<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q/A
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended October 28, 1995
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________________ to _______________________.
Commission file number: 0-15077
SHOREWOOD PACKAGING CORPORATION
(Exact name of registrant as specified in its Charter)
DELAWARE 11-2742734
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
277 PARK AVENUE
NEW YORK, NEW YORK 10172
(Address of principal executive offices)
(212) 371-1500
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES /X/ NO / /
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
FEBRUARY 16, 1995 21,687,119
Date Number of Shares
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SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
Part II
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.96 - 1993 Incentive Program as amended May 4, 1995
10.97 - Non-Negotiable Promissory Note of Marc P. Shore dated May 4, 1995
10.98 - Employment Agreement dated January 25, 1996 and effective as of
May 1, 1995 between Shorewood Packaging Corporation and Marc P.
Shore *
___________________________
* The sole exhibit to this Agreement, the Shorewood Packaging Corporation 1995
Performance Bonus Plan, has previously been filed as Exhibit 10.94 to
Shorewood Packaging Corporation's Form 10-Q/A for the quarterly period ended
July 29, 1995.
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SIGNATURES
Pursuant to the regulations of the Securities Exchange Act of 1934, the
Registrant has duly caused this amended report to be signed on its behalf by
the undersigned thereunto duly authorized.
SHOREWOOD PACKAGING CORPORATION
(Registrant)
By: /s/ William H. Hogan
--------------------------------
William H. Hogan
Controller (Chief Accounting
Officer)
Dated: February 20, 1996
<PAGE> 4
EXHIBIT INDEX
<TABLE>
<CAPTION>
Item Description Page
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.96 1993 Incentive Program as amended May 4, 1995 5
10.97 Non-Negotiable Promissory Note of Marc P. Shore 14
10.98 Employment Agreement dated January 25, 1996 and 20
effective as of May 1, 1995 between Shorewood
Packaging Corporation and Marc P. Shore *
</TABLE>
___________________________
* The sole exhibit to this Agreement, the Shorewood Packaging Corporation 1995
Performance Bonus Plan, has previously been filed as Exhibit 10.94 to
Shorewood Packaging Corporation's Form 10-Q/A for the quarterly period ended
July 29, 1995.
4
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SHOREWOOD PACKAGING CORPORATION
1993 INCENTIVE PROGRAM
AS AMENDED MAY 4, 1995
The 1993 Incentive Program, as amended (the "Program") of Shorewood
Packaging Corporation (the "Company") authorizes the Compensation and Stock
Option Committee of the Board of Directors (the "Committee") to provide
officers, directors, key executives, employees, consultants and advisors of the
Company and its direct or indirect subsidiaries with certain rights to acquire
shares of the Company's common stock (the "Common Stock"). The Company
believes that this Program will cause those persons to contribute materially to
the growth of the Company, thereby benefitting its stockholders.
1. ADMINISTRATION.
The Program shall be administered and interpreted by a
Committee or Committees consisting of not less than two persons appointed by
the Board of Directors of the Company from among its members. The Board may
appoint different Committees to handle different administrative duties under
the Program. The Committee or Committees with respect to directors and
officers subject to the reporting requirements of Section 16 (the "Reporting
Persons") promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), must be constituted in such manner as to permit the
Program and transactions thereunder to comply with Rule 16b-3 under the
Exchange Act. The Committee shall determine the fair market value of the
Common Stock for purposes of the Program in accordance with the provisions of
Section 10(i) hereof. Subject to the requirements of Rule 16b-3 under the
Exchange Act, the decisions of the Board of Directors or Committee designated
by the Board of Directors shall be final and conclusive with respect to the
interpretation and administration of the Program and any grant made under it.
2. GRANTS.
Grants under the Program shall consist of incentive stock
options, non-qualified stock options, stock appreciation rights in tandem with
stock options or freestanding, restricted stock grants, and Restored Options
(any of the foregoing, in any combination, collectively, "Grants"). All Grants
shall be subject to the terms and conditions set forth herein and to such other
terms and conditions consistent with this Program as the Committee deems
appropriate. The Committee shall approve the form and provisions of each
Grant. Grants under a particular section of the Program need not be uniform,
and Grants under two or more sections may be combined in one instrument.
3. ELIGIBILITY FOR GRANTS.
Grants may be made to any employee of the Company or any of
its subsidiaries who is an officer or other key executive, director,
professional or administrative employee or a consultant or advisor to the
Company or any of its subsidiaries ("Eligible Employee"). The Committee shall
select the persons to receive Grants ("Grantees") from among the Eligible
Employees and determine the number of shares subject to any particular Grant.
4. SHARES AVAILABLE FOR GRANT.
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(a) Shares Subject to Issuance or Transfer. Subject to
adjustment as provided in Section 4(b), the aggregate number of shares of
Common Stock (the "Shares") that may be issued or transferred under the Program
is 1,000,000 Shares, plus 10% of any increase (excluding any increase relating
to or arising out of the conversion or exercise of any convertible securities,
options or warrants issued and outstanding as of the date the Program was
adopted by the Board) in the number of shares issued and outstanding over the
number of Shares issued and outstanding on the date the Program was adopted by
the Board (the "Incremental Amount"). The Shares may be authorized but
unissued Shares or treasury Shares. The number of Shares available for Grants
at any given time shall be reduced by the aggregate of all Shares previously
issued or transferred plus the aggregate of all Shares which may become subject
to issuance or transfer under then-outstanding and then-currently exercisable
Grants. For purposes of this Section 4, the number of shares outstanding at
any time shall not include Grants under the Program but shall include Shares
issuable under Substituted Stock Incentives (as defined in Section 10(b) below)
assumed by the Company upon or in connection with the acquisition of a merger
with another corporation.
(b) Recapitalization Adjustment. If any subdivision or
combination of shares of Common Stock or any stock dividend, capital
reorganization, recapitalization, consolidation, or merger in which the Company
is the surviving corporation occurs after the adoption of the Program, the
Committee shall make such proportional adjustments as it determines appropriate
in the number of shares of Common Stock that may be issued or transferred
thereafter under Section 4(a) or 8. The Committee shall similarly adjust the
number of Shares subject to such stock option and option price in all
outstanding Grants made before the event within 60 days of the event.
5. STOCK OPTIONS.
The Committee may grant options qualifying as incentive stock
options ("ISOs") under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("NQOs") not entitled to
special tax treatment under the Code or Restored Options (collectively, "Stock
Options"). The following provisions are applicable to Stock Options (other
than Director Options).
(a) Exercise of Option. A Grantee may exercise a Stock
Option by delivering a notice of exercise to the Company, either with or
without accompanying payment of the option price. The notice of exercise, once
delivered, shall be irrevocable.
(b) Satisfaction of Option Price. The Grantee shall pay
the option price (the "Option Price") in cash, or with the Committee's
permission, by delivering shares of Common Stock already owned by the Grantee,
held by the Grantee for a minimum of six (6) months and having a Fair Market
Value on the date of exercise equal to the Option Price, or a combination of
cash and Shares. The Grantee shall pay the Option Price not later than thirty
(30) days after the date of a statement from the Company following exercise
setting forth the Option Price, Fair Market Value of Common Stock on the
exercise date, the number of Shares that may be delivered in payment of the
Option Price, and the amount of withholding tax due, if any. If the Grantee
fails to pay the Option Price within the period and in the manner prescribed in
the specific instrument of Grant, the Committee shall have the right to take
whatever action it deems appropriate, including voiding the option exercise.
The Company shall not issue or transfer Shares upon exercise of a Stock Option
until the Option Price is fully paid. The Committee may prescribe such other
or different exercise or payment terms as it may deem appropriate.
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(c) Price; Term and Conditions. The exercise price per
share, term and other provisions of stock options granted hereunder shall be
specified by the grant, as limited, in the case of ISOs, by the provisions of
paragraph (d) below. In addition, the Committee may prescribe such other
conditions as it may deem appropriate, which conditions shall be specified by
the Grant.
(d) Limits on the ISOs. The aggregate fair market value
of the stock covered by ISOs granted under the Program or any other stock
option plan of the Company or any subsidiary or parent of the Company that
becomes exercisable for the first time by any Grantee in any calendar year
shall not exceed $100,000. The aggregate Fair Market Value will be determined
at the time of grant. The period of exercise of an ISO shall not exceed ten
(10) years from the date of Grant (or five (5) years if the Grantee is also a
10% stockholder). The price at which Common Stock may be purchased by the
Grantee under an Incentive Stock Option shall be the Fair Market Value (or 110%
of the Fair Market Value if the Grantee is a 10% stockholder) of Common Stock
on the date of the Grant.
(e) Restored Options. Stock Options granted under the
Program may, with the Committee's permission, include the right to acquire a
restored option (a "Restored Option"). If a Stock Option grant contains a
Restored Option and if a Grantee pays all or part of the Option Price of the
Stock Option with shares of Common Stock held by the Grantee, then upon
exercise of the Stock Option the Grantee shall be granted a Restored Option to
purchase, at the fair market value as of the date of the grant of the Restored
Option, the number of shares of Common Stock of the Company equal to the sum of
the number of whole shares used by the Grantee in payment of the Option Price
and the number of whole shares, if any, withheld by the Company as payment for
withholding taxes. A Restored Option may be exercised between the date of
grant and the date of expiration, which will be the same as the date of
expiration of the Stock Option to which a Restored Option is related.
6. STOCK APPRECIATION RIGHT.
The Committee may grant a Stock Appreciation Right ("SAR")
either independently or in conjunction with any Stock Option granted under the
Program either at the time of grant of the option or thereafter. The following
provisions are applicable to each SAR:
(a) Options to Which Right Relates. Each SAR which is
issued in conjunction with a Stock Option shall specify the Stock Option to
which the SAR is related, together with the Option Price and number of option
shares subject to the SAR at the time of its grant.
(b) Requirement of Employment. Each SAR may be exercised
only while the Grantee is in the employment of the Company, provided that the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.
(c) Exercise. A Grantee may exercise each SAR in whole or
in part by delivering a notice of exercise to the Company, except that the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.
(d) Payment and Form of Settlement. If a Grantee
exercises any SAR which is issued in conjunction with a Stock Option, the
grantee shall receive the aggregate of the excess of the fair market value of
each share of Common Stock with respect to which the SAR is being exercised
over the Option Price of each such share. Payment, in any event, may be made in
cash, Common Stock or a combination of the two, in the discretion of the
Committee. Fair Market Value shall be determined as of the date of exercise.
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(e) Expiration and Termination. Each SAR shall expire on
a date determined by the Committee at the time of grant. If a Stock Option is
exercised in whole or in part, any SAR related to the Shares purchased in
connection with such exercise shall terminate immediately.
7. RESTRICTED STOCK GRANTS.
The Committee may issue or transfer Shares ("Restricted
Stock") to a Grantee under a Restricted Stock Grant. Upon the issuance or
transfer, the Grantee is entitled to vote the Shares and to receive any
dividends paid. The following provisions are applicable to Restricted Stock
Grants:
(a) Requirement of Employment. If the Grantee's
employment terminates during the period designated in the Grant as the
"Restriction Period", the Restricted Stock Grant terminates and the shares of
Common Stock must be returned immediately to the Company. However, the
Committee may provide for partial or complete exceptions to this requirement as
it deems equitable.
(b) Restrictions of Transfer and Legend on Stock
Certificate. During the Restriction Period, a Grantee may not sell, assign,
transfer, pledge, or otherwise dispose of the Shares of Restricted Stock except
to a Successor Grantee under Section 10(a). Each certificate for shares issued
or transferred under a Restricted Stock Grant shall contain a legend giving
appropriate notice of the restrictions applicable to the Grant.
(c) Lapse of Restrictions. All restrictions imposed
under any Restricted Stock Grant shall lapse upon the fulfillment of the
conditions for vesting set forth in the instrument of Grant provided that all
of the conditions stated in Sections 7(a) and (b) have been met as of the date
of such lapse. The Grantee shall then be entitled to have the legend removed
from the certificate.
8. DIRECTOR STOCK OPTIONS.
(a) Eligible Directors. This Section 8 provides for the
automatic Grant of NQOs (the "Director Options") to directors of the Company
who are neither employees nor officers of the Company or any of its
subsidiaries (the "Eligible Directors"). All powers vested in the Committee in
respect of the administration and interpretation of the Program and the Grants
made under it shall, solely in respect of this Section 8, be vested in an
alternate committee appointed by the Board (the "Alternate Committee")
consisting of two or more directors not eligible to receive Director Options.
All terms and conditions of Director Options not specifically set forth in this
Section 8 shall be determined by the Alternate Committee.
(b) Shares Subject to Issuance or Transfer. Subject to
adjustment as provided in Section 4(b), the aggregate number of Shares that may
be issued or transferred under Section 8 of the Program is up to, but not in
excess of, 100,000, plus 10% of any Incremental Amount.
(c) Non-Qualified Options. All options granted under this
Section 8 shall be NQOs not entitled to special tax treatment under Section 422
of the Code.
(d) Grant of Options. Director Options shall be granted
automatically on the date of adoption of the Program by the stockholders of the
Company and on January 2 (or if January 2 is not a business day, on the next
succeeding business day) of each calendar year following the year in which this
Program is adopted (each, a "Program Year"). The number of Shares subject to
Director Options
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granted pursuant to this Section 8 to any Eligible Director shall be equal to
the nearest number of whole shares determined in accordance with the following
formula:
Annual Retainer Number
-------------------------------- = of
Fair Market Value - $_____ Shares
"Annual Retainer" shall mean the dollar amount set by the Board for the
relevant Program Year, prior to the commencement of such Program Year, and
shall include all fees for attendance at meetings of the Board or any committee
of the Board or for any other services to be provided to the Company. The
Annual Retainer may be zero in any year. "Fair Market Value" shall mean the
Fair Market Value of the Common Stock on January 2 of the applicable year,
determined in accordance with Section 10(i) hereof. Notwithstanding the
foregoing, the maximum number of Shares subject to Director Options granted in
any year pursuant to this Section 8 shall not exceed 10,000 per director. The
exercise price of the Shares subject to Director Options shall be equal to the
Fair Market Value of the Common Stock on the date of grant of the Director
Options. The amount, price and timing of awards of Director Options are fixed
by the terms of this paragraph and are not intended to be subject to the
discretion of any person or committee. The award of Director Options is not
intended to preclude the Company from awarding other compensation to Eligible
Directors outside of the Program for attendance at meetings of the Board or any
committee of the Board or for any other services provided or to be provided to
the Company.
(e) Terms. Director Options shall become exercisable
over five (5) years from the date of grant with installments of 20% of the
total number of underlying shares vesting on each of the first five (5)
anniversaries of the date of grant; provided, however, that Director Options
shall become exercisable in full for a period of 90 days following (i) the
death of the Grantee director or retirement from the Board because of total and
permanent disability, or (ii) a Change in Control of the Company (as that term
is defined in Section 10(j)).
(f) Exercise of Director Options. A Director Option
shall be exercised by delivering a notice of exercise to the Company,
accompanied by a certified check in the amount of, or Shares of Common Stock
already owned by the Grantee, held by the Grantee for a minimum of six (6)
months and having a Fair Market Value on the date of exercise equal to, the
aggregate amount of the exercise price. If the Grantee fails to comply with
this paragraph, the Alternate Committee shall have the right to take such
action as it deems appropriate, including voiding the option exercise. The
Company shall not issue or transfer Shares of Common Stock upon exercise of a
Director Option until the exercise price has been paid in full.
(g) Termination. All rights of an Eligible Director
in a Director Option, to the extent that they have not been previously
exercised, shall terminate upon the expiration of ten (10) years from the date
of grant or, if sooner, two (2) years after such director's termination as a
director of the Company for any reason, except that, if a director is removed
for cause, all of his Director Options then outstanding hereunder shall
terminate immediately upon such removal. Notwithstanding the foregoing, if an
Eligible Director dies during his tenure on the Board, all of his Director
Options then outstanding shall terminate upon the failure of his designated
representative to exercise said options within the time period provided in
Section 8(e). In the event that an Eligible Director ceases to be a member of
the Board for any reason, the number of Shares subject to the Director Option
issued to him or her in respect of the Program Year in which such termination
occurs shall, effective as of the date of such termination, be reduced in the
same proportion that the unearned portion of such Director's Annual Retainer
for the relevant Program Year bears to the aggregate Annual Retainer set by the
Board for that Program Year.
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(h) Death of Director. Any Director Option granted
to an Eligible Director under this Section 8 and outstanding on the date of
such director's death may be exercised by the personal representative of the
deceased director or the person or persons to whom the Option shall have been
transferred by the director's will in accordance with the laws of descent and
distribution at any time prior to the termination of such Option in accordance
with the terms of Section 8(g).
(i) Restriction on Amendments. Notwithstanding anything
to the contrary contained in this Program, the provisions of Section 8 shall
not be amended more than once every 6 months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act, or the rules
thereunder.
9. AMENDMENT AND TERMINATION OF THE PROGRAM.
(a) Amendment. Subject to Section 8(i) above, the Board
of Directors may amend the Program except that it may not, with respect to ISOs
granted hereunder, (i) increase the maximum number of Shares in the aggregate
which may be sold pursuant to such options granted hereunder; (ii) change the
manner of determining the minimum option prices, other than to change the
manner of determining the fair market value of any Shares underlying the option
to conform to any than applicable provisions of the Code or regulations
thereunder, (iii) increase the periods during which such options may be granted
or exercised or (iv) change the employees or class of employees eligible to
receive such options hereunder. In any event, no termination, suspension,
modification or amendment of the Program may adversely affect the rights of any
Grantee without his consent.
(b) Termination of the Program. The Program shall
terminate on the tenth anniversary of its effective date unless terminated
earlier by the Board or unless extended by the Board.
(c) Termination and Amendment of Outstanding Grants. A
termination or amendment of the Program that occurs after a Grant is made shall
not result in the termination or amendment of the Grant unless the Grantee
consents or unless the Committee acts under Section 10(e). The termination of
the Program shall not impair the power and authority of the Committee with
respect to outstanding Grants. Whether or not the Program has terminated, an
outstanding Grant may be terminated or amended under Section 10(e) or may be
amended by agreement of the Company and the Grantee consistent with the
Program.
10. GENERAL PROVISIONS.
(a) Prohibitions Against Transfer. Only a Grantee or his
authorized representative may exercise rights under a Grant. Except as
provided herein, a Grantee may not transfer rights under a Grant, except upon
the express written consent of the Company, which may be granted or denied in
the Company's discretion. Except as otherwise expressly provided herein or in
the instrument of grant, when a Grantee dies, the personal representative or
other person entitled under a prior Stock Option or a Grant under the Program
to succeed to the rights of the Grantee ("Successor Grantee") may exercise the
rights. A Successor Grantee must furnish proof satisfactory to the Company of
his or her right to receive the Grant under the Grantee's will or under the
applicable laws of descent and distribution.
(b) Substitute Grants. The Committee may make a Grant (a
"Substitute Grant") to an employee of another corporation who becomes an
Eligible Employee by reason of a corporate merger, consolidation, acquisition
of stock or property, reorganization or liquidation involving the Company in
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substitution for a stock option, stock appreciation right, performance award,
or restricted stock grant granted by such corporation ("Substituted Stock
Incentive"). The terms and conditions of the Substitute Grant may vary from
the terms and conditions required by the Program and from those of the
Substituted Stock Incentive. The Committee shall prescribe the exact
provisions of the Substitute Grant, preserving where possible the provisions of
the Substitute Stock Incentive. The Committee shall also determine the number
of shares of Common Stock to be taken into account under Section 4.
(c) Subsidiaries. The term "subsidiary" means an
affiliated corporation controlled by the Company directly or indirectly through
one or more intermediaries.
(d) Fractional Shares. Fractional shares shall not be
issued or transferred under a Grant, but the Committee or Alternate Committee
may pay cash in lieu of a fraction or round the fraction.
(e) Compliance with Law. The Program, the exercise of
Grants, and the obligations of the Company to issue or transfer shares of
Common Stock under Grants shall be subject to all applicable laws and to
approvals by any governmental or regulatory agency as may be required. The
Committee or Alternate Committee may revoke any Grant if it is contrary to law
or modify a Grant to bring it into compliance with any valid and mandatory
government regulation. The Committee may also adopt rules regarding the
withholding of taxes on payment to Grantees.
(f) Ownership of Stock. A Grantee or Successor Grantee
shall have no rights as a stockholder of the Company with respect to any Shares
covered by a Grant until the Shares are issued or transferred to the Grantee or
Successor Grantee on the Company's books.
(g) No Right to Employment. The Program and the Grants
under it shall not confer upon any Grantee the right to continue in the
employment of the Company or affect in any way the right of the Company to
terminate the employment of a Grantee at any time.
(h) Effective Date of the Program. The Program shall
become effective upon its approval by the Company's stockholders entitled to
vote thereon.
(i) Fair Market Value. For the purposes of the Program,
the term "Fair Market Value" means, as of any date, the closing price of a
share of Common Stock of the Company on such date. The closing price shall be
(i) if the Common Stock is then listed or admitted for trading on any national
securities exchange or, if not so listed or admitted for trading, is listed or
admitted for trading on the Nasdaq National Market, the last sale price of the
common stock, regular way, or the mean of the bid and asked prices thereof for
any trading day on which no such sale occurred, in each case as officially
reported on the principal securities exchange on which the common stock is
listed or admitted for trading or on the Nasdaq National Market, as the case
may be, or (ii) if not so listed or admitted for trading on a national
securities exchange or the Nasdaq National Market, the mean between the closing
high bid and low asked quotations for the Common Stock in the over-the-counter
market as reported by Nasdaq, or any similar system for the automated
dissemination of securities prices then in common use, if so quoted, as
reported by any member firm of the New York Stock Exchange selected by the
Company; provided, however, that if, by reason of extended or continuous
trading hours on any exchange or in any market or for any other reason, the
time, with respect to any trading day, of the close of trading for the purpose
of determining the "last sale price" or the "closing" bid and asked prices is
not objectively determinable, the time on such trading day used for the purpose
of reporting any compilation of last sale prices or
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closing bid and asked prices in The Wall Street Journal shall be the time on
such trading day as of which the "last sale price" or "closing" bid and asked
prices are determined for purposes of this definition. If the Common Stock is
quoted on a national securities or central market system in lieu of a market or
quotation system described above, the closing price shall be determined in the
manner set forth in clause (i) of the preceding sentence if actual transactions
are reported, and in the manner set forth in clause (ii) of the preceding
sentence if bid and asked quotations are reported but actual transactions are
not. If on the date in question, there is no exchange or over-the-counter
market for the Common Stock, the "fair market value" of such Common Stock shall
be determined by the Committee acting in good faith.
(j) Change in Control. For purposes of the Program, the
term "Change of Control" means: the acquisition, without the approval of the
Board, by any person or entity, other than the Company and certain related
entities, of more than 20% of the outstanding shares of Common Stock through a
tender offer, exchange offer, or otherwise; the liquidation or dissolution of
the Company following a sale or other disposition of all or substantially all
of its assets; a merger or consolidation involving the Company that results in
the Company not being the surviving parent corporation; or a change in the
majority of the members of the Board during any two-year period that is not
approved by at least two-thirds of the members of the Board who were members at
the beginning of the two year period.
(k) Withholding. The Committee may, in its discretion
and subject to such rules as it may adopt, permit or require a Grantee to
satisfy, in whole or in part, any withholding tax obligation which may arise in
connection with the distribution to him or her of Shares of Common Stock or
cash pursuant to the Program by authorizing the Company to withhold from such
distribution cash or Shares having a Fair Market Value equal to the amount of
the withholding tax. Notwithstanding the foregoing, the Committee shall
require, as a condition to the distribution of any cash or Shares of Common
Stock to any Reporting Person, that the Company withhold from such distribution
cash or Shares having an aggregate Fair Market Value equal to the amount of the
Grantee's liability for any and all taxes required by law to be withheld.
(l) Further Restrictions Applicable to Reporting Persons.
Common Stock acquired by a Reporting Person pursuant to the Program shall in no
event be transferable until six (6) months have elapsed from the date of Grant
of the Common Stock or, in the case of Shares acquired pursuant to a stock
option awarded under the Program, at least six (6) months have elapsed from the
date of Grant of the stock option to the date of disposition of the Common
Stock underlying such option.
(m) Program Controls. In the case of any conflict
between the term of this Program and the terms of any instrument of Grant, the
terms of this Program will control.
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NON-NEGOTIABLE PROMISSORY NOTE
$2,000,000 New York, New York
May 4, 1995
FOR VALUE RECEIVED, the undersigned, Marc P. Shore (the "Maker"), the
Vice Chairman of the Board and President of Shorewood Packaging Corporation, a
Delaware corporation (the "Payee"), hereby promises to pay to the order of Payee
the principal sum of $2,000,000 on May 4, 2000, together with interest thereon
at an annual rate of interest equal to the Applicable Federal Rate (defined
below), payable quarterly in arrears on January 1, April 1, July 1 and October 1
of each year, commencing July 1, 1995. Interest on this Note shall be
calculated on the basis of a year of 365 days for the actual number of days
elapsed in any period in which interest is payable (including the first day but
excluding the last day). Interest on this Note shall be adjusted on the first
day of each month based upon the Applicable Federal Rate in effect at the close
of business on the last business day of the immediately preceding month. All
payments of the principal of and interest on this Note shall be made in
immediately available funds in such coin or currency of the United States of
America as at the time of payment shall be legal tender for the payment of
public and private debts to the Payee at its principal executive offices in the
City of New York. Whenever any payment under this Note is due on a Saturday,
Sunday or any other day on which banks in the City of New York are required or
permitted by law to be closed, such payment shall be made on the next succeeding
day on which banks in the City of New York are not required or permitted by law
to be closed, and such extensions of time shall be included in the computation
of the amount of interest which is payable hereunder. As used hereinabove,
"Applicable Federal Rate" means the rate of interest for term loans as set forth
in Internal Revenue Code Section 7872(f), as it may be amended from time to
time, and as such rate may be published from time to time by the United States
Department of the Treasury.
<PAGE> 2
(i) Promissory Note. This Note evidences a loan made by
Payee to Maker.
(ii) Prepayment. The Maker may, without premium or
penalty, at any time and from time to time, prepay all or any portion of the
outstanding principal amount of this Note, together with interest accrued on
the principal amount to be prepaid through the date of prepayment. Partial
prepayments shall be applied first to accrued and unpaid interest, and then to
unpaid principal.
(iii) Mandatory Prepayments. (a) If the aggregate base
salary and cash bonus (the "Aggregate Compensation") earned by the Maker on
account of his employment by the Payee in any given fiscal year of the Payee
exceeds $750,000 (the amount by which Maker's Aggregate Compensation exceeds
$750,000 is to be referred to herein as the "Excess Payment"), then, on the
date as of which such cash bonus is payable to Maker, the Maker shall prepay a
portion of this Note equal to the lesser of (i) the then outstanding principal
amount of this Note and all accrued and unpaid interest thereon and (ii) the
"Mandatory Prepayment Amount" (defined below). In such event, Payee is hereby
authorized to withhold from Maker's cash bonus the amount to be so prepaid, as
described above. Mandatory prepayments pursuant to this paragraph shall be
applied first to accrued and unpaid interest, and then to unpaid principal
under this Note. As used herein, "Mandatory Prepayment Amount" means an amount
equal to the sum of (i) 50% of the first $250,000 of the Excess Amount plus
(ii) 100% of the amount, if any, by which the Excess Amount exceeds $250,000.
(b) Notwithstanding anything to the contrary
contained herein, if Maker voluntary resigns from the employ of the Payee or
his employment by the Payee is otherwise terminated "for cause", the then
outstanding principal amount of this Note and all accrued and unpaid interest
thereon shall become due and payable immediately.
11
<PAGE> 3
(iv) Remedies. If Maker shall fail to make the payment of
the principal of or interest on this Note when the same shall become due and
payable hereunder, the Payee may exercise any right, power or remedy permitted
to it by law, either by suit or equity or by action at law, or both. Maker
hereby waives presentment, protest, notice of protest, notice of dishonor,
diligence in collection, and any and all other notices in matters of a like
nature to the maximum extent permitted by law. No remedy conferred upon the
Payee by this Note is intended to be exclusive of any other remedy, and each
and every remedy shall be cumulative and shall be in addition to every other
remedy given hereunder or now or hereafter existing at law, in equity or
otherwise. No course of dealing on the part of the Payee, nor any delay or
failure on the part of the Payee to exercise any right or power under this
Note, shall operate as a waiver of such right or power or otherwise prejudice
the rights, powers and remedies of the Payee. No waiver of a default, right or
remedy by the Payee shall be effective unless it is set forth in a written
instrument which is executed by the Payee; and no such waiver shall be deemed
to be a waiver of any other or subsequent default, right or remedy. No failure
to require compliance with any covenant, term, condition or other provision of
this Note shall constitute a waiver by the Payee of any such covenant, term,
condition or other provision, or of any event of default in connection
therewith.
(v) Miscellaneous.
5.1 The Maker hereby agrees to (i) promptly reimburse the
Payee for the costs and expenses, including, but not limited to, reasonable
attorneys' fees and expenses, which the Payee may incur in connection with the
collection of this Note or the enforcement of its rights hereunder and (ii) pay
all sums which are payable by it under this Note without counterclaim, setoff,
deduction or defense.
5.2 This Note (i) may only be modified by a written
instrument which is executed by the Maker and the Payee, (ii) shall inure to
the benefit of the Payee and its successors and assigns, and
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<PAGE> 4
shall be binding upon the Maker and its successors and assigns, and (iii) shall
be governed by, and construed in accordance with, the laws of the State of New
York applicable to contracts made and to be wholly performed therein. The
captions herein contained are for the sole purpose of convenience of reference,
and shall not in any way affect or limit the meaning or interpretation of any
of the provisions hereof.
5.3 EACH OF THE MAKER AND THE PAYEE HEREBY IRREVOCABLY
(I) SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR FEDERAL COURT SITTING
IN NEW YORK CITY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
NOTE, (II) AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD OR DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT, (III) WAIVES
PERSONAL SERVICE OF ANY AND ALL PROCESSES UPON IT IN CONNECTION WITH ANY SUCH
ACTION OR PROCEEDING, AND CONSENTS TO THE SERVICE OF SUCH PROCESS BY THE
MAILING OF COPIES THEREOF IN THE MANNER SET FORTH IN THE IMMEDIATELY PRECEDING
PARAGRAPH, (IV) WAIVES ANY OBJECTION TO ANY SUCH ACTION OR PROCEEDING BASED
UPON FORUM NON CONVENIENS OR VENUE, AND (V) WAIVES ANY RIGHT TO A TRIAL BY JURY
IN ANY SUCH ACTION OR PROCEEDING AND AGREES THAT ANY SUCH ACTION OR PROCEEDING
SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY; PROVIDED, HOWEVER, THAT
NOTHING HEREIN CONTAINED SHALL EFFECT THE RIGHT OF THE PAYEE TO SERVE LEGAL
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR AFFECT THE RIGHT OF THE PAYEE
TO BRING ANY ACTION OR PROCEEDING AGAINST THE MAKER OR ITS PROPERTY IN THE
COURTS OF ANY OTHER JURISDICTION. EACH OF THE MAKER AND THE PAYEE HEREBY
AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
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<PAGE> 5
SHALL BE CONCLUSIVE, AND MAY BE ENFORCED IN ANY OTHER JURISDICTION BY SUIT UPON
THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW.
5.4 This Note is transferable only upon the express
written consent of Maker.
IN WITNESS WHEREOF, the Maker has caused this Note to be duly
executed and delivered by it as of the date first above written.
By: /s/ Marc. P. Shore
-------------------
Marc P. Shore
14
<PAGE> 1
EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
MARC P. SHORE
AGREEMENT dated January 25, 1996 and made effective as of the 1st day
of May, 1995, among SHOREWOOD PACKAGING CORPORATION, a Delaware corporation
having its principal executive offices at 277 Park Avenue, New York, New York
10172 (herein called the "Corporation" or the "Company"), and MARC P. SHORE,
currently residing at 68 Talcott Road, Ryebrook, NY 10573, New York (herein
called the "Executive").
W I T N E S S E T H
The Corporation wishes to employ the Executive and Executive wishes to
accept employment by the Corporation.
The Corporation recognizes that the longer the Executive remains in the
full time active employ of the Corporation, the more valuable will be any
consultative and advisory services that the Executive may provide following his
full time employment by the Corporation.
The Corporation recognizes that the possibility of a proposal from a
third person, whether solicited by the Corporation or unsolicited, concerning a
possible business combination with the Corporation, including the acquisition of
a substantial share of the equity or voting securities of the Corporation, may
be unsettling to the Executive and deter him from entering into the employ of
the Corporation.
This Agreement is intended to help assure a continuing dedication by
the Executive to his duties to the Corporation notwithstanding the possibility
or occurrence of a business combination proposal.
The Corporation and the Executive believe it imperative that should the
Corporation receive proposals from third parties with respect to its future, the
Executive should, without being influenced by the uncertainties of his own
situation, assess and advise the Corporation whether such proposals would be in
the best interest of the Corporation and its stockholders and take such other
action regarding such proposals as the Corporation might determine to be
appropriate.
Accordingly, the parties desire to and do hereby enter into this
Agreement as of the date first set forth above.
NOW, THEREFORE,
<PAGE> 2
1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of
this Agreement shall be from May 1, 1995 through and including April 30, 2000.
The Corporation agrees to and does hereby employ the Executive as President for
the period commencing May 1, 1995 and terminating April 30, 2000 (the
"Employment Period") and the Executive agrees that he shall serve as President
of the Corporation during the Employment Period. The foregoing notwithstanding,
in the event of any "Change in Control" of the Corporation (as hereinafter
defined) at any time during the last two fiscal years of the Corporation
beginning prior to April 30, 2000, the Employment Period hereunder shall be
automatically extended through and including April 30, 2002.
2. EXECUTIVE. Except as hereinafter provided, the Executive
shall during the Employment Period perform the executive and administrative
duties and functions and shall have the powers and privileges of the President
of the Corporation, as such duties, functions, powers and privileges are defined
in the By-Laws of the Corporation in effect on the date hereof and as currently
interpreted, and, to the extent not defined therein, as the same are customarily
performed and exercised by a President of a publicly owned corporation
incorporated in one of the United States of America. If elected, the Executive
shall serve as a member of the Board of Directors (and of any Executive
Committee or similar committee having powers of the Board of Directors now in
existence or hereafter created) of the Corporation without any additional
compensation for such services. As used in this Agreement, the term
"Corporation" includes each Subsidiary of the Corporation. So long as he is an
officer of the Corporation, the Executive agrees to devote substantially all his
business time to the business and affairs of the Corporation, and to exert his
best efforts in the performance of his duties as an officer, director and member
of any committee of the Board of Directors of the Corporation to which he may be
elected, so as to promote the profit, benefit and advantage of the business to
the Corporation. The Executive agrees to accept the payments to be made to him
under this Agreement as full and complete compensation for the services required
to be performed by him under this Agreement.
3. COMPENSATION. As compensation for the services to be
rendered by the Executive pursuant to this Agreement, subject to the conditions
herein stated, the Corporation agrees to pay to the Executive all of the
following:
(a) BASE SALARY. Beginning May 1, 1995 and until the
expiration of the Employment Period the Corporation shall pay to the Executive a
base salary (the "Base Salary") at a minimum rate of $600,000 per year, payable
in weekly or bi-weekly installments as nearly equal as may be practicable or
otherwise in accordance with the Corporation's customary payroll practices for
its Executives. Executive's Base Salary shall be reviewed anually and may be
increased at the Corporation's discretion. This Agreement shall not be deemed
abrogated or terminated if the Corporation, in its discretion shall determine to
increase the compensation of the Executive for any period of time or if the
Executive shall accept such increase; but, nothing herein shall be deemed to
obligate the Corporation to make any such increase.
(b) BONUS. Executive shall during the Employment Period be
entitled to receive annual performance bonuses in accordance with the terms and
conditions of the Company's 1995 Performance Bonus Plan (the "Bonus Plan") in
the form annexed hereto as Exhibit I, as same may be amended from time to time
hereafter in accordance with its terms. The provisions of the Bonus Plan shall
govern the award of performance bonuses by the Corporation to Executive under
the Bonus Plan, and, to that extent, shall supersede any inconsistent or
contrary provisions contained in the main body of this Agreement. The
Corporation may in its discretion award bonuses to Executive outside of the
scope of
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<PAGE> 3
the Bonus Plan; but, nothing herein shall be deemed to obligate the Corporation
to award any such bonuses.
(c) PARACHUTE EFFECTIVE DATE. Notwithstanding the present
effectiveness of this Agreement, the provisions of Sections 3(g), (h), (i), (k),
(l) and (n) of this Agreement shall become operative only when, as and if there
has been a "Change in Control" of the Corporation. For purposes of this
Agreement, the terms "Subsidiary" and "Subsidiaries" shall mean each corporation
of which more than 50% of the outstanding capital stock entitled to vote for
directors is owned directly or indirectly by the Corporation and a "Change in
Control" of the Corporation shall be deemed to have occurred upon the occurrence
of any of the following events:
(i) A change in control of the direction and
administration of the Company's business of a nature that if any securities of
the Company were registered under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), would be required to be reported in response to
(a) Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Exchange
Act, or (b) Item 1(a) of Form 8-K under the Exchange Act as each is in effect on
the date hereof and any successor provision of such regulations under the
Exchange Act, whether or not the Company is then subject to such reporting
requirements; or
(ii) Any "person" or "group" (as such term is used
in connection with Section 13(d) and 14(d)(2) of the Exchange Act) but excluding
any employee benefit plan of the Company or any "affiliate" or "associate" of
the Company (as defined in Regulation 12b-2 under the Exchange Act) (a) is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
percent (50%) or more of the combined voting power of the Company's outstanding
securities then entitled ordinarily (and apart from rights accruing under
special circumstances) to vote for the election of directors or (b) acquires by
proxy or otherwise 50% or more of the combined voting securities of the Company
having the right to vote for the election of directors of the Company, for any
merger or consolidation of the Company, for the election of Directors, or for
any other matter; or
(iii) During any period of twenty-four (24)
consecutive months, the individuals who at the beginning of such period
constitute the Board of Directors of the Company or any individuals who would be
"Continuing Directors" (as hereinafter defined) cease for any reason to
constitute at least a majority thereof; or
(iv) The Company shall cease to meet the basic
conditions of listing on the Nasdaq National Market in respect of the number of
the Company's Common Stock (as hereinafter defined) held by the public; or
(v) There shall be consummated (A) any
consolidation, merger or recapitalization of the Company or any similar
transaction involving the Company, whether or not the Company is the continuing
or surviving corporation, pursuant to which shares of the Company's common
stock, par value $.01 per share ("Common Stock"), would be converted into cash,
securities or other property, other than a merger of the Company in which the
holders of Common Stock immediately prior to the merger have the same proportion
and ownership of common stock of the surviving corporation immediately after the
merger, (B) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all, or substantially all, of the assets of
the Company or (C) the adoption of a plan of complete liquidation of the Company
(whether or not in connection with the sale of all or
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<PAGE> 4
substantially all of the Company's assets) or a series of partial liquidations
of the Company that is de jure or de facto part of a plan of complete
liquidation of the Company; provided, that the divestiture of less than
substantially all of the assets of the Company in one transaction or a series
of related transactions, whether effected by sale, lease, exchange, spin-off,
sale of the stock or merger of a Subsidiary or otherwise, or a transaction
solely for the purpose of reincorporating the Company in another jurisdiction,
shall not constitute a "Change in Control"; or
(vi) The Board of Directors of the Company shall
approve any merger, consolidation or like business combination or reorganization
of the Company, the consummation of which would result in the occurrence of any
event described in Section 3(c)(i), (ii) or (v) above.
(d) DEFINITION OF "CONTINUING DIRECTORS". For purposes of
this Agreement, "Continuing Directors" shall mean the directors of the Company
in office on the date hereof and any successor to any such director and any
additional director who after the date hereof (i) was nominated or selected by a
majority of the Continuing Directors in office at the time of his nomination or
selection and (ii) who is not an "affiliate" or "associate" (as defined in
Regulation 12b-2 under the Exchange Act) of any person who is the beneficial
owner, directly or indirectly, of securities representing ten percent (10%) or
more of the combined voting power of the Company's outstanding securities then
entitled ordinarily to vote for the election of directors.
(e) TERMINATION RIGHTS UNCHANGED. Except as provided in
Section 3(f) below, nothing in this Agreement shall affect any right which the
Executive may otherwise have to terminate his employment by the Company or a
Subsidiary, nor shall anything in this Agreement affect any right which the
Company or any Subsidiary may have to terminate the Executive's employment at
any time in any lawful manner, subject to the provision that in the event of
termination of the Executive's employment under the circumstances specified in
Sections 3(g) and 3(n) below following a Change in Control, the Company will
provide to the Executive the payments and benefits described in Sections 3(g)
and 3(n) of this Agreement.
(f) VOLUNTARY TERMINATION. In the event any person or
organization commences a tender or exchange offer, circulates a proxy statement
to the Company's stockholders, or takes other steps designed to effect a Change
in Control of the Company, the Executive agrees that in order to receive the
benefits provided by this Agreement, he will not voluntarily leave the employ of
the Company or any of its Subsidiaries, and will continue to perform his regular
duties and to render the services specified in the recitals of this Agreement,
until such person or organization has abandoned or terminated his or its efforts
to effect a Change in Control or until a Change in Control has occurred. Should
the Executive voluntarily terminate his employment before any such effort to
effect a Change in Control of the Company has commenced, or after any such
effort has been abandoned or terminated without effecting a Change in Control
and no such effort is then in process, this Agreement shall lapse and be of no
further force or effect. Should the Executive voluntarily terminate his
employment with the Company or any of its Subsidiaries during such time as any
person or organization has commenced, but has not yet abandoned, any steps
designed to effect a Change in Control of the Company, but at a time when a
Change in Control has not been effected, the Executive shall not be entitled to
receive any of the benefits of Sections 3(g) and 3(n) hereof.
(g) TERMINATION FOLLOWING CHANGE IN CONTROL. If a Change
in Control of the Company shall have occurred, then Executive shall be entitled
to the benefits provided in Section 3(n) hereof upon the subsequent termination
of his employment within the applicable period set forth in
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<PAGE> 5
Section 3(n) hereof following such Change in Control, unless such termination
is (i) due to the Executive's death or voluntary Retirement (as defined herein)
or (ii) by the Company or a Subsidiary by reason of the Executive's Disability
(as defined herein) or for Cause (as defined herein) or (iii) by the Executive
other than for Good Reason, as such term is defined in Section 3(j) hereof.
(h) TERMINATION BY REASON OF DEATH OR DISABILITY. If the
Executive's employment is terminated by reason of his death or Disability during
the two (2) years following a Change in Control, the Executive shall be entitled
to death or long-term disability benefits, as the case may be, from the Company
no less favorable than the most favorable benefits to which he would have been
entitled had the death or termination for Disability occurred at any time during
the period commencing one year prior to the initiation of actions that resulted
in a Change in Control. If prior to any such termination for Disability during
the two (2) years following a Change in Control, the Executive fails to perform
his duties as a result of incapacity due to physical or mental illness, he shall
continue to receive his Base Salary (as defined herein) less any benefits as may
be received by him under the Company's or Subsidiary's disability plan until his
employment is terminated for Disability, and shall be entitled to the most
favorable other benefits applicable under the Company's policies during the
period commencing one year prior to the initiation of actions that resulted in
the Change in Control.
(i) TERMINATION FOR CAUSE. If the Executive's employment
shall be terminated by the Company for Cause or by the Executive other than for
Good Reason during the two (2) years following a Change in Control, the Company
shall pay to the Executive his full Base Salary through the Date of Termination
(as defined herein) at the rate in effect at the time Notice of Termination (as
defined herein) is given and any amounts to be paid to the Executive pursuant to
any deferred compensation or other employee benefit plan or program, and the
Company shall have no further obligations to the Executive under this Agreement.
(j) DEFINITIONS. For purposes of this Agreement:
(i) "Disability" shall mean that, as a result of
the Executive's incapacity due to physical or mental illness, the Executive has
been absent from the full-time performance of his duties with the Company for
six (6) consecutive months and, within thirty (30) days after Notice of
Termination is given to the Executive, he has not returned to the full-time
performance of his duties. Any question as to the existence of Disability shall
be determined by a qualified independent physician selected by the Executive
(or, if he is unable to make such selection, such selection shall be made by any
adult member of the Executive's family) and approved by the Company. The
written determination of such physician shall be final and conclusive for
purposes of this Agreement.
(ii) "Retirement" shall mean that the Executive
shall have retired after reaching the earliest normal or early retirement date
provided in the Company's retirement plans as then in effect (or if Executive
retires after a Change in Control of the Company, as in effect on the date of
the Change in Control).
(iii) "Cause" shall mean:
(A) The willful and continued failure by
the Executive to perform substantially his duties with the Company (other than
any such failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure resulting from
termination by the Executive for Good Reason) which is not cured within thirty
(30) days after a
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<PAGE> 6
written demand for substantial performance is delivered to the Executive by the
Board of Directors, which demand specifically identifies the manner in which
the Board of Directors believes that the Executive has not substantially
performed his duties; or
(B) The willful engagement in conduct by
the Executive which is demonstrably and materially injurious to the Company,
monetarily or financially, which is not discontinued within five (5) days after
written demand to cease and desist from such conduct is delivered to the
Executive by the Board of Directors, which demand specifically identifies the
conduct which the Board of Directors believes is injurious to the Company; or
(C) Conviction for a felony or other crime
punishable by imprisonment for more than one (1) year, or the entering of a plea
of nolo contendere thereto.
Notwithstanding any of the foregoing, the Executive shall not be deemed
to have been terminated for Cause unless and until there shall have been
delivered to the Executive a resolution duly adopted by the affirmative vote of
not less than a majority of the entire membership of the Board of Directors
(other than the Executive) at a meeting called and held for such purpose (after
reasonable notice to the Executive and an opportunity for the Executive,
together with his counsel, to be heard before the Board of Directors), finding
that in the good faith opinion of the Board of Directors the Executive was
guilty of conduct set forth above in clause (A), (B) or (C) and specifying the
particulars thereof in detail.
(iv) "Good Reason" shall mean:
(A) The assignment by the Company or a
Subsidiary to the Executive of duties which (i) are inconsistent with, or
require travel significantly more time-consuming or extensive than, the
Executive's duties and business travel obligations immediately prior to the
Change in Control, or (ii) result, without the Executive's express written
consent, in a significant reduction in the Executive's authority and
responsibility when compared to the highest level of authority and
responsibility assigned to the Executive at any time during the six (6) month
period prior to the Change in Control; or
(B) A reduction by the Company or a
Subsidiary of the Executive's Base Salary as the same may be increased from
time to time hereafter; or
(C) A change of the Executive's assigned
site location without the Executive's express written consent or, in the event
of any relocation of the Executive with his express written consent, the failure
by the Company to pay (or reimburse the Executive for) all reasonable moving
expenses incurred by the Executive and relating to a change of his principal
residence and to indemnify the Executive against any loss realized by the
Executive and/or the Executive's spouse in the sale of the Executive's principal
residence in connection with any such change of residence, all to the effect
that the Executive shall incur no loss on an after-tax basis; or
(D) The failure of the Company to continue
to provide the Executive with substantially the same level of retirement and
welfare benefits (which for purposes of this Agreement shall mean benefits under
all welfare plans as that term is defined in Section 3(1) of the Employee
Retirement Income Security Act of 1974, as amended) and perquisites (including
participation on a comparable basis in the Company's retirement plans, stock
option plans, incentive plans, group life insurance plans, medical, health,
accident, disability and other plans in which employees of the Company
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<PAGE> 7
of comparable title and salary grade participate) and any other material
benefits hereunder as were provided to the Executive immediately prior to such
Change in Control, or with a package of retirement and welfare benefits and
perquisites that, though one or more such benefits or perquisites (including
participation on a comparable basis in the Company's or a Subsidiary's
retirement plans, stock option plans, incentive plans, group life insurance
plans, medical, health, accident, disability and other plans) may vary from
those provided before such Change in Control, is substantially comparable in
all material respects when taken as a whole to such retirement and welfare
benefits and perquisites provided prior to the Change in Control; or
(E) The failure by the Company to obtain
the express written assumption of and agreement to perform this Agreement by any
successor as contemplated in Section 12 hereof; or
(F) Any purported termination of the
Executive's employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 3(k) hereof.
For purposes of this Section 3(j), no act, or failure to act, on the
Executive's part shall be considered "willful" unless done, or omitted to be
done, by him knowing and with the intent that such action or inaction would not
be in the best interests of the Company or otherwise was done or omitted to be
done in bad faith.
(v) "Base Salary" shall mean the annual base
salary paid to the Executive immediately prior to the Change in Control of the
Company (provided that such amount shall in no event be less than the annual
base salary paid to the Executive during the one (1) year period immediately
prior to the Change in Control).
(k) NOTICE OF TERMINATION. Any purported termination of
employment by the Company by reason of the Executive's Disability or for Cause,
or by the Executive for Good Reason, shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice given by the Executive or by the
Company or a Subsidiary, as the case may be, which shall indicate the specific
basis for termination and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for determination of any payments under
this Agreement; provided, however, that the (i) Executive shall not be entitled
to give a Notice of Termination that he is terminating his employment with the
Company or a Subsidiary for Good Reason after the expiration of six (6) months
following the last to occur of the events specified by him to constitute Good
Reason and (ii) the Corporation shall not be entitled to give a Notice of
Termination that it is terminating Executive's employment hereunder with the
Company or a Subsidiary by reason of Executive's Disability or For Cause after
the expiration of six (6) months following the last to occur of the events
specified by it to constitute Good Reason or Disability.
(l) DATE OF TERMINATION. For purposes of this Agreement,
"Date of Termination" shall mean (i) if the Executive's employment is terminated
for Disability, thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time performance of his
duties during such thirty (30) day period) and (ii) if the Executive's
employment is terminated for Cause or Good Reason, the date specified in the
Notice of Termination, which shall be not more than ninety (90) days after such
Notice of Termination is given. If within thirty (30) days after any Notice of
Termination is given, the party who receives such Notice of Termination notifies
the other
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<PAGE> 8
party that a Dispute (as hereinafter defined) exists, the parties agree to
pursue promptly the resolution of such Dispute with reasonable diligence.
Pending the resolution of any such Dispute, the Company or a Subsidiary shall
make the payments and provide the benefits provided for in Section 3(m) hereof
to the Executive. In the event that it is finally determined, either by mutual
written agreement of the parties, by a binding arbitration award or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or the time for appeal therefrom having expired and no appeal having
been perfected), that a challenged termination by the Company or a Subsidiary
by reason of the Executive's Disability or for Cause was justified, or that a
challenged termination by the Executive for Good Reason was not justified, then
all sums paid by the Company or a Subsidiary to the Executive from the Date of
Termination specified in the Notice of Termination until final resolution of
the Dispute pursuant to this Section 3(l) shall be repaid promptly by the
Executive to the Company or a Subsidiary, with interest at the base rate
charged from time to time by the Company's principal commercial bank. In the
event that it is finally determined that a challenged termination by the
Company or a Subsidiary by reason of the Executive's Disability or for Cause
was not justified, or that a challenged termination by the Executive for Good
Reason was justified, then the Executive shall be entitled to retain all sums
paid to the Executive pending resolution of the Dispute.
(m) DEFINITION OF "DISPUTE". For purposes of this
Agreement, "Dispute" shall mean (i) in the case of the Executive's termination
as an Executive with the Company or a Subsidiary for Disability or Cause, that
the Executive challenges the existence of Disability or Cause and (ii) in the
case of the Executive's termination as an Executive with the Company or a
Subsidiary by the Executive for Good Reason, that the Company or a Subsidiary
challenges the existence of Good Reason.
(n) PARACHUTE PAYMENTS UPON TERMINATION. If within two (2)
years after a Change in Control of the Company, the Company or a Subsidiary
shall terminate the Executive's employment other than by reason of the
Executive's death, Disability, voluntary Retirement or for Cause or if the
Executive shall terminate his employment for Good Reason then, in any such
event, and subject in each case to Section 3(l) hereof, the Company or a
Subsidiary will pay to the Executive as compensation for services rendered,
beginning not later than the fifth business day following completion of the
"Parachute Procedure" (as hereinafter defined) if the Company elects to follow
such procedure and not later than the fifteenth day after the Date of
Termination otherwise:
(i) the Executive's Base Salary through the Date
of Termination, any existing fringe benefits (including medical benefits) and
incentive compensation for the fiscal year in which the termination occurs in
accordance with any arrangements then existing with the Executive and
proportionate to the period of the fiscal year which has expired prior to the
termination; and
(ii) a lump sum severance payment equal to 2.99
times the Executive's average annual compensation during the Base Period (as
hereinafter defined) (subject to any applicable payroll or other taxes and
charges required to be withheld computed at the rate for supplemental payments)
provided that in no event shall "Total Payments" (as hereinafter defined) exceed
2.99 times the Executive's "Base Amount," as such term is defined in Section
28OG of the Internal Revenue Code (the "Code"). The Executive's Base Amount
shall be determined in accordance with temporary or final regulations
promulgated under Section 28OG of the Code then in effect, if any. In the
absence of such regulations, if the Executive was not employed by the Company
(or any corporation or partnership affiliated with the Company (an "Affiliate")
within the meaning of Section 1504 of the Code or a predecessor of the Company)
during the entire five calendar years (the "Base Period") preceding the calendar
year in which a Change in Control of the Company occurred, the Executive's
average annual compensation
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for the purposes of such determination shall be the lesser of (1) the average
of the Executive's annual compensation for the complete calendar years during
the Base Period during which the Executive was so employed or (2) the average
of the Executive's annual compensation for both complete and partial calendar
years during the Base Period during which the Executive was so employed,
determined by annualizing any compensation (other than nonrecurring items)
includible in the Executive's gross income for any partial calendar year or (3)
the annual average of the Executive's total compensation for the Base Period
during which the Executive was so employed, determined by dividing such total
compensation by the number of whole and fractional years included in the Base
Period. Compensation payable to the Executive by the Company or any Affiliate
or predecessor of the Company shall include every type and form of compensation
includible in the Executive's gross income in respect of the Executive's
employment by the Company or any Affiliate or predecessor of the Company,
including compensation income recognized as a result of the Executive's
exercise of stock options or sale of the stock so acquired, except to the
extent otherwise provided in temporary or final regulations promulgated under
Section 28OG of the Code. For purposes of this Section 3(n) a "change in
control of the Company" shall have the meaning set forth in Section 28OG of the
Code and any temporary or final regulations promulgated thereunder, subject to
the limitation stated in Section 3(n)(iii) below; and
(iii) (A) Notwithstanding anything to the contrary
contained herein, in the event that any portion of the aggregate payments and
benefits (the "Total Payments") received or to be received by the Executive,
whether paid or payable pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, a Subsidiary or any other
person or entity, would not be deductible in whole or in part by the Company, a
Subsidiary or by such other person or entity in the calculation of its Federal
income tax by reason of Section 28OG of the Code, the Total Payments payable
shall be reduced by the least amount necessary so that no portion of the Total
Payments would fail to be deductible by reason of being an "excess parachute
payment."
(B) At the option of the Company, no
payments shall be made pursuant to this section until the procedure described
in this Section 3(n)(iii) is completed (the "Parachute Procedure"). If the
Company elects to comply with such procedure, the Company shall cause its
independent auditors to deliver to the Executive, within fifteen (15) days
after the Date of Termination, a statement which shall indicate whether payment
to the Executive of the Total Payments would cause any portion of the Total
Payment not to be deductible in whole or part in the calculation of Federal
income tax by reason of Section 28OG of the Code, or would cause, directly or
indirectly, an "excess parachute payment" to exist within the meaning of
Section 28OG of the Code. Such statement shall set forth the value, calculated
in accordance with the principles of Section 28OG of the Code and any temporary
or final regulations promulgated thereunder, of any non-cash benefits or any
deferred or contingent payment or benefit payable pursuant to the terms of this
Agreement or any other plan, arrangement or benefit, together with sufficient
information to enable the Employer to determine the payments that may be made
to the Executive without resulting in a loss of deduction under Section 28OG of
the Code or an "excess parachute payment" to the Executive within the meaning
of Section 28OG of the Code. The Company warrants to the Executive the
accuracy of all information and calculations supplied to the Executive in such
statement. If such statement indicates that payment of the Total Payments
would result in a loss of a deduction by reason of Section 28OG of the Code or
would cause an "excess parachute payment" to exist within the meaning of
Section 28OG of the Code, the Executive shall, within thirty (30) days after
receipt of the statement, deliver to the Company a statement indicating which
of the payments and benefits specified in such auditor's statement the
Executive elects to receive; provided, however, that the payments and benefits
selected by the Executive shall not result in a loss of deduction under Section
28OG of the Code or an "excess parachute payment" to the Executive within the
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meaning of Section 28OG of the Code and, provided, further, however, that if
the Company does not comply with the Parachute Procedure, it shall deliver the
payments required by this Section 3(n) within fifteen (15) days after the Date
of Termination. Delivery of the statement by the Executive to the Company
shall constitute completion of the Parachute Procedures; and
(iv) The Company shall contest any improper assessment of an
excise or other tax imposed as a result of determination that an "excess
parachute payment" has been made to the Executive within the meaning of Section
28OG of the Code. If it is established pursuant to a final determination of a
court of competent jurisdiction or an Internal Revenue Service proceeding that
an "excess parachute payment" does in fact exist, within the meaning of Section
28OG of the Code, then the Executive shall pay to the Company, upon demand, an
amount not to exceed the sum of (i) the excess of the aggregate Total Payments
over the aggregate Total Payments that would have been paid without any portion
of such payment being deemed an "excess parachute payment" within the meaning of
Section 28OG of the Code and (ii) interest on the amount set forth in clause (i)
above at the applicable federal rate specified in Section 1274(d) of the Code
from the date of receipt by the Executive of such excess until the date of such
repayment.
4. BENEFITS. (a) The Executive shall be entitled to participate
in any life, accident, disability and health insurance, hospitalization or any
other plan or benefits afforded by the Corporation to its executives generally,
if and to the extent that the Executive is eligible to participate in accordance
with the provisions of any such plan or for such benefits. Nothing herein is
intended, or shall be construed, to require the Corporation to institute any, or
any particular, plan or benefits. In addition, the Executive shall be furnished
with an automobile lease allowance of $2,050 per month for the remainder of the
lease term now in effect and $2,250 per month thereafter for the balance of the
Employment Period plus reimbursement for reasonable insurance, maintenance,
gasoline and parking expenses incurred in furtherance of the Corporation's
business.
(b) The Corporation shall maintain in effect during the Employment
Period a term life insurance policy on the life of Executive in a declining
amount equal at any one time to the aggregate Base Salary payable hereunder over
the then unexpired balance of the Employment Period. In addition, the
Corporation shall maintain in effect during the Employment Period disability
insurance for the benefit of Executive covering, in the event this Agreement is
terminated on account of Executive's Disability, 100% of Executive's Base Salary
through the end of the Employment Period less any benefits as may be received by
him during such time under the Company's other disability plans. In connection
therewith, Executive shall, at such time or times and at such place or places as
the Corporation may reasonably direct, subject himself to such physical
examinations and execute and deliver such documents as the Corporation may deem
necessary.
5. EARLY TERMINATION; NO CHANGE OF CONTROL. If prior to the
expiration of this Agreement or a Change in Control of the Corporation, (a) the
Executive fails because of Disability to perform services of the character
contemplated by Section 2 of this Agreement; or (b) if the Corporation's Board
of Directors determines that the Executive has been negligent in the performance
of his duties, has willfully neglected his duties, has been dishonest, has
willfully disobeyed the Corporation's rules, instructions or orders or has
breached any of his covenants herein contained (any such conduct, to be referred
to as "Objectionable Conduct"); then, the Corporation may by written Notice of
Termination (defined below) terminate Executive's employment herein. In
addition, this Agreement shall terminate immediately upon the death or
Retirement of Executive. Upon any termination of the Executive's employment
under this Section 5, the Executive shall be deemed removed from all positions
held by him
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with the Corporation, its subsidiaries and affiliates, effective as of the
"Date of Termination" (defined below), and shall be entitled to receive solely
all amounts and benefits to be paid or provided by the Corporation under
Sections 3(a), 3(b) and 4 of this Agreement up to the Date of Termination and
any other amounts to be paid thereafter to Executive or his beneficiaries
pursuant to any deferred compensation plan or other employee benefit plan or
program in effect on the Date of Termination, to the extent he remains eligible
to participate thereunder under the terms of the Corporation's applicable
policies and plans. The provisions of this Section 5 shall terminate and cease
to be of any force or effect immediately upon any Change in Control of the
Corporation. For purposes of this Section 5 only, (i) "Date of Termination"
shall mean, (x) in respect of any termination of Executive's employment by
reason of death or retirement, the effective date of Retirement or the date of
death, as the case may be, (y) in respect of any termination of Executive's
employment by reason of Disability, thirty (30) days after the Notice of
Termination is given to Executive (provided that Executive shall not have
returned to the full-time performance of his duties during such thirty (30) day
period) and (z) in respect of any termination of Executive's employment by
reason of Objectionable Conduct, fifteen (15) days after the Notice of
Termination is delivered to Executive (provided that Executive shall not have
cured and/or ceased, as appropriate, such conduct within such fifteen (15) day
period); and (ii) "Notice of Termination" shall mean a notice given by the
Company to Executive which shall indicate the specific basis for termination
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for determination of any payments due under this Agreement;
provided, however, that the Company shall not be entitled to give a Notice of
Termination that it is terminating Executive's employment after the expiration
of six (6) months following the last to occur of the events constituting the
basis for such termination.
6. COMPLETE PAYMENT. (a) Upon the payment of the amounts provided
in this Agreement, the Corporation shall have no further liability of any kind
or nature whatsoever to the Executive under this Agreement, except such
liability, if any, as may continue under any plan or for the benefits (in
accordance with the express terms hereof) referred to in Section 4 hereof.
Notwithstanding the foregoing, Executive expressely reserves any rights he may
have at law, equity or otherwise in the event that his employment by the Company
is terminated in contravention of this Agreement.
(b) NON-COMPETITION. The Executive expressly covenants and
agrees that during the term of this Agreement he will not, directly or
indirectly, own, manage, operate, join, control or participate in or be
connected with as an officer, employee, partner, stockholder, or otherwise, any
business, individual, partnership, firm or corporation (other than a parent of
the Corporation or a subsidiary or affiliate of such parent), which is at the
time engaged wholly or partly, in the business of manufacturing and marketing
packaging products or in any business which is directly in competition with the
then business of the Corporation or any subsidiary or affiliate of the
Corporation (as defined in the General Rules and Regulations promulgated under
the Securities and Exchange Act of 1934), or any firm, partnership or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary or affiliate.
(c) INVESTMENTS. Nothing in this Agreement is intended, or
shall be construed, to prevent the Executive during the term of his employment
hereunder from investing in the stock or other securities listed on a national
securities exchange or actively traded on the over-the-counter market of any
corporation which is at the time engaged wholly or partly in any business which
is, directly or indirectly, at the time, in competition with the business of the
Corporation or any such subsidiary or affiliate, or any firm, partnership, or
corporation which shall succeed to all or a substantial part of the business of
the Corporation, or any such subsidiary or affiliate, provided that the
Executive and direct
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members of his family living in the same household as the Executive shall not
directly or indirectly, hold, beneficially or otherwise, in the aggregate, more
than three percent of any issue of such stock or other securities of any one
such corporation.
(d) CONFIDENTIAL INFORMATION. The Executive expressly
covenants and agrees that he will not at any time, during the term of his
employment hereunder or thereafter and without regard to when or for what
reason, if any, such employment shall terminate, directly or indirectly, use or
permit the use of any trade secrets, customers' lists or other information of,
or relating to, the Corporation, or any Subsidiary or affiliate, in connection
with any activity or business, except the business of the Corporation or any
Subsidiary or affiliate of the Corporation, and will not divulge such trade
secrets, customers' lists, and information to any person, firm, or corporation
whatsoever, except as may be necessary in the performance of his duties
hereunder.
(e) REMEDIES. It is expressly understood and agreed that
the services to be rendered hereunder by the Executive are special, unique, and
of extraordinary character, and in the event of the breach by the Executive of
any of the terms and conditions of this Agreement on his part to be performed
hereunder, including, but not limited to, the terms and provisions of
subparagraphs (b) or (d) of this Section, then the Corporation shall be
entitled, if it so elects, to institute and prosecute any proceedings in any
court of competent jurisdiction, either in law or equity, for such relief as it
deems appropriate, including, without limiting the generality of the foregoing,
any proceedings, to obtain damages for any breach of this Agreement, or to
enforce the specific performance thereof by the Executive or to enjoin the
Executive from performing services for any other person, firm or corporation.
7. SEVERABILITY. The invalidity or unenforceability of any
provisions of this Agreement in any circumstance shall not affect the validity
or enforceability of such provision in any other circumstance or the validity or
enforceability of any other provision of this Agreement, and except to the
extent such provision is invalid or unenforceable, this Agreement shall remain
in full force and effect. Any provision in this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective only to the extent of such prohibition or unenforceability without
invalidating or affecting the remaining provisions hereof in such jurisdiction,
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
8. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and if sent by registered mail,
to his then residence in the case of the Executive or to its principal office in
the case of the Corporation, and shall be deemed given when deposited in the
United States mails, postage prepaid.
9. SUCCESSORS. The rights and obligations of the Corporation
under this Agreement shall inure to the benefit of and shall be binding upon any
successor of the Corporation or to the business of the Corporation. Neither
this Agreement or any rights or obligations of the Executive hereunder shall be
transferable or assignable by the Executive; provided, however, that this
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amounts would still be payable to the Executive hereunder if he had continued to
live, all such amounts, unless otherwise provided herein, shall be paid in
accordance with the terms of this Agreement to the Executive's devisee, legatee
or other designee or, if there be no such designee, to the Executive's estate.
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10. ATTORNEYS' FEES. If litigation shall be brought to enforce or
interpret any provision contained herein, the Company shall indemnify the
Executive for his attorneys' fees and disbursements incurred in such litigation
and pay prejudgment interest on any money judgment obtained by the Executive
calculated at the base rate of interest charged from time to time from the date
that payment should have been made under this Agreement; provided, however, that
the Executive shall not have been found by the court to have had no cause to
bring the action, or to have acted in bad faith, which findings must be final
with the time to appeal therefrom having expired and no appeal having been
taken.
11. OBLIGATION TO PAY COMPENSATION. The Company's obligation to
pay the Executive the compensation and to make the arrangements provided herein
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, any setoff, counterclaim,
recoupment, defense or other right which the Company may have against the
Executive or anyone else. All amounts payable by the Company hereunder shall be
paid without notice or demand. Except as expressly provided herein, the Company
waives all rights it may now have or may hereafter have conferred upon it, by
statute or otherwise, to terminate, cancel or rescind this Agreement in whole or
in part. Except as otherwise provided herein, each and every payment made
hereunder by the Company shall be final and the Company will not seek to recover
for any reason all or any part of such payment from the Executive or any person
entitled thereto. The Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment, and if
Executive obtains such other employment, any compensation earned by Executive
pursuant thereto shall not be applied to mitigate any payment made to Executive
pursuant to this Agreement.
12. SUCCESSORS BOUND BY AGREEMENT. The Company shall 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, by written agreement, 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. As used in this
Agreement, the term "Company" shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid which executes and
delivers the agreement required by this Section 12, or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law.
13. ENTIRE AGREEMENT. This Agreement shall constitute the entire
agreement between the Executive and the Company concerning the subject matter
hereof and supersedes all prior agreements between the parties with respect
thereto. In the event that Executive's employment is terminated subsequent to a
Change in Control as provided herein, performance by the Company of its
obligations hereunder shall constitute full settlement and release of any claim
or cause of action, of whatsoever nature, which the Executive might otherwise
assert or claim against the Company or any of its directors, stockholders,
officers or employees on account of such termination. No provisions of this
Agreement may be modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing, signed by the Executive and an authorized
officer of the Company. No waiver by either party hereto at any time of any
breach by the other party hereto of compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of any similar or dissimilar provision or condition at such same or at any prior
or subsequent time. No assurances or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. However, this
Agreement is in addition to and not in lieu or any other plan providing for
payments to or benefits for the Executive or any agreement now existing or which
hereafter may be entered into between the Company and the
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Executive, provided that, notwithstanding anything to the contrary contained in
the terms of any such plan or agreement, in the event of Executive's
termination, within two (2) years after a Change in Control as provided herein,
of Executive's employment, this Agreement shall govern the rights and the
obligations of the Company and the Executive. The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of New York without giving effect to the provisions, principles, or
policies thereof relating to choice or conflict of laws.
14. MISCELLANEOUS. The masculine or neuter gender shall include
the feminine gender. This Agreement may be executed in more than one
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly exercised this
Agreement in duplicate original as of the day and year first above written.
SHOREWOOD PACKAGING CORPORATION
By:/s/ Howard M. Liebman
--------------------------------
Howard M. Liebman
Executive Vice President
/s/ Marc P. Shore
--------------------------------
Marc P. Shore
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