<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(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 30, 1999
----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT 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)
<TABLE>
<CAPTION>
DELAWARE 11-2742734
<S> <C>
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
</TABLE>
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.
DECEMBER 1, 1999 27,367,000
Date Number of Shares
Page 1 of 20
<PAGE> 2
SHOREWOOD PACKAGING CORPORATION
AND SUBSIDIARIES
<TABLE>
<CAPTION>
INDEX PAGE
<S> <C>
Part I: Financial Statements
Consolidated Balance Sheets
October 30, 1999 (Unaudited) and
May 1, 1999 (Audited) 3
Consolidated Condensed Statements of Earnings
13 weeks ended October 30, 1999 (Unaudited) and
13 weeks ended October 31, 1998 (Unaudited) 4
Consolidated Condensed Statements of Earnings
26 weeks ended October 30, 1999 (Unaudited) and
26 weeks ended October 31, 1998 (Unaudited) 5
Consolidated Condensed Statements of Cash Flows
26 weeks ended October 30, 1999 (Unaudited) and
26 weeks ended October 31, 1998 (Unaudited) 6
Notes to Consolidated Condensed Financial Statements 7 - 10
Management's Discussion and Analysis of Financial
Condition and Results of Operations 11 - 17
Part II: Other Information 18
</TABLE>
Certain statements under the caption "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and elsewhere in this Form
10-Q, constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are typically
identified by their inclusion of phrases such as "the Company anticipates,"
"the Company believes" and other phrases of similar meaning. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors that may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others: general economic and business conditions;
competition; political changes in international markets; raw material and other
operating costs; costs of capital equipment; changes in foreign currency
exchange rates; changes in business strategy or expansion plans; the results of
continuing environmental compliance testing and monitoring; quality of
management; availability, terms, and development of capital; fluctuating
interest rates; and other factors referenced in this Form 10-Q.
Page 2 of 20
<PAGE> 3
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
OCTOBER 30, MAY 1,
1999 1999
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS
- ------
Current Assets:
Cash and cash equivalents $ 7,732 $11,755
Accounts receivable, net 85,740 51,295
Inventories 49,394 52,654
Prepaid expenses and other current assets 9,642 8,212
-------- --------
Total Current Assets 152,508 123,916
Property, Plant and Equipment, net 247,230 243,448
Excess of Cost Over the Fair Value of Net Assets Acquired, net 122,143 123,954
Other Assets 39,660 24,145
-------- --------
$561,541 $515,463
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities:
Accounts payable $44,226 $44,130
Accrued expenses 35,718 32,064
Income taxes payable 1,773 4,215
Current maturities of long-term debt 20,000 20,000
--------- ---------
Total Current Liabilities 101,717 100,409
Long-Term Debt 261,800 227,712
Other Long-Term Liabilities 975 1,032
Minority Interest 13,155 14,981
Deferred Income Taxes 27,049 24,857
--------- ---------
Total Liabilities 404,696 368,991
--------- ---------
Commitments and Contingencies
Stockholders' Equity:
Series A preferred stock, $10 par value; 50,000 shares
authorized, none issued - -
Preferred stock, $10 par value; 5,000,000 shares authorized
none issued - -
Common stock, $.01 par value; 60,000,000 shares authorized;
35,776,995 issued and 27,306,571 outstanding in October and
35,544,464 issued and 27,457,269 outstanding in May 358 355
Additional paid-in capital 72,086 74,763
Retained earnings 172,301 153,003
Accumulated other comprehensive income (5,430) (4,997)
Treasury stock (8,470,424 and 8,087,195 shares at
cost in October and May) (82,470) (76,652)
-------- --------
Total Stockholders' Equity 156,845 146,472
-------- --------
$561,541 $515,463
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 3 of 20
<PAGE> 4
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
13 WEEKS 13 WEEKS
ENDED ENDED
OCTOBER 30, OCTOBER 31,
1999 1998
<S> <C> <C>
Net Sales $165,308 $145,378
-------- --------
Costs and Expenses:
Cost of Sales 121,480 110,153
Selling, General and Administrative 21,026 16,010
Amortization of Excess of Cost Over the Fair Value of Net
Assets Acquired 877 430
-------- -------
Earnings from Operations 21,925 18,785
Other (Expense) Income, net (127) 468
Interest Expense (4,520) (3,005)
-------- -------
Earnings Before Provision for Income Taxes, Minority Interest
and Extraordinary Item 17,278 16,248
Provision for Income Taxes 6,566 6,338
-------- -------
Earnings Before Minority Interest and Extraordinary Item 10,712 9,910
Minority Interest 843 -
-------- -------
Earnings Before Extraordinary Item 11,555 9,910
Extraordinary Item, net of Income Tax Benefit of $177 - (277)
-------- -------
Net Earnings $11,555 $9,633
========= =======
EARNINGS PER SHARE INFORMATION:
BASIC
Earnings Before Extraordinary Item $ .43 $ .37
Extraordinary Item - (0.01)
--------- ---------
Net Earnings Per Common Share $ .43 $.36
========= =========
DILUTED
Earnings Before Extraordinary Item $ .42 $ .37
Extraordinary Item - (0.01)
---------- ---------
Net Earnings Per Common Share $ .42 $.36
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 27,095 26,451
========= ========
DILUTED 27,700 27,112
========= ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 4 of 20
<PAGE> 5
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS
ENDED ENDED
OCTOBER 30, OCTOBER 31,
1999 1998
<S> <C> <C>
Net Sales $309,019 $260,737
-------- --------
Costs and Expenses:
Cost of Sales 230,254 200,207
Selling, General and Administrative 40,896 28,269
Amortization of Excess of Cost Over the Fair Value of Net
Assets Acquired 1,724 634
--------- --------
Earnings from Operations 36,145 31,627
Other Income, net 656 859
Interest Expense (8,620) (5,091)
---------- ---------
Earnings Before Provision for Income Taxes, Minority Interest,
Extraordinary Item and Cumulative Effect of a
Change in Accounting Principle 28,181 27,395
Provision for Income Taxes 10,709 10,685
--------- ------
Earnings Before Minority Interest, Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle 17,472 16,710
Minority Interest 1,826 -
---------- ------------
Earnings Before Extraordinary Item and
Cumulative Effect of a Change in Accounting Principle 19,298 16,710
Extraordinary Item, net of Income Tax Benefit of $177 - (277)
Cumulative Effect on Prior Years Related to the Adoption of
SOP 98-5 Reporting on the Cost of Start-Up Activities - (3,040)
---------- -----------
Net Earnings $19,298 $13,393
======= =========
EARNINGS PER SHARE INFORMATION:
BASIC
Earnings Before Extraordinary Item and Cumulative Effect of a
Change in Accounting Principle $ .71 $ .63
Extraordinary Item - (0.01)
Cumulative Effect of a Change in Accounting Principle - (0.11)
--------- --------
Net Earnings Per Common Share $ . 71 $.51
========= ========
DILUTED
Earnings Before Extraordinary Item and Cumulative Effect of a
Change in Accounting Principle $ .69 $ .62
Extraordinary Item - (0.01)
Cumulative Effect of a Change in Accounting Principle - (0.12)
--------- ---------
Net Earnings Per Common Share $ .69 $.49
========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING
BASIC 27,137 26,473
======= ======
DILUTED 27,882 27,097
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5 of 20
<PAGE> 6
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
26 WEEKS 26 WEEKS
ENDED ENDED
OCTOBER 30, OCTOBER 31,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net earnings before minority interest $17,472 $13,393
Adjustments to reconcile earnings to net cash flows
provided from operations:
Non-cash cumulative effect of change in
accounting principle - 3,040
Non-cash extraordinary item, net of tax - 277
Depreciation and amortization 14,128 10,144
Deferred income taxes 2,228 1,353
Changes in operating assets and liabilities:
Accounts receivable (34,572) (22,645)
Inventories 3,137 4,202
Prepaid expenses and other current assets (1,441) 2,023
Other assets (15,746) 346
Accounts payable, accrued expenses and other
long term liabilities 1,407 7,527
---------- ---------
Net cash flows (used in) provided from operating activities (13,387) 19,660
---------- ---------
Cash Flows from Investing Activities:
Capital expenditures (15,841) (22,052)
Business acquisitions, net of cash acquired - (120,729)
---------- ----------
Net cash flows used in investing activities (15,841) (142,781)
---------- ----------
Cash Flows from Financing Activities:
Net proceeds from revolver borrowings 39,088 120,699
Additions to long-term borrowings - 100,000
Repayments of long-term borrowings (5,000) (82,728)
Purchase of treasury stock (5,818) (15,933)
Purchase of Common Stock Purchase Warrant (4,200) -
Issuance of common stock 1,526 550
--------- ---------
Net cash flows provided from financing activities 25,596 122,588
--------- ---------
Effect of exchange rate changes on cash and cash equivalents (391) (73)
--------- ---------
Decrease in cash and cash equivalents (4,023) (606)
Cash and cash equivalents at beginning of period 11,755 7,268
--------- ---------
Cash and cash equivalents at end of period $7,732 $6,662
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid, net of capitalized amounts $8,128 $6,859
========= =========
Income taxes paid $11,009 $7,566
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 6 of 20
<PAGE> 7
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
1. BASIS OF PRESENTATION
In the opinion of the Company, the accompanying unaudited consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the financial
position, the results of operations, and the changes in cash flows at October
30, 1999 and for all periods presented. Certain reclassifications have been
made to the prior periods' balances in order to conform to the current period's
presentation.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. These financial statements should be read in
conjunction with the Consolidated Financial Statements and Notes included in
the Company's May 1, 1999 Annual Report to Stockholders on Form 10-K as filed
with the Securities and Exchange Commission ("1999 Form 10-K").
The results of operations for the 13 week period and 26 week period ended
October 30, 1999 are not necessarily indicative of the results for the full
year.
2. BUSINESS ACQUISITION
In October 1998, the Company purchased substantially all of the assets and
assumed substantially all of the liabilities of The Queens Group, Inc.
("Queens") for a purchase price of $129.5 million comprised of approximately
$113.7 million in cash including the assumption of debt, and 1.0 million shares
of Company common stock, plus transaction expenses. Simultaneously with the
closing of the transaction, the Company repaid all outstanding bank debt of
Queens, approximating $19.0 million. Queens is engaged in the manufacture of
value added printed packaging primarily for the home entertainment industry.
The transaction was financed through a new credit facility.
The acquisition was recorded using the purchase method of accounting and,
accordingly, the results of operations of Queens are included in the
consolidated results of operations of the Company since the date of
acquisition. The purchase price of the acquisition has been allocated to the
net assets acquired based upon the related fair values. The excess of cost over
the fair value of net assets acquired approximated $108.2 million and is being
amortized over 40 years.
The following unaudited pro forma information for the twenty-six week period
ended October 31, 1998 includes the operations of the Company, inclusive of the
operations of Queens, as if the acquisition had occurred at the beginning of
the respective period presented. The pro forma gives effect to the amortization
expense associated with the excess of cost over the fair value of net assets
acquired, adjustments related to the fair market value of the net assets
acquired, shares issued in connection with the transaction, interest expense
related to financing the acquisition, and related income tax effects.
Page 7 of 20
<PAGE> 8
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
<TABLE>
<CAPTION>
26 WEEKS ENDED
OCTOBER 31, 1998
<S> <C>
Revenues $326,240
----------
Earnings from Operations $35,024
==========
Net Earnings Before Extraordinary Items and
Cumulative Effect of a Change in Accounting Principle $16,902
==========
Net Earnings Per Share Before Extraordinary Items and
Cumulative Effect of a Change in Accounting Principle
Basic $.62
========
Diluted $.61
========
</TABLE>
3. INCOME TAXES
The effective income tax rate for the three and six month periods ended October
30, 1999 is 38.0% and was 39.0% for the corresponding prior periods. These
rates reflect a blend of domestic and foreign taxes and are adjusted
periodically based upon the estimated annual effective tax rate and any
increase or decrease in the provision for income taxes is reflected in the
period in which the estimate is changed. The effective income tax rate for the
entire fiscal year ended May 1, 1999 was 36.2%.
4. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
OCTOBER 30, 1999 MAY 1, 1999
<S> <C> <C>
Raw materials and supplies $19,974 $20,286
Work in process 10,117 8,951
Finished goods 19,303 23,417
-------- --------
$49,394 $52,654
======== ========
</TABLE>
5. COMPREHENSIVE INCOME
The Company's total comprehensive earnings were as follows:
<TABLE>
<CAPTION>
26 WEEKS ENDED 26 WEEKS ENDED
OCTOBER 30, 1999 OCTOBER 31, 1998
<S> <C> <C>
Net earnings $19,298 $ 13,393
Other comprehensive earnings (losses):
Change in equity due to foreign currency translation adjustment (433) (4,534)
-------- ---------
Comprehensive earnings $18,865 $ 8,859
======= =========
</TABLE>
Page 8 of 20
<PAGE> 9
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
6. COMMITMENTS AND CONTINGENCIES
a. Treasury Stock
The Company's Board of Directors has authorized the purchase of the Company's
common stock as follows:
<TABLE>
<CAPTION>
DATE OF AUTHORIZATION AUTHORIZED SHARES
<S> <C>
January 1993 3.0 million
December 1995 3.0 million
April 1997 1.86 million
</TABLE>
Shares are authorized for purchase from time to time in the open market,
subject to the terms of the Company's credit facility. As of October 30, 1999,
approximately 1.26 million shares remain authorized for purchase.
b. New Facility
The Company has completed building a state-of-the-art manufacturing facility in
the city of Guangzhou, China (the "China Facility"), which commenced operations
in the third quarter of fiscal 1999. In the fourth quarter of fiscal 1999 the
Company consummated a definitive agreement with Westvaco Corporation whereby it
sold to Westvaco a 45% minority interest in its China Facility.
Included in earnings from operations for the 26 week period ended October 30,
1999 were losses of approximately $3.9 million (of which approximately $1.9
million is included in selling, general and administrative expenses). Included
in earnings from operations for the 26 week period ended October 31, 1998 were
losses of approximately $950 thousand (which was included in selling, general
and administrative expenses).
c. Environmental Matters
On a continuing basis, the Company monitors its compliance with applicable
environmental laws and regulations. As part of this process the Company
cooperates with appropriate governmental authorities to perform any necessary
testing and compliance procedures. The Company is not currently aware of any
environmental compliance matters that it believes will have a material effect
on the consolidated financial statements.
d. 1995 Performance Bonus Plan
In July 1995, the Board of Directors approved the 1995 Performance Bonus Plan
(the "Plan"), applicable to its Chairman of the Board (the "Chairman"). Under
the Plan, for each of the five fiscal years of the Company commencing with
fiscal year 1996, the Chairman will be entitled to a graduated bonus (the
"Performance Bonus") based upon a comparison of the Company's earnings from
operations plus depreciation and amortization (the "Performance Measure") in
that award year with the immediately preceding fiscal year. The size of the
Performance Bonus, if any, is tied to the level of the Company's performance,
as measured by the Performance Measure. The maximum Performance Bonus payable
in respect of any award year under the Plan is $2.0 million. In 1998, the Board
of Directors approved and shareholders have ratified the extension of the Plan
for an additional three years.
Page 9 of 20
<PAGE> 10
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(continued)
e. Loans to Executives
In connection with their exercise of stock options, the Company made loans of
approximately $527 thousand to its Chairman and approximately $657 to its
President in the first quarter of fiscal 2000. The principle amounts and
accrued interest on the loans (included as a component of additional paid-in
capital) are due and payable October 2, 2000. The loans are collateralized by
pledges of 44,562 and 55,977 shares, respectively, of common stock.
During fiscal 2000, the Company advanced to its Chairman approximately $2.6
million . These advances were repaid in December, 1999 including interest at an
annual rate of 6.71%.
f. Common Stock Purchase Warrants
In July 1999, the Company purchased a previously issued warrant to purchase
525,000 shares of its common stock for approximately $4.2 million.
7. SUBSEQUENT EVENTS
On October 26, the Company made a proposal to the Board of Directors of
Chesapeake Corporation ("Chesapeake") to acquire all of the outstanding shares
of that company for $40.00 per share. That proposal was rejected by Chesapeake
on November 10, 1999. Chesapeake's rejection included a counterproposal that
Chesapeake acquire Shorewood for cash consideration of $16.50 a share.
Shorewood's Board of Directors has rejected the counterproposal as being
inconsistent with the company's strategic plan to position itself as the
premier supplier of high end folding cartons to a multinational customer base.
Shorewood owned 809,000 Chesapeake shares or 4.62% of Chesapeake as of October
29, 1999, the date of Chesapeake's most recent 10-Q.
On November 29, 1999 an institutional investor agreed to sell 14.9% of the
outstanding shares of the Company to Chesapeake for $17.25 per share. The
regulatory filing disclosed that the institution would receive additional
consideration in the event the Company was acquired by Chesapeake or a third
party at a higher price.
On December 3, 1999 Chesapeake announced that through its wholly owned
subsidiary, Sheffield, Inc., it was commencing a tender offer for all of
Shorewood's outstanding shares at a $17.25 per share, subject to the
satisfaction of a number of conditions. Concurrently with the commencement of
the tender offer, Chesapeake filed materials to begin a consent solicitation
process with the ultimate intention of amending Shorewood's by-laws so as to
permit the removal of the Company's Board of Directors and replacing it with
Chesapeake's nominees. On December 10, 1999 the Company caused its preliminary
consent revocation statement to be filed with the SEC.
In addition, Chesapeake and its subsidiary filed a lawsuit in Delaware Chancery
Court for New Castle County (C.A. 17626) seeking to revoke certain by-law
amendments recently adopted by Shorewood's board of directors. In addition,
Chesapeake commenced a declaratory judgment action in the Federal District
Court of Delaware (C.A. No. 99-830) seeking a declaration that Chesapeake's
tender offer complies with federal securities laws.
Page 10 of 20
<PAGE> 11
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net Sales
Net sales for the three and six month periods ended October 30, 1999 were
$165.3 million and $309.0 million as compared to net sales of $145.4 million
and $260.7 million for the corresponding prior periods, an increase of 13.7%
and 18.6%, respectively. The revenue growth over the corresponding prior period
represents the strength of the home entertainment market (including the effect
of the acquisition of the Queens Group in the second quarter of fiscal 1999)
partially offset by lower sales to the Company's tobacco customers, reflecting
the softness in that industry.
The Company believes that future sales growth will be generated through
continued penetration of the home entertainment and cosmetics and general
consumer markets as well as its growth in China.
Cost of Sales
Cost of sales as a percentage of sales for the three and six month periods
ended October 30, 1999 were 73.5% and 74.6% as compared to 75.8% and 76.8% for
the corresponding prior periods. The decrease in cost of sales as a percentage
of sales is attributable to increased sales from the acquisition of Queens,
whose sales had a favorable margin when compared to consolidated margins,
favorable product mix, and favorable absorption of fixed overhead costs as a
result of higher sales volume. The decrease in cost of sales as a percentage of
sales is also attributable to savings derived from new equipment installed over
the previous fiscal year and purchasing and manufacturing synergies resulting
from the successful integration of the acquired operations. These decreases
were partially offset by losses on initial sales from its facility in China.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales for the
three and six month periods ended October 31, 1998 were 12.7% and 13.2% as
compared to 11.0% and 10.8% for the corresponding prior periods. Selling,
general and administrative expense as a percentage of sales for the former
Queens facilities are greater than that of existing Shorewood facilities.
Excess of Cost Over the Fair Value of Net Assets Acquired
The increase in the amortization of excess of cost over the fair value of net
assets acquired in Fiscal 2000 as compared to fiscal 1999 is directly related
to the acquisition of Queens.
Other Income, net
Other (expense) income, net, for the three and six month periods ended October
30, 1999 was $(127) thousand and $656 thousand, respectively. The net expense
for the three month period includes net foreign exchange losses of $415
thousand, offset by approximately $185 thousand of investment income and $103
thousand of gains on disposal of fixed assets. The net gain for the six month
period includes net foreign exchange gains of $112 thousand, approximately $444
thousand of investment income, and approximately $100 thousand of gains on
disposal of fixed assets.
Page 11 of 20
<PAGE> 12
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Other income, net, for the three and six month periods ended October 31, 1998
was $468 thousand and $859 thousand, respectively. The net gain for the three
month period includes net foreign exchange gains of $353 thousand and
approximately $115 thousand of investment income. The net gain for the six
month period includes net foreign exchange gains of $848 thousand, and
approximately $223 thousand of investment income, offset by losses on disposal
of fixed assets of $212 thousand.
The Company's exposure to foreign exchange transaction gains or losses relate
to the Company's Canadian facilities which have U.S. dollar denominated net
assets. The Company believes that fluctuations in foreign exchange rates will
not have a material impact on the operations or liquidity of the Company, based
upon current and historical levels of working capital at the Canadian
facilities. Recently, several Asian currencies have experienced weaknesses,
which had the impact of reducing some demand for Company products produced in
North America intended for ultimate use in export markets. The investments in
the China Facility expose the Company to foreign exchange risks related to the
Renminbi ("Rmb"). Should the Canadian dollar or Rmb weaken, the Company would
experience a reduction in the net worth of the Company's investments in Canada
and China (through the accumulated other comprehensive income account). In
addition, net operating results (whether losses or profits) would be reduced.
Exposure to foreign exchange transaction gains or losses in China is expected
to be minimal as the Company expects to make purchases and sales in both Rmb
and the US dollar, and settlement periods on both accounts receivable and
accounts payable are expected to be short. In addition, the Rmb exchange value
is centrally controlled by the government of China. Although not anticipated,
any sudden change in the Rmb exchange rate by the Chinese government could
impact the Company's Chinese operations.
Interest Expense
Interest expense for the three and six month periods ended October 30, 1999 was
$4.5 million and $8.6 million as compared to $3.0 million and $5.0 million for
the corresponding prior periods. The increase in interest costs is primarily
attributable to increased borrowings relating to financing the acquisition of
Queens and funding non-cash working capital. Capitalized interest decreased
from $508 thousand to $150 thousand for the three month period and from $1.0
million to $315 thousand for the six month period, primarily related to the
Company's completion of its facility in China during the third quarter of
fiscal 1999. The Company anticipates that the amount of interest to be
capitalized in fiscal 2000 will continue to be below the levels of the prior
year.
The Company uses interest rate derivatives to manage its exposure to
fluctuating interest rates. These transactions effectively change a portion of
the Company's interest rate exposure from a floating-rate to a fixed-rate
basis. The Company's interest rate derivatives are generally structured for the
Company to pay a fixed rate and receive a floating rate based on LIBOR, as
determined in three-month intervals.
In July 1997, the Company entered into a reversion swap agreement relating to
$50.0 million of borrowings under the credit facility. Under the agreement, the
Company pays a fixed rate of 5.73% and receives a floating rate based upon
LIBOR, as determined in three month intervals. This agreement terminates in
April 2002. After the first year, however, the fixed rate reverts back to
floating for any three month period during which the LIBOR rate exceeds 6.625%.
The rate reverts back to the fixed rate of 5.73% for any subsequent period for
which the LIBOR rate drops below 6.625%.
Page 12 of 20
<PAGE> 13
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
In addition to the July 1997 swap agreement described above, the Company has
the following swap agreements outstanding at October 30, 1999:
<TABLE>
<CAPTION>
NOTIONAL AMOUNT EXPIRING LIBOR RATE
- --------------- -------- ----------
<S> <C> <C>
$100.0 million October 2000 4.84%
$ 35.0 million May 2000 5.74%
</TABLE>
On June 16, 1998, the Financial Accounting Standards Board adopted Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." Adoption of SFAS No. 133 is not required
at this time. In July 1999, the Financial Accounting Standards Board adopted
SFAS No. 137 "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of SFAS No. 133--an amendment of
SFAS No. 133." SFAS 137 defers the effective date of SFAS 133 until June 15,
2000. The adoption of SFAS No. 133 and SFAS No. 137 are not expected to have a
material impact on the Company's financial statements.
Income Taxes
The effective income tax rate for the three and six month periods ended October
30, 1999 is 38.0% and was 39.0% for the corresponding prior periods. These
rates reflect a blend of domestic and foreign taxes and are adjusted
periodically based upon the estimated annual effective tax rate, which for the
entire fiscal year ended May 1, 1999 was 36.2%.
The China Facility will enjoy a tax holiday for the first three years of
profitable operations, and thereafter be taxed at lower rates than the
Company's North American operations. Anticipated losses during the early
periods of operation will not result in related tax benefits. Such benefits
will be recognized when realized. The Company anticipates that this situation
will temporarily result in an increase in its effective tax rate in fiscal
2000.
China Facility / Start-Up Costs / Minority Interest
The Company has completed building a state-of-the-art manufacturing facility in
the city of Guangzhou, China (the "China Facility"), which commenced operations
in the third quarter of fiscal 1999. In the fourth quarter of fiscal 1999 the
Company consummated a definitive agreement with Westvaco Corporation whereby it
sold to Westvaco a 45% minority interest in its China Facility.
Included in earnings from operations for the 26 week period ended October 30,
1999 were losses of approximately $3.9 million (of which approximately $1.9
million is included in selling, general and administrative expenses). Included
in earnings from operations for the 26 week period ended October 31, 1998 were
losses of approximately $950 thousand (which was included in selling, general
and administrative expenses).
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at October 30, 1999 was $7.7 million as compared to
$11.8 million at May 1, 1999, and working capital was $51.6 million as compared
to $23.5 million as of the same dates respectively. The current ratio at
October 30, 1999 was 1.5 to one and was 1.2 to one at May 1, 1999. The Company
has a cash management program whereby collection of accounts receivable are
used to retire revolver obligations, and payments of accounts payable and
accrued expenses are funded through the revolving credit facility.
Page 13 of 20
<PAGE> 14
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Cash flow from operating activities for the six months ended October 30, 1999
was $33.8 million before changes in operating assets and liabilities as
compared to $28.2 million for the corresponding prior period. Cash flows from
operations as well as borrowings under the Company's credit facilities were
used to support $15.8 million in capital investments. In addition, the Company
purchased approximately $5.8 million of treasury stock under the Board of
Directors authorized program described below. The Company anticipates that
capital expenditures will approximate $32.0 million for all of fiscal 2000.
The Company's Board of Directors has authorized the purchase of the Company's
common stock as follows:
<TABLE>
<CAPTION>
DATE OF AUTHORIZATION AUTHORIZED SHARES
<S> <C>
January 1993 3.0 million
December 1995 3.0 million
April 1997 1.86 million
</TABLE>
Shares are authorized for purchase from time to time in the open market,
subject to the terms of the Company's credit facility. As of October 30, 1999,
approximately 1.26 million shares remain authorized for purchase.
The Board and management of the Company believe the long-term outlook for the
Company to be promising and that the Company's common stock represents an
attractive investment opportunity. The treasury stock purchases will be made
from time to time as market conditions permit.
In October 1998, in order to facilitate the acquisition of Queens as described
in Note 2 and other global opportunities which may arise over the next several
years, the Company entered into a new credit agreement with its lending banks
to replace its existing credit facility. The new credit facility provides for
up to $325 million of borrowings and consists of a $100 million term loan to be
paid in equal quarterly installments over five years and a $225 million
revolving credit facility maturing at the end of five years. The revolving
credit is available, in its entirety, without any borrowing base limitation.
Borrowings pursuant to the facility will bear interest at the discretion of the
Company, at either the Bank's prime rate or at the LIBOR rate plus 62.5 to 125
basis points based upon financial ratios as defined in the underlying
Agreement. Unused commitment fees will range from 20 to 30 basis points. At
October 31, 1999, the Company had borrowings under the revolving credit
facility of $196.8 million.
The underlying loan agreement contains covenants related to levels of debt to
cash flow, current assets to current liabilities, fixed charge coverage, net
worth and investments (including investments in the Company's own common
stock), and restricts the amount of retained earnings available for payment of
dividends. At October 31, 1999, there was approximately $38.6 million of
retained earnings available for the payment of dividends.
The Company expects that cash flow from operations together with the borrowing
capacity under the revolving credit facility will be sufficient to meet the
needs of the business.
Page 14 of 20
<PAGE> 15
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
YEAR 2000
State of Readiness
Independent of Year 2000 concerns, the Company has been focused on replacing
and/or upgrading all of its primary information systems, a project which began
in fiscal 1996. By eliminating the Company's legacy systems and replacing them
with an integrated system of modern information applications, the Company
expects to benefit both by enhancing business capabilities generally and
concurrently eliminating Year 2000 problems. This project is expected to be
completed by the end of calendar 1999.
To specifically address Year 2000 issues and to identify and eliminate Year
2000 problems throughout its operations, the Company has implemented a
structured program encompassing both information and non-information technology
systems. This program includes an internal review of all computer hardware and
software, whether used directly to support business and manufacturing processes
or embedded in components of machinery and other equipment, and a thorough
review of third party relationships.
With regard to its internal business systems, the Company has been preparing
for Year 2000 since mid-1997. The Company's assessment is that a significant
proportion of information systems and applications have been rendered Year 2000
ready; however, the Company continues to monitor the status of its systems.
As to third party issues, the Company has contacted key suppliers whose
noncompliance, either individually or cumulatively, could materially impact the
Company's business. Those suppliers who have responded indicate that they will
address Year 2000 issues in a timely manner. The Company is following up with
suppliers who have not responded. The Company is also soliciting and reviewing
on an ongoing basis Year 2000 disclosures of customers having similar
significance to the Company's business. The Company cannot provide assurance
that the Year 2000 compliance plans of its suppliers and customers will be
successfully completed in a timely manner.
Program Costs
As at October 30, 1999, cumulative Year 2000 program costs are estimated to be
less than $1 million. This estimate includes internal costs (i.e., related
payroll and required downtime) and external costs (i.e., hiring outside
consultants to assist in compliance efforts). Year 2000 program costs do not
include the cost of major new business system implementations scheduled prior
to or independently from the Company's specific Year 2000 compliance efforts
described herein. Estimated costs would have been substantially greater but for
the fact that recent modernization of many of the Company's business systems
discussed above involved the replacement of legacy software with new software
which is Year 2000 compliant. The Year 2000 program costs have been funded by
operating cash flow and expensed as incurred. The Company does not expect a
material adverse impact on its long-term results of operations, liquidity or
financial position as a result of Year 2000 program costs. Cost estimates may
be refined as technical assessment, remediation and testing continue and as
compliance status information becomes available from third-party business
associates.
Page 15 of 20
<PAGE> 16
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Risks
As a result of the steps detailed above, the Company does not anticipate that
Year 2000 issues will cause material problems for the Company, or will disrupt
business or result in a decline in earnings. However, if the Company, its
customers and suppliers are unable to adequately resolve Year 2000 issues, the
most likely worst case scenario includes a temporary slowdown or abrupt
stoppage of operations at one or more of the Company's facilities due to the
failure of one or more critical process control elements or business systems.
Such failures could result in interruptions in manufacturing, safety or
environmental systems; or a temporary inability to receive raw materials, ship
finished products, or process orders and invoices. Although not anticipated at
this time, if such or similar scenarios were to occur, they could, depending on
their duration, have a material impact on the Company's results of operations
and financial position. Such theoretical consequences are of a kind and
magnitude generally shared with other manufacturing companies. Assuming the
successful completion of its Year 2000 program in a timely manner, the
Company expects that any Year 2000 disruptions which may occur will be minor
and not material to its business.
Contingency Plans
Contingency plans for business and process control systems began to be
implemented in April 1999. Such plans include the identification of alternate
suppliers; coordination with and support of customers to encourage placement of
orders and subsequent delivery of products in late 1999 rather than in early
2000; accumulation of raw material inventory; identification of manual
alternatives; and identification and implementation of alternative
communication methods. Contingency plans will continue to be reassessed and
refined as additional information becomes available
SUBSEQUENT EVENTS
On October 26, the Company made a proposal to the Board of Directors of
Chesapeake Corporation ("Chesapeake") to acquire all of the outstanding shares
of that company for $40.00 per share. That proposal was rejected by Chesapeake
on November 10, 1999. Chesapeake's rejection included a counterproposal that
Chesapeake acquire Shorewood for cash consideration of $16.50 a share.
Shorewood's Board of Directors has rejected the counterproposal as being
inconsistent with the company's strategic plan to position itself as the
premier supplier of high end folding cartons to a multinational customer base.
Shorewood owned 809,000 Chesapeake shares or 4.62% of Chesapeake as of October
29, 1999, the date of Chesapeake's most recent 10-Q.
On November 29, 1999 an institutional investor agreed to sell 14.9% of the
outstanding shares of the Company to Chesapeake for $17.25 per share. The
regulatory filing disclosed that the institution would receive additional
consideration in the event the Company was acquired by Chesapeake or a third
party at a higher price.
On December 3, 1999 Chesapeake announced that through its wholly owned
subsidiary, Sheffield, Inc., it was commencing a tender offer for all of
Shorewood's outstanding shares at a $17.25 per share, subject to the
satisfaction of a number of conditions. Concurrently with the commencement of
the tender offer, Chesapeake filed materials to begin a consent solicitation
process with the ultimate intention of amending
Page 16 of 20
<PAGE> 17
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(CONTINUED)
Shorewood's by-laws so as to permit the removal of the Company's Board of
Directors and replacing it with Chesapeake's nominees. On December 10, 1999 the
Company caused its preliminary consent revocation statement to be filed with
the SEC.
In addition, Chesapeake and its subsidiary filed a lawsuit in Delaware Chancery
Court for New Castle County (C.A. 17626) seeking to revoke certain by-law
amendments recently adopted by Shorewood's board of directors. In addition,
Chesapeake commenced a declaratory judgment action in the Federal District
Court of Delaware (C.A. No. 99-830) seeking a declaration that Chesapeake's
tender offer complies with federal securities laws.
Page 17 of 20
<PAGE> 18
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
Part II
Item 1 LEGAL PROCEEDINGS
Information concerning legal and environmental matters is incorporated
by reference from Part I, Footnotes 6 and 7 of Notes to Consolidated
Condensed Financial Statements
Item 2 CHANGES IN SECURITIES
None
Item 3 DEFAULTS UPON SENIOR SECURITIES
None
Item 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's annual meeting of Stockholders was held on September 22,
1999 (the "Meeting"). At the Meeting, the Company's stockholders voted
upon the following matters: (I) To elect three directors comprising
the Class I Directors to serve until the 2002 Annual Meeting of
Stockholders and one director as a Class III Director to serve until
the 2001 Annual Meeting of Stockholders, (ii) the ratification of
Deloitte & Touche LLP as the independent auditors of the Company for
the fiscal year ending May 1, 1999, (iii) to consider and vote upon
proposed amendments to the Company's 1993 Incentive Program, and (iv)
to transact such other business as may properly come before the
meeting.
The Holders of the Company's common stock voted as a single class on
all matters submitted for a vote at the Meeting. The number of votes
cast for, against or withheld, as well as the number of abstentions,
as to each such matter is set forth below:
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
------------------------ ----------------- -------------
NAME FOR WITHHELD
------------------------ ----------------- -------------
<S> <C> <C>
Virginia A. Kamsky 21,347,255 1,329,867
------------------------ ----------------- -------------
Andrew N. Shore 21,011,544 1,665,578
------------------------ ----------------- -------------
Leonard J. Verebay 21,277,208 1,399,914
------------------------ ----------------- -------------
Sharon R. Fairley 21,310,904 1,366,218
------------------------ ----------------- -------------
</TABLE>
APPROVAL OF PROPOSED AMENDMENTS TO THE COMPANY'S 1993 INCENTIVE PROGRAM
<TABLE>
<CAPTION>
--------------------- ------------------- --------------
FOR AGAINST ABSTAIN
--------------------- ------------------- --------------
<S> <C> <C>
17,067,826 3,858,740 169,722
--------------------- ------------------- --------------
</TABLE>
RATIFICATION OF APPOINTMENT OF DELOITTE & TOUCHE LLP
<TABLE>
<CAPTION>
------------------- ------------------- ----------------
FOR AGAINST ABSTAIN
------------------- ------------------- ----------------
<S> <C> <C>
22,639,983 7,857 29,282
------------------- ------------------- ----------------
</TABLE>
Page 18 of 20
<PAGE> 19
Item 5 OTHER INFORMATION
None
Item 6 EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits
<S> <C>
10.130-- Employment Agreement made effective as of May 3, 1998 between Shorewood
Packaging Corporation and Marc P. Shore.
10.131-- Employment Agreement made effective as of May 3, 1998 between Shorewood
Packaging Corporation and Howard M. Liebman.
10.132-- Employment Agreement executed November 10, 1999 and made effective as of
May 3, 1998 between Shorewood Packaging Corporation and Marc P. Shore.
10.133-- Employment Agreement executed November 10, 1999 and made effective as of
May 3, 1998 between Shorewood Packaging Corporation and Howard M. Liebman.
10.134-- By-laws of Shorewood Packaging Corporation as Amended and Restated as of
November 22, 1999, incorporated by reference to the Company's Current Report on
Form 8-K as filed with the Commission on December 2, 1999, Commission File No. O-
15077
(b) Reports on Form 8-K
-------------------
Form 8-K filed on December 2, 1999 related to the adoption of certain By-law Amendments.
</TABLE>
Page 19 of 20
<PAGE> 20
SIGNATURES
Pursuant to the regulations of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SHOREWOOD PACKAGING CORPORATION
(Registrant)
by: /s/ Howard M. Liebman
---------------------------------
Howard M. Liebman
President and
Chief Financial Officer
Dated: December 14, 1999
Page 20 of 20
<PAGE> 1
EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
MARC P. SHORE
AGREEMENT made effective as of May 3, 1998, 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") and MARC P. SHORE, currently residing at 68 Talcott Road,
Ryebrook, New York 10573 (herein called the "Executive").
W I T N E S S E T H:
The Corporation and the Executive entered into that certain
Employment Agreement dated January 25, 1996 and made effective as of May 1, 1995
(the "Prior Employment Agreement"), which provides for the employment of the
Executive by the Corporation upon the terms and conditions set forth therein.
The Corporation and the Executive desire to enter into a new
employment agreement upon the terms and conditions hereinafter set forth, which
employment agreement will supersede and replace the Prior Employment Agreement
in its entirety.
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
during 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 continuing
full time employment with 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.
<PAGE> 2
Accordingly, the parties desire to and do hereby enter into
this Agreement as of the date first set forth above.
NOW, THEREFORE,
1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of
this Agreement shall be from May 3, 1998 through and including May 2, 2003. The
Corporation agrees to and does hereby employ the Executive as Chief Executive
Officer and President for the period commencing May 3, 1998 and terminating May
2, 2003 (the "Employment Period") and the Executive agrees that he shall serve
as Chief Executive Officer and President of the Corporation during the
Employment Period. The foregoing notwithstanding, in the event of any "Change in
Control" (as hereinafter defined) of the Corporation at any time during the last
two fiscal years of the Corporation beginning prior to May 2, 2003, the
Employment Period hereunder shall be automatically extended through and
including May 2, 2005.
2. DUTIES. 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 Chief Executive
Officer and 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 Chief Executive Officer or
a President of a publicly owned corporation incorporated in one of the states of
the United States of America. The Executive shall serve as the Chairman of the
Board of Directors (and a member of the Executive Committee or any 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 for so long as the Executive is elected to serve on the Board, the
Executive Committee or any similar committee. 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 3, 1998 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 $800,000 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 annually
and may be increased at the Corporation's discretion. This Agreement shall not
be deemed abrogated or
2
<PAGE> 3
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. The Corporation shall pay to the Executive
a signing bonus in an aggregate amount of $1,000,000, payable in full although
earned ratably over the five-year Employment Period if Executive continues to be
employed by the Corporation at the end of each such year. In addition, during
the Employment Period the Executive shall be entitled to receive annual
performance bonuses in accordance with the terms and conditions of the
Corporation's Amended and Restated 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 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 Corporation's business of a nature that if any securities
of the Corporation 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 Corporation 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 Corporation or any "affiliate" or
"associate" of the Corporation (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
Corporation representing fifty percent (50%) or more of the combined voting
power of the Corporation'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 Corporation having the right to vote for
3
<PAGE> 4
the election of directors of the Corporation, for any merger or consolidation of
the Corporation, 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 Corporation 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 Corporation shall cease to meet the
basic conditions of listing on the New York Stock Exchange (or any other
securities exchange on which the Corporation's Common Stock, as hereinafter
defined, is listed for trading) in respect of the number of shares of the
Corporation's Common Stock held by the public; or
(v) There shall be consummated (A) any
consolidation, merger or recapitalization of the Corporation or any similar
transaction involving the Corporation, whether or not the Corporation is the
continuing or surviving corporation, pursuant to which shares of the
Corporation'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
Corporation 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 Corporation or (C) the adoption of a
plan of complete liquidation of the Corporation (whether or not in connection
with the sale of all or substantially all of the Corporation's assets) or a
series of partial liquidations of the Corporation that is de jure or de facto
part of a plan of complete liquidation of the Corporation; provided, that the
divestiture of less than substantially all of the assets of the Corporation 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
Corporation in another jurisdiction, shall not constitute a "Change in Control";
or
(vi) The Board of Directors of the
Corporation shall approve any merger, consolidation or like business combination
or reorganization of the Corporation, 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 Corporation 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 Corporation's outstanding
securities then entitled ordinarily to vote for the election of directors.
4
<PAGE> 5
(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 Corporation
or a Subsidiary, nor shall anything in this Agreement affect any right which the
Corporation 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 Corporation 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 Corporation's stockholders, or takes other steps designed to effect a
Change in Control of the Corporation, the Executive agrees that in order to
receive the benefits provided by this Agreement, he will not voluntarily leave
the employ of the Corporation 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 Corporation 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 Corporation 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 Corporation,
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 Corporation 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 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 Corporation 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)(iv) 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
Corporation 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 Corporation's or
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Subsidiary's disability plan until his employment is terminated for Disability,
and shall be entitled to the most favorable other benefits applicable under the
Corporation'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 Corporation for Cause or by the Executive
other than for Good Reason during the two (2) years following a Change in
Control, the Corporation 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 Corporation 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
Corporation 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
Corporation. 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 Corporation's retirement plans as then in effect
(or if Executive retires after a Change in Control of the Corporation, 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
Corporation (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 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
Corporation, monetarily or otherwise, 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
Corporation; or
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(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
Corporation 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 Corporation
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 Corporation 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 Corporation
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 Corporation's retirement
plans, stock option plans, incentive plans, group life insurance plans, medical,
health, accident, disability and other plans in which employees of the
Corporation 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 Corporation's or a Subsidiary's
retirement plans, stock option plans, incentive plans, group life insurance
plans, medical, health, accident, disability and
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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 Corporation
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 Corporation 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
Corporation (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 Corporation 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
Corporation 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 (i) the Executive shall
not be entitled to give a Notice of Termination that he is terminating his
employment with the Corporation 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 Corporation 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 party that a Dispute (as
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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 Corporation or a Subsidiary shall make the payments and provide the
benefits provided for in Section 3(l) 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 Corporation 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
Corporation 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
Corporation or a Subsidiary, with interest at the base rate charged from time to
time by the Corporation's principal commercial bank. In the event that it is
finally determined that a challenged termination by the Corporation 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 Corporation 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 Corporation or
a Subsidiary by the Executive for Good Reason, that the Corporation 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 Corporation, the Corporation 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 Corporation 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 Corporation 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
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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 Corporation (or any corporation or partnership affiliated with the
Corporation (an "Affiliate") within the meaning of Section 1504 of the Code or a
predecessor of the Corporation) during the entire five calendar years (the "Base
Period") preceding the calendar year in which a Change in Control of the
Corporation occurred, the Executive's average annual compensation 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 Corporation or any Affiliate or predecessor of
the Corporation shall include every type and form of compensation includible in
the Executive's gross income in respect of the Executive's employment by the
Corporation or any Affiliate or predecessor of the Corporation, 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 Corporation"
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 Corporation, a Subsidiary or
any other person or entity, would not be deductible in whole or in part by the
Corporation, 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 Corporation,
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
Corporation elects to comply with such procedure, the Corporation 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
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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 Corporation 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 Corporation 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 Corporation 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 meaning of Section 28OG of the Code and, provided, further, however,
that if the Corporation 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
Corporation shall constitute completion of the Parachute Procedures; and
(iv) The Corporation 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 Corporation, 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 $[2,250]
per month during the Employment Period plus reimbursement for reasonable
insurance, maintenance, gasoline and parking expenses incurred in furtherance of
the Corporation's business.
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(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 Corporation'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 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
Corporation 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 Corporation shall not be entitled to give a Notice
of
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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. (a) COMPLETE PAYMENT. 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 expressly reserves any rights he may have at law, equity or
otherwise in the event that his employment by the Corporation 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 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.
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(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.
10. ATTORNEYS' FEES. If litigation shall be brought to enforce or
interpret any provision contained herein, the Corporation 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
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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 Corporation'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 Corporation may have against the
Executive or anyone else. All amounts payable by the Corporation hereunder shall
be paid without notice or demand. Except as expressly provided herein, the
Corporation 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 Corporation shall be final and the Corporation 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 Corporation 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
Corporation, by written agreement, to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. As used in this
Agreement, the term "Corporation" shall mean the Corporation 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 Corporation 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
Corporation 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 Corporation 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 Corporation. 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
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benefits for the Executive or any agreement now existing or which hereafter may
be entered into between the Corporation and the 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 Corporation 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 signed this
Agreement in duplicate original effective as of May 3, 1998.
SHOREWOOD PACKAGING CORPORATION
By:
---------------------------------
Howard M. Liebman
Executive Vice President
---------------------------------
Marc P. Shore
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<PAGE> 1
EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
HOWARD M. LIEBMAN
AGREEMENT made effective as of May 3, 1998, among SHOREWOOD
PACKAGING CORPORATION, a Delaware corporation having its principal executive
offices at 277 Park Avenue, New York, N.Y. 10172-0124 (herein called the
"Corporation"), and HOWARD M. LIEBMAN, currently residing at 1302 Azure Place,
Hewlett Harbor, N.Y. 11557 (herein called the "Executive").
W I T N E S S E T H:
The Corporation and the Executive entered into that certain
Employment Agreement dated as of May 16, 1994 (the "Prior Employment
Agreement"), which provides for the employment of the Executive by the
Corporation upon the terms and conditions set forth therein.
The Corporation and the Employee desire to enter into a new
employment agreement upon the terms and conditions hereinafter set forth, which
employment agreement will supersede and replace the Prior Employment Agreement
in its entirety.
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
during 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 continuing
full time employment with 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
<PAGE> 2
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,
1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of this
Agreement shall be from May 3, 1998 through and including May 2, 2003. The
Corporation agrees to and does hereby employ the Executive as Chief Financial
Officer and an Executive Vice President for the period commencing May 3, 1998
and terminating May 2, 2003 (the "Employment Period") and the Executive agrees
that he shall serve as an Executive Vice President and the Chief Financial
Officer of the Corporation during the Employment Period. The foregoing
notwithstanding, in the event of any "Change in Control" (as hereinafter
defined) of the Corporation at any time during the last two fiscal years of the
Corporation beginning prior to May 2, 2003, the Employment Period hereunder
shall be automatically extended through and including May 2, 2005.
2. DUTIES. 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 an Executive Vice
President and the Chief Financial Officer 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
Chief Financial Officer or an Executive Vice President of a publicly owned
corporation incorporated in one of the states of the United States of America.
The Executive shall serve as a member of the Board of Directors (and of the
Executive Committee or any 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 for so long as the Executive is
elected to serve on the Board, the Executive Committee or any similar committee.
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 3, 1998 and until the
expiration of the Employment Period, the Corporation shall pay to the Executive
a base salary (the "Base
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<PAGE> 3
Salary") at a minimum rate of $450,000 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 annually 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. Within ninety (90) days after the end of each
fiscal year of the Corporation during the Employment Period, the Corporation
shall pay to the Executive a cash bonus in an amount determined by the Chairman
of the Board of Directors and the President of the Corporation in their sole
discretion, but not less than $________ per year (the "Guaranteed Bonus"),
pro-rated if the Executive's employment year and the Corporation's fiscal year
do not end simultaneously.
(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 Corporation's business of a nature that if any securities
of the Corporation 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 provisions of such regulations under the
Exchange Act, whether or not the Corporation 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 Corporation or any "affiliate" or "associate"
of the Corporation (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 Corporation
representing fifty percent (50%) or more of the combined voting power of the
Corporation'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 Corporation having the right to vote for the election
of directors of the Corporation, for any merger or consolidation of the
Corporation, or for any other matter; or
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<PAGE> 4
(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 Corporation 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 Corporation shall cease to meet the basic
conditions of listing on the New York Stock Exchange (or any other securities
exchange on which the Corporation's Common Stock, as hereinafter defined, is
listed for trading) in respect of the number of shares of the Corporation's
Common Stock held by the public; or
(v) There shall be consummated (A) any consolidation,
merger or recapitalization of the Corporation or any similar transaction
involving the Corporation, whether or not the Corporation is the continuing or
surviving corporation, pursuant to which shares of the Corporation'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 Corporation 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 Corporation or (C) the adoption of a
plan of complete liquidation of the Corporation (whether or not in connection
with the sale of all or substantially all of the Corporation's assets) or a
series of partial liquidations of the Corporation that is de jure or de facto
part of a plan of complete liquidation of the Corporation; provided, that the
divestiture of less than substantially all of the assets of the Corporation 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
Corporation in another jurisdiction, shall not constitute a "Change-in-Control";
or
(vi) The Board of Directors of the Corporation shall
approve any merger, consolidation, or like business combination or
reorganization of the Corporation, 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 Corporation 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) or 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 Corporation'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 Corporation or a
Subsidiary, nor shall anything in this
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<PAGE> 5
Agreement affect any right which the Corporation 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 Corporation 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 Corporation's stockholders, or takes other steps designed to effect a
Change in Control of the Corporation, the Executive agrees that in order to
receive the benefits provided by this Agreement, he will not voluntarily leave
the employ of the corporation 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 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 Corporation 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 Corporation 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 Corporation,
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) or 3(n)
hereof.
(g) TERMINATION FOLLOWING CHANGE OF CONTROL. If a Change in
Control of the Corporation 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 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
Corporation 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)(iv) 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
Corporation 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 and Guaranteed Bonus (as
herein defined) less any benefits as may be received by him under the
Corporation'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
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<PAGE> 6
Corporation'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 Corporation for Cause or by the Executive other than for
Good Reason during the two (2) years following a Change in Control, the
Corporation shall pay to the Executive his full Base Salary and Guaranteed
Bonus, pro-rated through the Date of Termination (as defined herein), at the
rate in effect at the time Notice of Termination 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 Corporation 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 (as described in Section 2
hereof) with the Corporation 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 (as described in Section 2
hereof). 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 Corporation. 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 Corporation's retirement plans as then in effect (or if
Executive retires after a Change in Control of the Corporation, as in effect on
the date of the Change in Control).
(iii) "For Cause" shall mean:
(A) The willful and continued failure by the
Executive to substantially perform his duties with the Corporation (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 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 Corporation,
monetarily or otherwise, 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 Corporation;
or
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(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 Corporation or a
Subsidiary to the Executive of duties which (i) are inconsistent with, or
require travel significantly more time-consuming or extensive than, the
Employee'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 Corporation or a
Subsidiary of the Executive's Base Salary, as the same may be increased from
time to time hereafter or the Executive's Guaranteed Bonus; 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 Corporation 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 Corporation 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 Corporation's retirement
plans, stock option plans, incentive plans, group life insurance plans, medical,
health, accident, disability and other plan in which employees of the
Corporation 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 Corporation's or a Subsidiary's
retirement plans, stock
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<PAGE> 8
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 Corporation to obtain
the express written assumption of and agreement to perform this Agreement by any
successor as contemplated in Section 3(n)(viii) 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 Corporation 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
Corporation (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 Corporation 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
Corporation 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 (i) the Executive shall
not be entitled to give a Notice of Termination that he is terminating his
employment with the Corporation 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 Corporation 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
(as described in Section 2 hereof) 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
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<PAGE> 9
Termination is given, the party who receives such Notice of Termination notifies
the other 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 Corporation or a
Subsidiary shall make the payments and provide the benefits provided for in
Section 3(n) 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 Corporation 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
Corporation 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
Corporation or a Subsidiary, with interest at the base rate charged from time to
time by the Corporation's principal commercial bank. In the event that it is
finally determined that a challenged termination by the Corporation 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 Corporation or a Subsidiary for Disability or Cause, that the
Executive challenges the existence of Disability or Cause and (ii) in this case
of the Executive's termination as an Executive with the Corporation or a
Subsidiary by the Executive for Good Reason, that the Corporation 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 Corporation, the Corporation 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 Corporation 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 Corporation elects to
follow such procedure and not later than the fifteenth day after the Date of
Termination otherwise:
(i) the Executive's Base Salary and Guaranteed Bonus
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
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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 Corporation (or any corporation or partnership affiliated with the
Corporation (an "Affiliate") within the meaning of Section 1504 of the Code or a
predecessor of the Corporation) during the entire five calendar years (the "Base
Period") preceding the calendar year in which a Change in Control of the
Corporation occurred, the Executive's average annual compensation 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 Corporation or any Affiliate or predecessor of
the Corporation shall include every type and form of compensation includible in
the Executive's gross income in respect of the Executive's employment by the
Corporation or any Affiliate or predecessor of the Corporation, 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
Corporation" 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 Corporation, a subsidiary or any other
person or entity, would not be deductible in whole or in part by the
Corporation, 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 Corporation, 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 Corporation
elects to comply with such procedure, the Corporation 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
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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
Corporation 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 Corporation 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 Corporation 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 meaning of Section 28OG of the
Code and, provided, further, however, that if the Corporation 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 Corporation shall constitute completion of
the Parachute Procedure; and
(iv) The Corporation 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
Corporation, 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.
(v) If litigation shall be brought to enforce or
interpret any provision contained herein, the Corporation 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.
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(vi) The Corporation'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 Corporation may have against the Executive or anyone else.
All amounts payable by the Corporation hereunder shall be paid without notice or
demand.
(vii) Except as expressly provided herein, the
Corporation 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 Corporation shall be final and the Corporation 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.
(viii) The Corporation 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 Corporation, by
written agreement to assume expressly and agree to perform this Agreement in the
same manner and to the same extent that the Corporation would be required to
perform it if no such succession had taken place. As used in this Agreement, the
term "Corporation" shall mean the Corporation as hereinbefore defined and any
successor to or assignee of its business and/or assets as aforesaid which
executes and delivers the agreement required by this Section 3(n)(viii), or
which otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
(ix) This Agreement shall constitute the entire
agreement between the Executive and the Corporation concerning the Executive's
termination subsequent to a Change in Control as provided herein, and
performance of its obligations hereunder by the Corporation 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
Corporation 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
Corporation. 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 Corporation and the Executive,
provided that, notwithstanding anything to the contrary contained
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<PAGE> 13
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 Corporation and the Executive.
4. BENEFITS. The Executive shall be entitled to participate in any
life, accident 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 $[1,000] per month during the Employment Period
plus reimbursement for reasonable insurance, maintenance, gasoline and parking
expenses incurred in furtherance of the Corporation's business.
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 with the Corporation, its subsidiaries and affiliates, effective as
of the "Date of Termination" (defined below). Upon any termination of the
Executive's employment under this Section 5, the Executive 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, except that a "Proportionate Part" (hereinafter defined) of the
Guaranteed Bonus is payable under Section 3(b) of this Agreement. 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; (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
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<PAGE> 14
employment after the expiration of six (6) months following the last to occur of
the events constituting the basis for such termination.; and (iii) a
"Proportionate Part" shall be the amount determined by multiplying the
Guaranteed Bonus by a fraction the numerator of which shall be the number of
days of an Employment Year which have elapsed prior to the date of the
termination of the Executive's employment and the denominator of which is three
hundred and sixty-five (365).
6. (a) COMPLETE PAYMENT. 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 expressly reserves any rights he may
have at law, equity or otherwise in the event that his employment by the
Corporation is terminated in contravention of this Agreement.
(b) ON-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 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 of business, except the business of the Corporation of any
Subsidiary or affiliate of the Corporation,
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<PAGE> 15
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, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of paragraphs (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. ENTIRE AGREEMENT. This Agreement embodies the entire agreement of
the parties and supersedes all prior agreements between the parties with respect
to the subject matter hereof. It may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, extension or discharge is sought.
10. WAIVER. The waiver by the Corporation of a breach of any provision
of this Agreement by the Executive shall not operate or be construed as a waiver
of any subsequent breach by the Executive. The waiver by the Executive of a
breach of any provisions of this Agreement by the Corporation shall not operate
or be construed as a waiver of any subsequent breach by the Corporation
11. GOVERNING LAW. This Agreement shall be subject to, and governed by,
the laws of the State of New York.
12. 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
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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.
IN WITNESS WHEREOF, the parties hereto have duly signed this
Agreement in duplicate original effective as of May 3, 1998.
SHOREWOOD PACKAGING CORPORATION
By:
-----------------------------
Name:
Title:
--------------------------------
HOWARD M. LIEBMAN
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<PAGE> 1
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
MARC P. SHORE
AGREEMENT made effective as of May 3, 1998, 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") and MARC P. SHORE, currently residing at 68 Talcott Road,
Ryebrook, New York 10573 (herein called the "Executive").
W I T N E S S E T H:
The Corporation and the Executive entered into that certain
Employment Agreement dated January 25, 1996 and made effective as of May 1, 1995
(the "Prior Employment Agreement"), which provides for the employment of the
Executive by the Corporation upon the terms and conditions set forth therein.
The Corporation and the Executive desire to enter into a new
employment agreement upon the terms and conditions hereinafter set forth, which
employment agreement will supersede and replace the Prior Employment Agreement
in its entirety.
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
during 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 continuing
full time employment with 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.
<PAGE> 2
Accordingly, the parties desire to and do hereby enter into
this Agreement as of the date first set forth above.
NOW, THEREFORE,
1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of
this Agreement shall be from May 3, 1998 through and including May 2, 2003. The
Corporation agrees to and does hereby employ the Executive as Chief Executive
Officer and President for the period commencing May 3, 1998 and terminating May
2, 2003 (the "Employment Period") and the Executive agrees that he shall serve
as Chief Executive Officer and President of the Corporation during the
Employment Period. The foregoing notwithstanding, in the event of any "Change in
Control" (as hereinafter defined) of the Corporation at any time during the last
two fiscal years of the Corporation beginning prior to May 2, 2003, the
Employment Period hereunder shall be automatically extended through and
including May 2, 2005.
2. DUTIES. 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 Chief Executive
Officer and 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 Chief Executive Officer or
a President of a publicly owned corporation incorporated in one of the states of
the United States of America. The Executive shall serve as the Chairman of the
Board of Directors (and a member of the Executive Committee or any 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 for so long as the Executive is elected to serve on the Board, the
Executive Committee or any similar committee. 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 3, 1998 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 $800,000 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 annually
and may be increased at the Corporation's discretion. This Agreement shall not
be deemed abrogated or
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<PAGE> 3
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. The Corporation shall pay to the Executive
a signing bonus in an aggregate amount of $1,000,000, payable in full although
earned ratably over the five-year Employment Period if Executive continues to be
employed by the Corporation at the end of each such year. In addition, during
the Employment Period the Executive shall be entitled to receive annual
performance bonuses in accordance with the terms and conditions of the
Corporation's Amended and Restated 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 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),
and (m) 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 Corporation's business of a nature that if any securities
of the Corporation 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 Corporation 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 Corporation or any "affiliate" or
"associate" of the Corporation (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
Corporation representing fifty percent (50%) or more of the combined voting
power of the Corporation'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 Corporation having the right to vote for the
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<PAGE> 4
election of directors of the Corporation, for any merger or consolidation of the
Corporation, 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 Corporation 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 Corporation shall cease to meet the
basic conditions of listing on the New York Stock Exchange (or any other
securities exchange on which the Corporation's Common Stock, as hereinafter
defined, is listed for trading) in respect of the number of shares of the
Corporation's Common Stock held by the public; or
(v) There shall be consummated (A) any
consolidation, merger or recapitalization of the Corporation or any similar
transaction involving the Corporation, whether or not the Corporation is the
continuing or surviving corporation, pursuant to which shares of the
Corporation'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
Corporation 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 Corporation or (C) the adoption of a
plan of complete liquidation of the Corporation (whether or not in connection
with the sale of all or substantially all of the Corporation's assets) or a
series of partial liquidations of the Corporation that is de jure or de facto
part of a plan of complete liquidation of the Corporation; provided, that the
divestiture of less than substantially all of the assets of the Corporation 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
Corporation in another jurisdiction, shall not constitute a "Change in Control";
or
(vi) The Board of Directors of the
Corporation shall approve any merger, consolidation or like business combination
or reorganization of the Corporation, 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 Corporation 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 Corporation's outstanding
securities then entitled ordinarily to vote for the election of directors.
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<PAGE> 5
(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 Corporation
or a Subsidiary, nor shall anything in this Agreement affect any right which the
Corporation 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(m) below following a Change in Control, the Corporation will
provide to the Executive the payments and benefits described in Sections 3(g)
and 3(m) 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 Corporation's stockholders, or takes other steps designed to effect a
Change in Control of the Corporation, the Executive agrees that in order to
receive the benefits provided by this Agreement, he will not voluntarily leave
the employ of the Corporation 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 Corporation 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 Corporation 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 Corporation,
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(m)
hereof.
(g) TERMINATION FOLLOWING CHANGE IN CONTROL. If a
Change in Control of the Corporation shall have occurred, then Executive shall
be entitled to the benefits provided in Section 3(m) hereof upon the subsequent
termination of his employment by the Corporation or the Executive for any reason
or for no reason within the applicable period set forth in Section 3(m) hereof
following such Change in Control.
(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
Corporation 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 Corporation'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 Corporation's
policies during
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the period commencing one year prior to the initiation of actions that resulted
in the Change in Control.
(i) 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
Corporation 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
Corporation. 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 Corporation's retirement plans as then in effect
(or if Executive retires after a Change in Control of the Corporation, 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
Corporation (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 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
Corporation, monetarily or otherwise, 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
Corporation; 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
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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.
For purposes of this Section 3(i), 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 Corporation or otherwise was done or omitted
to be done in bad faith.
(iv) "Base Salary" shall mean the annual
base salary paid to the Executive immediately prior to the Change in Control of
the Corporation (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).
(j) NOTICE OF TERMINATION. Any purported termination
of employment by the Corporation by reason of the Executive's Disability or for
Cause, or by the Executive for any or no 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 Corporation or a Subsidiary, as the case may be, which shall indicate
the specific basis for termination (if any) 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 Corporation
shall not be entitled to give a Notice of Termination that it is terminating
Executive's employment hereunder with the Corporation 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 Cause or
Disability.
(k) 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) or (ii) if the
Executive's employment is terminated by the Corporation for Cause or by the
Executive for any or no 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 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 Corporation or a Subsidiary shall make the payments and
provide the benefits to the Executive provided for in Section 3(m) or Section 5
hereof, as the case may be. 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 Corporation or a
Subsidiary by reason of the Executive's Disability or for Cause was justified,
then all sums paid by the Corporation 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(k) shall be repaid promptly
by the Executive to the Corporation or a Subsidiary, with interest at the base
rate charged from time to time by the
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Corporation's principal commercial bank. In the event that it is finally
determined that a challenged termination by the Corporation or a Subsidiary by
reason of the Executive's Disability or for Cause was not justified, then the
Executive shall be entitled to retain all sums paid to the Executive pending
resolution of the Dispute.
(l) DEFINITION OF "DISPUTE". For purposes of this
Agreement, "Dispute" shall mean in the case of the Executive's termination as an
Executive with the Corporation or a Subsidiary for Disability or Cause, that the
Executive challenges the existence of Disability or Cause.
(m) PARACHUTE PAYMENTS UPON TERMINATION; CHANGE OF
CONTROL. If within two (2) years after a Change in Control of the Corporation,
the Executive's employment shall terminate for any or no reason, subject in each
case to Section 3(k) hereof, the Corporation 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 Corporation 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
Corporation (or any corporation or partnership affiliated with the Corporation
(an "Affiliate") within the meaning of Section 1504 of the Code or a predecessor
of the Corporation) during the entire five calendar years (the "Base Period")
preceding the calendar year in which a Change in Control of the Corporation
occurred, the Executive's average annual compensation 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
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Corporation or any Affiliate or predecessor of the Corporation shall include
every type and form of compensation includible in the Executive's gross income
in respect of the Executive's employment by the Corporation or any Affiliate or
predecessor of the Corporation, 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(m) a "change in control of the Corporation" 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(m)(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 Corporation, a Subsidiary or
any other person or entity, would not be deductible in whole or in part by the
Corporation, 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
Corporation, no payments shall be made pursuant to this section until the
procedure described in this Section 3(m)(iii) is completed (the "Parachute
Procedure"). If the Corporation elects to comply with such procedure, the
Corporation 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 Corporation 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
Corporation 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 Corporation 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 meaning of Section 28OG of the
Code and, provided, further, however, that
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if the Corporation does not comply with the Parachute Procedure, it shall
deliver the payments required by this Section 3(m) within fifteen (15) days
after the Date of Termination. Delivery of the statement by the Executive to the
Corporation shall constitute completion of the Parachute Procedures; and
(iv) The Corporation 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 Corporation, 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 $2,250
per month during 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 Corporation'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's employment should be terminated for
Cause; then, the Corporation may by written Notice of Termination terminate
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Executive's employment. In addition, this Agreement shall terminate immediately
upon the death or Retirement of Executive prior to a Change of Control of the
Corporation. Upon any termination of the Executive's employment under this
Section 5, the Executive shall be deemed removed from all positions held by him
with the Corporation, its subsidiaries and affiliates, effective as of the Date
of Termination, 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.
6. (a) COMPLETE PAYMENT. 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 expressly reserves any rights he may
have at law, equity or otherwise in the event that his employment by the
Corporation 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 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.
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(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
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Executive's devisee, legatee or other designee or, if there be no such designee,
to the Executive's estate.
10. ATTORNEYS' FEES. If litigation shall be brought to enforce
or interpret any provision contained herein, the Corporation 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 Corporation'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 Corporation may have against the
Executive or anyone else. All amounts payable by the Corporation hereunder shall
be paid without notice or demand. Except as expressly provided herein, the
Corporation 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 Corporation shall be final and the Corporation 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 Corporation 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 Corporation, by written agreement, to assume expressly and agree
to perform this Agreement in the same manner and to the same extent that the
Corporation would be required to perform it if no such succession had taken
place. As used in this Agreement, the term "Corporation" shall mean the
Corporation 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 Corporation 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
Corporation 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 Corporation or any of its
directors, stockholders, officers or employees on
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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
Corporation. 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 Corporation and the 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
Corporation 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 signed this
Agreement in duplicate original on the ____ day of November 1999 effective as of
May 3, 1998.
SHOREWOOD PACKAGING CORPORATION
By:______________________________
Howard M. Liebman
President
______________________________
Marc P. Shore
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AMENDED AND RESTATED EMPLOYMENT AGREEMENT
SHOREWOOD PACKAGING CORPORATION
WITH
HOWARD M. LIEBMAN
AGREEMENT made effective as of May 3, 1998, among SHOREWOOD
PACKAGING CORPORATION, a Delaware corporation having its principal executive
offices at 277 Park Avenue, New York, N.Y. 10172-0124 (herein called the
"Corporation"), and HOWARD M. LIEBMAN, currently residing at 1302 Azure Place,
Hewlett Harbor, N.Y. 11557 (herein called the "Executive").
W I T N E S S E T H:
The Corporation and the Executive entered into that certain
Employment Agreement dated as of May 16, 1994 (the "Prior Employment
Agreement"), which provides for the employment of the Executive by the
Corporation upon the terms and conditions set forth therein.
The Corporation and the Employee desire to enter into a new
employment agreement upon the terms and conditions hereinafter set forth, which
employment agreement will supersede and replace the Prior Employment Agreement
in its entirety.
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
during 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 continuing
full time employment with 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
<PAGE> 2
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,
1. EMPLOYMENT; TERM. Subject to the terms hereof, the term of
this Agreement shall be from May 3, 1998 through and including May 2, 2003. The
Corporation agrees to and does hereby employ the Executive as Chief Financial
Officer and an Executive Vice President for the period commencing May 3, 1998
and terminating May 2, 2003 (the "Employment Period") and the Executive agrees
that he shall serve as an Executive Vice President and the Chief Financial
Officer of the Corporation during the Employment Period. The foregoing
notwithstanding, in the event of any "Change in Control" (as hereinafter
defined) of the Corporation at any time during the last two fiscal years of the
Corporation beginning prior to May 2, 2003, the Employment Period hereunder
shall be automatically extended through and including May 2, 2005.
2. DUTIES. 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 an Executive Vice
President and the Chief Financial Officer 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
Chief Financial Officer or an Executive Vice President of a publicly owned
corporation incorporated in one of the states of the United States of America.
The Executive shall serve as a member of the Board of Directors (and of the
Executive Committee or any 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 for so long as the Executive is
elected to serve on the Board, the Executive Committee or any similar committee.
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 3, 1998 and
until the expiration of the Employment Period, the Corporation shall pay to the
Executive a base salary (the "Base
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Salary") at a minimum rate of $450,000 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 annually 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) PARACHUTE EFFECTIVE DATE. Notwithstanding
the present effectiveness of this Agreement, the provisions of Sections 3(f),
(g) and (l) 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 Corporation's business of a nature that if any securities
of the Corporation 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 provisions of such regulations under the
Exchange Act, whether or not the Corporation 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 Corporation or any "affiliate" or
"associate" of the Corporation (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
Corporation representing fifty percent (50%) or more of the combined voting
power of the Corporation'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 Corporation having the right to vote for the election
of directors of the Corporation, for any merger or consolidation of the
Corporation, 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 Corporation 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 Corporation shall cease to meet the
basic conditions of listing on the New York Stock Exchange (or any other
securities exchange on which the
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Corporation's Common Stock, as hereinafter defined, is listed for trading) in
respect of the number of shares of the Corporation's Common Stock held by the
public; or
(v) There shall be consummated (A) any
consolidation, merger or recapitalization of the Corporation or any similar
transaction involving the Corporation, whether or not the Corporation is the
continuing or surviving corporation, pursuant to which shares of the
Corporation'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
Corporation 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 Corporation or (C) the adoption of a
plan of complete liquidation of the Corporation (whether or not in connection
with the sale of all or substantially all of the Corporation's assets) or a
series of partial liquidations of the Corporation that is de jure or de facto
part of a plan of complete liquidation of the Corporation; provided, that the
divestiture of less than substantially all of the assets of the Corporation 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
Corporation in another jurisdiction, shall not constitute a "Change-in-Control";
or
(vi) The Board of Directors of the
Corporation shall approve any merger, consolidation, or like business
combination or reorganization of the Corporation, the consummation of which
would result in the occurrence of any event described in Section 3(c)(i), (ii)
or (v) above.
(c) DEFINITION OF "CONTINUING DIRECTORS". For
purposes of this Agreement, "Continuing Directors" shall mean the directors of
the Corporation 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) or 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 Corporation's outstanding
securities then entitled ordinarily to vote for the election of directors.
(d) 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 Corporation
or a Subsidiary, nor shall anything in this Agreement affect any right which the
Corporation 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(l) below following a Change in Control, the Corporation will
provide to the Executive the payments and benefits described in Sections 3(g)
and 3(l) of this Agreement.
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(e) VOLUNTARY TERMINATION. In the event any person or
organization commences a tender or exchange offer, circulates a proxy statement
to the Corporation's stockholders, or takes other steps designed to effect a
Change in Control of the Corporation, the Executive agrees that in order to
receive the benefits provided by this Agreement, he will not voluntarily leave
the employ of the corporation 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 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 Corporation 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 Corporation 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 Corporation,
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) or 3(l)
hereof.
(f) TERMINATION FOLLOWING CHANGE OF CONTROL. If a
Change in Control of the Corporation shall have occurred, then Executive shall
be entitled to the benefits provided in Section 3(l) hereof upon the subsequent
termination of his employment by the Corporation or the Executive for any reason
or for no reason within the applicable period set forth in Section 3(l) hereof
following such Change in Control.
(g) 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
Corporation 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 and Guaranteed Bonus (as
herein defined) less any benefits as may be received by him under the
Corporation'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 Corporation's policies during the period commencing one
year prior to the initiation of actions that resulted in the Change in Control.
(h) 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 (as
described in Section 2 hereof) with the Corporation 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 (as
described in Section
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2 hereof). 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 Corporation. 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 Corporation's retirement plans as then in effect
(or if Executive retires after a Change in Control of the Corporation, as in
effect on the date of the Change in Control).
(iii) "For Cause" shall mean:
(A) The willful and continued
failure by the Executive to substantially perform his duties with the
Corporation (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 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
Corporation, monetarily or otherwise, 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
Corporation; 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.
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 Corporation or otherwise was done or omitted
to be done in bad faith.
(iv) "Base Salary" shall mean the annual
base salary paid to the Executive immediately prior to the Change in Control of
the Corporation (provided that such
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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).
(i) NOTICE OF TERMINATION. Any purported termination
of employment by the Corporation by reason of the Executive's Disability or for
Cause, or by the Executive for any or no 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 Corporation or a Subsidiary, as the case may be, which shall indicate
the specific basis for termination (if any) 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 Corporation
shall not be entitled to give a Notice of Termination that it is terminating
Executive's employment hereunder with the Corporation 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 Cause or
Disability.
(j) 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 (as described in Section 2 hereof) during such thirty
(30) day period) or (ii) if the Executive's employment is terminated by the
Corporation for Cause or by the Executive for any or no 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 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
Corporation or a Subsidiary shall make the payments and provide the benefits to
the Executive provided for in Section 3(l) or Section 5 hereof, as the case may
be. 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 Corporation or a Subsidiary by
reason of the Executive's Disability or for Cause was justified, then all sums
paid by the Corporation 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 Corporation or a Subsidiary, with interest at the base rate charged from
time to time by the Corporation's principal commercial bank. In the event that
it is finally determined that a challenged termination by the Corporation or a
Subsidiary by reason of the Executive's Disability or for Cause was not
justified, then the Executive shall be entitled to retain all sums paid to the
Executive pending resolution of the Dispute.
(k) 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 Corporation or a Subsidiary for Disability or Cause,
that the Executive challenges the existence of Disability or Cause.
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(l) PARACHUTE PAYMENTS UPON TERMINATION; CHANGE OF
CONTROL. If within two (2) years after a Change in Control of the Corporation,
the Executive's employment shall terminate for any or no reason, subject in each
case to Section 3(j) hereof, the Corporation 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 Corporation elects to follow such procedure and not
later than the fifteenth day after the Date of Termination otherwise:
(i) the Executive's Base Salary and
Guaranteed Bonus 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
Corporation (or any corporation or partnership affiliated with the Corporation
(an "Affiliate") within the meaning of Section 1504 of the Code or a predecessor
of the Corporation) during the entire five calendar years (the "Base Period")
preceding the calendar year in which a Change in Control of the Corporation
occurred, the Executive's average annual compensation 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 Corporation or any Affiliate or predecessor of the
Corporation shall include every type and form of compensation includible in the
Executive's gross income in respect of the Executive's employment by the
Corporation or any Affiliate or predecessor of the Corporation, 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(l), a "change in control of the
Corporation" 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(l)(iii) below; and
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(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 Corporation, a subsidiary or
any other person or entity, would not be deductible in whole or in part by the
Corporation, 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
Corporation, no payments shall be made pursuant to this section until the
procedure described in this Section 3(l)(iii) is completed (the "Parachute
Procedure"). If the Corporation elects to comply with such procedure, the
Corporation 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 Corporation 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
Corporation 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 Corporation 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 meaning of Section 28OG of the
Code and, provided, further, however, that if the Corporation does not comply
with the Parachute Procedure, it shall deliver the payments required by this
Section 3(l) within fifteen (15) days after the Date of Termination. Delivery of
the statement by the Executive to the Corporation shall constitute completion of
the Parachute Procedure; and
(iv) The Corporation 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
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meaning of Section 28OG of the Code, then the Executive shall pay to the
Corporation, 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.
(v) If litigation shall be brought to
enforce or interpret any provision contained herein, the Corporation 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.
(vi) The Corporation'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 Corporation may have against the Executive or anyone else.
All amounts payable by the Corporation hereunder shall be paid without notice or
demand.
(vii) Except as expressly provided herein,
the Corporation 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 Corporation shall be final and the
Corporation 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.
(viii) The Corporation 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
Corporation, by written agreement to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Corporation would
be required to perform it if no such succession had taken place. As used in this
Agreement, the term "Corporation" shall mean the Corporation as hereinbefore
defined and any successor to or assignee of its business and/or assets as
aforesaid which executes and delivers the agreement required by this Section
3(l)(viii), or which otherwise becomes bound by all the terms and provisions of
this Agreement by operation of law.
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(ix) This Agreement shall constitute the
entire agreement between the Executive and the Corporation concerning the
Executive's termination subsequent to a Change in Control as provided herein,
and performance of its obligations hereunder by the Corporation 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
Corporation 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
Corporation. 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 Corporation and the 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
Corporation and the Executive.
4. BENEFITS. The Executive shall be entitled to participate in
any life, accident 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 $[1,000] per month during the Employment Period
plus reimbursement for reasonable insurance, maintenance, gasoline and parking
expenses incurred in furtherance of the Corporation's business.
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's employment should be terminated for
Cause; then, the Corporation may by written Notice of Termination terminate
Executive's employment. In addition, this Agreement shall terminate immediately
upon the death or Retirement of Executive prior to a change of Control of the
Corporation. Upon any termination of the Executive's employment under this
Section 5, the Executive shall be deemed removed from all positions held by him
with the Corporation, its subsidiaries and affiliates, effective as of the Date
of Termination. Upon any termination of the Executive's employment under this
Section 5, the Executive 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, except that a "Proportionate
Part" (hereinafter defined) of the Guaranteed Bonus is payable under Section
3(b) of this Agreement. The provisions of this
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Section 5 shall terminate and cease to be of any force or effect immediately
upon any Change in Control of the Corporation.
6. (a) COMPLETE PAYMENT. 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 expressly reserves any rights he may
have at law, equity or otherwise in the event that his employment by the
Corporation 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 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 of business, except the business of the Corporation of 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.
12
<PAGE> 13
(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, or in the event of the breach or threatened breach by the Executive
of the terms and provisions of paragraphs (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. ENTIRE AGREEMENT. This Agreement embodies the entire
agreement of the parties and supersedes all prior agreements between the parties
with respect to the subject matter hereof. It may not be changed orally but only
by an agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
10. WAIVER. The waiver by the Corporation of a breach of any
provision of this Agreement by the Executive shall not operate or be construed
as a waiver of any subsequent breach by the Executive. The waiver by the
Executive of a breach of any provisions of this Agreement by the Corporation
shall not operate or be construed as a waiver of any subsequent breach by the
Corporation
11. GOVERNING LAW. This Agreement shall be subject to, and
governed by, the laws of the State of New York.
12. 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
13
<PAGE> 14
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.
IN WITNESS WHEREOF, the parties hereto have duly signed this
Agreement in duplicate original on the ____ day of November 1999 effective as of
May 3, 1998.
SHOREWOOD PACKAGING CORPORATION
By: _____________________________
Name:
Title:
__________________________________
HOWARD M. LIEBMAN
14
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