UNTIL AFTER THE EXPIRATION OF THE OFFER.
PLEASE NOTE THAT THE DEADLINE FOR THE TRUSTEES OF THE PSP TO TENDER YOUR
SHARES IS FRIDAY, FEBRUARY 18, 2000. IF YOU ELECT TO TENDER SHARES FROM YOUR PSP
ACCOUNT, THE ENCLOSED GREEN TENDER INSTRUCTION FORM MUST BE RECEIVED BY
EQUISERVE ON OR BEFORE MONDAY, FEBRUARY 14, 2000 SO THE TRUSTEES HAVE SUFFICIENT
TIME TO EFFECT THE TENDER OF THE SHARES IN THE PSP. PLEASE USE THE ENCLOSED
REPLY ENVELOPE TO RETURN YOUR TENDER INSTRUCTION FORM.
YOU MUST COMPLETE AND SIGN YOUR TENDER INSTRUCTION FORM. IF YOU DO NOT SIGN
THE FORM AND FILL IN YOUR SOCIAL SECURITY NUMBER, YOUR DIRECTIONS WILL NOT BE
ACCEPTED AND THE INSTRUCTION FORM, AS WELL AS YOUR DIRECTIONS, WILL BE VOID. THE
PSP PROVIDES THAT THE TRUSTEES WILL TENDER SHARES FOR WHICH NO DIRECTION IS
GIVEN IN THE SAME PROPORTION AS THE SHARES FOR WHICH PARTICIPANTS HAVE GIVEN
DIRECTIONS.
TRUSTEES
The American Business Products, Inc. Profit
Sharing Retirement Plan
<PAGE> 4
TENDER INSTRUCTION FORM
FOR SHARES IN THE
AMERICAN BUSINESS PRODUCTS, INC.
PROFIT SHARING RETIREMENT PLAN
TO THE TRUSTEES OF THE PROFIT SHARING RETIREMENT PLAN:
I am a participant in the above-referenced Profit Sharing Retirement Plan
(the "PSP") and have a Stock Bonus Account in the PSP invested in ABP Company
Stock, and, as such, I have received a copy of the Offer to Purchase dated
January 21, 2000, relating to the Offer by Sherman Acquisition Corporation, a
Georgia corporation ("Purchaser") and wholly owned indirect subsidiary of
Mail-Well, Inc., a Colorado corporation ("Mail-Well"), to purchase all of the
Company's common stock (the "Shares") at a price of $20.00 per Share, net to the
seller in cash.
I hereby direct you to tender or not to tender the Shares in my PSP Account
as follows: [Please check one box below and complete]
<TABLE>
<S> <C>
[ ] TENDER I direct the Trustees to tender ____% (whole percentages
only) of the Shares allocated to my PSP account in response
to the Offer. If no percentage is designated, the
undersigned is deemed to tender 100% of the Shares allocated
to the undersigned's PSP account.
[ ] DO NOT TENDER I direct the Trustees not to tender any of the Shares
allocated to my PSP account in response to the Offer.
</TABLE>
I have read and understand the Offer to Purchase and the Notice to Plan
Participants from the Trustees and I agree to be bound by the terms of the
Offer.
<TABLE>
<S> <C>
- ---------------------- ------------------------------------------------------------
Date Signature of Participant
- ---------------------- ------------------------------------------------------------
Social Security Number Please Print Name
</TABLE>
THIS TENDER INSTRUCTION FORM MUST BE COMPLETED AND SIGNED. IF THE FORM IS
NOT SIGNED, THE DIRECTIONS INDICATED WILL NOT BE ACCEPTED. PLEASE RETURN THIS
TENDER INSTRUCTION FORM TO EQUISERVE, P.O. BOX 9389, BOSTON, MASSACHUSETTS
02205-9967, USING THE PREADDRESSED, POSTAGE PRE-PAID REPLY ENVELOPE PROVIDED
WITH YOUR TENDER MATERIALS. YOUR INSTRUCTION FORM MUST BE RECEIVED BY MONDAY,
FEBRUARY 14, 2000.
<PAGE> 1
EXHIBIT 19
(LOGO)
AMERICAN BUSINESS PRODUCTS, INC.
POST OFFICE BOX 105684 ATLANTA, GEORGIA 30348
(770) 953-8300
January 21, 2000
NOTICE TO PARTICIPANTS
IN THE
AMERICAN BUSINESS PRODUCTS, INC. EMPLOYEE SAVINGS PLAN
TENDER OFFER TO PURCHASE FOR CASH
BY
SHERMAN ACQUISITION CORPORATION, A WHOLLY OWNED INDIRECT SUBSIDIARY
OF
MAIL-WELL, INC.
To: Participants in the American Business Products, Inc. Employee Savings Plan
Enclosed are materials being sent to all shareholders of American Business
Products, Inc. (the "Company") in connection with the recently announced offer
by Sherman Acquisition Corporation, a Georgia corporation ("Purchaser") and
indirect wholly owned subsidiary of Mail-Well, Inc., a Colorado corporation
("Mail- Well"), to purchase shares of the Company's common stock (the "Shares")
at a price of $20.00 per share upon the terms and conditions set forth in the
Offer to Purchase dated January 21, 2000 (the "Offer to Purchase") and in the
related Letter of Transmittal (the "Letter of Transmittal").
On January 13, 2000, the Company entered into an Agreement and Plan of
Merger with Mail-Well and Purchaser that provides for the acquisition of all of
the common stock, par value $2.00 per share, of the Company (the "Shares" or,
individually, a "Share") by Purchaser at a price of $20.00 per Share, net to the
seller in cash. Under the terms of the proposed transaction, Purchaser has
commenced a tender offer (the "Offer") for all outstanding Shares at a price of
$20.00 per Share, net to the seller in cash. The Offer is currently scheduled to
expire at 12:00 midnight, Eastern Standard Time, on Friday, February 18, 2000,
unless extended.
Following the successful completion of the Offer and upon approval by the
affirmative vote of holders of a majority of the Shares, if required, Purchaser
will be merged with and into the Company and all Shares not purchased in the
Offer, other than Shares held by the Company, Mail-Well or any of their
respective subsidiaries or Shares as to which appraisal rights have been
exercised, will be converted into the right to receive, without interest, an
amount in cash equal to $20.00 per Share.
TENDER OFFER DISCLOSURES
Enclosed are the following documents for your careful review:
1) Letter from Harold Smethills, Chief Executive Officer of ABP,
announcing the Offer.
2) Offer to Purchase, dated January 21, 2000. This document describes
the terms and conditions of the Offer.
3) Letter of Transmittal. This document is part of the "Offer."
However, this form does not apply to you as a participant in the Company's
Employee Savings Plan. This is the form that shareholders with direct
ownership (outside of a plan) will use to tender their shares.
<PAGE> 2
NOTICE TO PARTICIPANTS IN THE ABP EMPLOYEE SAVINGS PLAN
January 21, 2000
Page 2
4) The Company's Solicitation/Recommendation Statement on Schedule
14D-9, filed by the Company with the Securities and Exchange Commission.
5) TENDER INSTRUCTION FORM. (Yellow form). This is the form that you
should complete, sign and mail in the enclosed, pre-addressed, postage
pre-paid envelope.
Please note that if you are a direct shareholder of the Company or if you are a
participant in the American Business Products, Inc. Profit Sharing Retirement
Plan, you may receive additional packages related to the Offer. IT IS VERY
IMPORTANT THAT YOU FOLLOW THE INSTRUCTIONS IN EACH PACKAGE AND THAT YOU RESPOND
TO THE OFFER WITH REGARD TO EACH PLAN AND THE SHARES YOU MAY DIRECTLY OR
BENEFICIALLY OWN. This may require that you submit several responses and each
response should be returned according to the applicable instructions.
PLAN PROVISIONS REGARDING TENDER OFFERS
As a participant in the American Business Products, Inc. Employee Savings
Plan (the "ESP"), you may elect to direct the Trustees of the ESP to "tender"
(or sell) some or all of the Shares (including fractional Shares) currently
allocated to your account in the ESP. The Trustees of the ESP will follow your
directions to the extent they are proper.
The ESP provides that the Trustees will tender Shares for which no
direction has been received in the same proportion as the Shares for which
participants returned their directions. Therefore, it is important that you
indicate your desires with regard to the Shares in your account. There are no
unallocated Shares in the ESP.
The ESP is intended to constitute a plan described in Section 404(c) of the
Employee Retirement Income Security Act and Title 29 of the Code of Federal
Regulations Section 2550.404c-1. The fiduciaries of the ESP may be relieved of
liability for any losses which are the direct and necessary result of investment
instructions given by participants and beneficiaries. For purposes of the tender
vote, each participant (or beneficiary, as applicable) is deemed a fiduciary.
CONFIDENTIALITY
The ESP provides that the Trustees will protect the confidentiality of the
participants' directions with respect to the Plan Administrator and the
management of the Company. For this purpose, the Trustees have engaged EquiServe
to receive the participants' directions. In this role, EquiServe will receive
and calculate the total directions from the ESP participants. After the
calculations are complete, EquiServe will notify the Trustees of the total
number of Shares to be tendered pursuant to participant direction and the
proportion of the remaining (undirected) Shares in the ESP to be tendered. All
instructions received from individual participants will be held in confidence
and will not be divulged to any person, including American Business Products,
Inc., any of its respective affiliates, directors, officers or employees, as
well as the Plan Administrator of the ESP, other than as necessary for the
processing of the tender instructions and the normal operations of the ESP.
TENDER INSTRUCTIONS
A Tender Instruction Form (Yellow form) is also enclosed for you to use to
direct the ESP Trustees regarding the Offer. Please complete and sign the Tender
Instruction Form and return it as indicated for receipt on or before Monday,
February 14, 2000. Before making a decision, you should read carefully the
materials regarding the Offer and the Tender Instruction Form.
If you have any questions regarding the tender procedures, including the
enclosed Tender Instruction Form, you may call Morrow & Co., Inc. at
1-800-566-9061. DO NOT CALL OR CONTACT YOUR HUMAN RESOURCES
<PAGE> 3
NOTICE TO PARTICIPANTS IN THE ABP EMPLOYEE SAVINGS PLAN
January 21, 2000
Page 3
DEPARTMENT OR REPRESENTATIVE, YOUR BENEFITS ADMINISTRATOR, THE PLAN
ADMINISTRATOR, THE PLAN RECORDKEEPER OR THE TRUSTEES -- your instructions may be
delivered only by submitting the Tender Instruction Form.
ANY DISTRIBUTIONS FROM THE ESP THAT MAY BE REQUESTED DURING THE OFFER
PERIOD MAY BE DELAYED UNTIL AFTER THE EXPIRATION OF THE OFFER.
PLEASE NOTE THAT THE DEADLINE FOR THE TRUSTEES OF THE ESP TO TENDER YOUR
SHARES IS FRIDAY, FEBRUARY 18, 2000. IF YOU ELECT TO TENDER SHARES FROM YOUR ESP
ACCOUNT, THE ENCLOSED YELLOW TENDER INSTRUCTION FORM MUST BE RECEIVED BY
EQUISERVE ON OR BEFORE MONDAY, FEBRUARY 14, 2000 SO THE TRUSTEES HAVE SUFFICIENT
TIME TO EFFECT THE TENDER OF THE SHARES IN THE ESP. PLEASE USE THE ENCLOSED
REPLY ENVELOPE TO RETURN YOUR TENDER INSTRUCTION FORM.
YOU MUST COMPLETE AND SIGN YOUR TENDER INSTRUCTION FORM. IF YOU DO NOT SIGN
THE FORM AND FILL IN YOUR SOCIAL SECURITY NUMBER, YOUR DIRECTIONS WILL NOT BE
ACCEPTED AND THE INSTRUCTION FORM, AS WELL AS YOUR DIRECTIONS, WILL BE VOID. THE
ESP PROVIDES THAT THE TRUSTEES WILL TENDER SHARES FOR WHICH NO DIRECTION IS
GIVEN IN THE SAME PROPORTION AS THE SHARES FOR WHICH PARTICIPANTS HAVE GIVEN
DIRECTIONS.
TRUSTEES
The American Business Products, Inc. Employee
Savings Plan
<PAGE> 4
TENDER INSTRUCTION FORM
FOR SHARES IN THE
AMERICAN BUSINESS PRODUCTS, INC.
EMPLOYEE SAVINGS PLAN
TO THE TRUSTEES OF THE EMPLOYEE SAVINGS PLAN:
I am a participant in the above-referenced Employee Savings Plan (the
"ESP") and have a Company Stock Account in the ESP invested in ABP Company
Stock, and, as such, I have received a copy of the Offer to Purchase dated
January 21, 2000, relating to the Offer by Sherman Acquisition Corporation, a
Georgia corporation ("Purchaser") and wholly owned indirect subsidiary of
Mail-Well, Inc., a Colorado corporation ("Mail-Well"), to purchase all of the
Company's common stock (the "Shares") at a price of $20.00 per Share, net to the
seller in cash.
I hereby direct you to tender or not to tender the Shares in my ESP Account
as follows: [Please check one box below and complete]
<TABLE>
<S> <C>
[ ] TENDER I direct the Trustees to tender ____% (whole percentages
only) of the Shares allocated to my ESP account in response
to the Offer. If no percentage is designated, the
undersigned is deemed to tender 100% of the Shares allocated
to the undersigned's ESP account.
[ ] DO NOT TENDER I direct the Trustees not to tender any of the Shares
allocated to my ESP account in response to the Offer.
</TABLE>
I have read and understand the Offer to Purchase and the Notice to Plan
Participants from the Trustees and I agree to be bound by the terms of the
Offer.
<TABLE>
<S> <C>
- ---------------------- ------------------------------------------------------------
Date Signature of Participant
- ---------------------- ------------------------------------------------------------
Social Security Number Please Print Name
</TABLE>
THIS TENDER INSTRUCTION FORM MUST BE COMPLETED AND SIGNED. IF THE FORM IS
NOT SIGNED, THE DIRECTIONS INDICATED WILL NOT BE ACCEPTED. PLEASE RETURN THIS
TENDER INSTRUCTION FORM TO EQUISERVE, P.O. BOX 9389, BOSTON, MASSACHUSETTS
02205-9967, USING THE PREADDRESSED, POSTAGE PRE-PAID REPLY ENVELOPE PROVIDED
WITH YOUR TENDER MATERIALS. YOUR INSTRUCTION FORM MUST BE RECEIVED BY MONDAY,
FEBRUARY 14, 2000.
