<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Quarterly Report under Section 13 or 15 (d) of the Securities Exchange Act of
1934 for the Quarterly Period Ended April 1, 1995
--------------------------------------------
Commission File No. 1-2300
-------------------------------------------------------------
Scott Paper Company
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1065080
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Scott Plaza, Philadelphia, Pennsylvania 19113
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(610) 522-5000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
None
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 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 _______
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 12, 1995
- --------------------------- ---------------------------
Common Shares, no par value 151,434,220 shares
<PAGE>
SCOTT PAPER COMPANY
INDEX
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Item 1. Financial Statements:
Consolidated statement of earnings for the three month
periods ended April 1, 1995, and March 26, 1994...................................... 3
Consolidated balance sheet at April 1, 1995,
December 31, 1994, and March 26, 1994................................................ 4
Consolidated statement of changes in common shareholders
equity for the nine month period ended December 31, 1994,
and the three month period ended April 1, 1995....................................... 5
Consolidated statement of cash flows (condensed) for
the three month periods ended April 1, 1995,
and March 26, 1994................................................................... 6
Notes to Consolidated Financial Statements............................................ 7
Item 2. Management's Discussion and Analysis.................................................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................... 11
Item 4. Submission of Matters to a Vote of Security Holders................................... 11
Item 6. Exhibits and Reports on Form 8-K...................................................... 12
Signatures..................................................................................... 13
</TABLE>
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF EARNINGS /(a)/
----------------------------------
(Millions, Except on a Per Share Basis)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 1, March 26,
1995 1994
--------- ----------
<S> <C> <C>
Sales $1,003.3 $828.7
-------- ------
Costs and expenses
Product costs 688.8 596.8
Marketing and distribution 120.0 117.6
Research, administration and general 42.8 49.1
Other (7.4) 1.5
-------- ------
844.2 765.0
-------- ------
Income from operations 159.1 63.7
Interest expense 24.4 29.4
Other income and (expense) 6.8 0.6
-------- ------
Income before taxes 141.5 34.9
Taxes on income 50.2 13.4
-------- ------
Income before share of earnings of international equity affiliates 91.3 21.5
Share of earnings of international equity affiliates 5.6 7.0
-------- ------
Income from continuing operations 96.9 28.5
-------- ------
Discontinued operation -- printing and publishing papers:
Loss from operations, net of income tax benefit - (3.3)
-------- ------
Net Income $ 96.9 $ 25.2
======== ======
Earnings per share /(b)/
Income from continuing operations $0.64 $ 0.19
Loss from discontinued operation - (0.02)
----- ------
Net Income $0.64 $ 0.17
===== ======
Dividends per share /(b)/ $0.10 $0.10
Average shares outstanding /(b)/ 151.5 148.5
</TABLE>
/(a)/ Unaudited, but management believes that all adjustments necessary for fair
presentation of results have been made.
/(b)/ Earnings per share, dividends per share, and average shares outstanding
reflect the impact of a two-for-one stock split, pursuant to which shares
were distributed on or about May 12, 1995, to shareholders of record on
April 28, 1995.
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED BALANCE SHEET
--------------------------
(Millions)
<TABLE>
<CAPTION>
April 1, 1995 December 31, 1994 March 26, 1994
------------- ----------------- --------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C> <C> <C>
Assets
- ------
Current assets
Cash and cash equivalents $ 158.8 $1,114.0 $ 101.6
Receivables 660.4 592.2 573.5
Inventories
Finished products $ 135.5 $ 150.6 $ 221.1
Work in process 56.4 56.0 66.4
Raw materials and other 191.4 383.3 195.3 401.9 229.9 517.4
--------- --------- ---------
Deferred income taxes 120.4 146.6 271.7
Prepaid items and other 59.7 53.8 75.8
-------- -------- --------
1,382.6 2,308.5 1,540.0
Plant assets at cost 4,634.3 4,625.0 7,416.8
Accumulated depreciation (2,140.4) 2,493.9 (2,143.0) 2,482.0 (3,377.7) 4,039.1
--------- --------- ---------
Timber resources 83.8 84.2 112.3
Investments in and advances
to affiliates 201.5 227.3 307.7
Construction funds held by trustees 69.1 79.5 87.2
Notes receivable 220.0 220.0 220.0
Goodwill and other assets 225.3 224.6 243.3
-------- -------- --------
Total $4,676.2 $5,626.1 $6,549.6
======== ======== ========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities
Payable to suppliers and others $ 729.1 $ 810.8 $ 799.7
Accruals for restructuring programs 75.9 108.6 584.6
Current maturities of long-term debt 74.8 764.8 122.0
Accrued taxes on income 93.5 254.7 50.8
-------- -------- --------
973.3 1,938.9 1,557.1
Long-term debt 1,145.0 1,093.1 2,463.0
Deferred income taxes and
other liabilities 752.2 841.7 932.8
-------- -------- --------
2,870.5 3,873.7 4,952.9
Preferred shares 7.1 7.1 7.1
Common shareholders' equity 1,798.6 1,745.3 1,589.6
-------- -------- --------
Total $4,676.2 $5,626.1 $6,549.6
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF CHANGES IN COMMON SHAREHOLDERS' EQUITY
----------------------------------------------------------------
(Millions)
(UNAUDITED)
<TABLE>
<CAPTION>
Cumulative
Reinvested Common Treasury Translation
Earnings Shares Shares Adjustment Total
----------- ------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Balance at March 26, 1994 $1,368.4 $459.2 $(11.9) $(226.1) $1,589.6
Net income 184.6 184.6
Dividends
Common shares (44.9) (44.9)
Preferred Shares (0.2) (0.2)
Shares issued for the
exercise of stock options,
stock awards, and
restricted stock grants 46.9 0.7 47.6
Foreign currency
translation adjustment (33.1) (33.1)
Minimum pension liability adjustment 1.7 1.7
____________________________________________________________________________________________________
Balance at December 31, 1994 $1,509.6 $506.1 $(11.2) $(259.2) $1,745.3
Net income 96.9 96.9
Dividends
Common shares (15.2) (15.2)
Preferred shares (0.1) (0.1)
Shares issued for the
exercise of stock options,
stock awards, and
restricted stock grants 58.9 1.1 60.0
Purchase of shares by the Company (61.2) (61.2)
Foreign currency
translation adjustment (27.1) (27.1)
____________________________________________________________________________________________________
Balance at April 1, 1995 $1,591.2 $565.0 $(71.3) $(286.3) $1,798.6
======== ====== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
SCOTT PAPER COMPANY
-------------------
CONSOLIDATED STATEMENT OF
-------------------------
CASH FLOWS (Condensed)
----------------------
(Millions)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------
April 1, March 26,
1995 1994
--------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
- ------------------------------------
Net income $ 96.9 $ 25.2
Adjustments to reconcile net income to net cash (used in) provided
by operating activities:
Share of earnings of affiliates, net of distributions (5.9) (4.7)
Depreciation, cost of timber harvested and amortization 56.6 74.4
Gains on asset sales (5.7) -
Postretirement benefits, net (funding) cost (72.8) 8.8
Deferred income taxes and other expenses 5.4 10.3
Net changes in current assets and current liabilities
net of effects of businesses divested (341.5) (105.8)
-------- -------
Net cash (used in) provided by operating activities (267.0) 8.2
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
- ------------------------------------
Investments in plant assets, timber resources and other assets (65.0) (87.8)
Proceeds from asset sales 52.8 -
Decrease in construction funds held by trustees 10.4 -
Advances to affiliates, net (0.3) (0.3)
Other investing (4.0) 9.8
-------- -------
Net cash used in investing activities (6.1) (78.3)
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
- ------------------------------------
Net (decrease) increase short-term borrowings (15.5) 14.9
Proceeds from issuance of long-term debt 80.5 166.7
Repayments of long-term debt (711.6) (144.1)
Dividends paid (15.3) (14.9)
Proceeds from exercise of stock options 42.9 8.0
Treasury stock purchases (61.2) -
Other financing (0.7) 6.7
-------- -------
Net cash used in financing activities (680.9) 37.3
-------- -------
Effect of exchange rate changes on cash (1.2) 0.8
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (955.2) (32.0)
Cash and cash equivalents at beginning of period 1,114.0 133.6
-------- -------
Cash and cash equivalents at end of period $ 158.8 $ 101.6
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1. Statement of Information Furnished
----------------------------------
The accompanying financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of management, these consolidated financial
statements give effect to all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly the financial position
of Scott Paper Company and its subsidiaries as of April 1, 1995, March 26,
1994, and December 31, 1994, and the earnings and cash flows for the three
month periods ended April 1, 1995, and March 26, 1994.
The Company presumes that users of this Quarterly Report on Form 10-Q have
read or have access to the audited financial statements contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994.
Accordingly, footnote disclosures which would substantially dupli cate the
disclosures contained therein have been omitted.
2. Supplemental Cash Flow Information
----------------------------------
Cash payments for interest, net of amounts capitalized, were $40.1 million
and $46.9 million during the first three months of 1995 and 1994,
respectively. Cash payments for income taxes were $195.8 million (related
primarily to 1994 asset sales) and $7.9 million during the first three
months of 1995 and 1994, respectively.
3. Restructuring and Productivity Improvement
------------------------------------------
At year end 1994, the Company had accruals for restructuring programs of
$108.6 million recorded in its balance sheet including the 1993 charges for
restructuring and productivity improvement programs. During the first
quarter of 1995, $32.7 million was charged to these reserves primarily for
continued severance payments associated with the 1994 work force
reductions.
4. Subsequent Event
----------------
On April 18, 1995, the Board of Directors authorized a two-for-one stock
split of common shares. The additional common shares are to be issued on
May 12, 1995, to shareholders of record on April 28, 1995. Accordingly,
earnings per share, cash dividends per share, and weighted average common
shares outstanding for all periods presented have been restated to reflect
the stock split.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operations
- ---------------------
First Quarter 1995 Compared with First Quarter 1994
- ---------------------------------------------------
The Company's first quarter 1995 net income increased 285% to $96.9 million from
$25.2 million for the same period in 1994. Reported earnings for the first
quarter of 1994 included the results of the Company's former printing and
publishing subsidiary, S. D. Warren, which was sold in December 1994 and is
reflected as a discontinued operation. Earnings per share for the first quarter
of 1995 increased 276% to $.64 from $.17 in 1994, after restating both periods
to reflect the Company's two-for-one stock split effective in May 1995. Dollar
sales in the first quarter of 1994 increased 21% to $1.0 billion.
The quarter represented the Company's second consecutive all-time record
quarterly earnings and reflected significant increases in sales, income from
operations and margins from the company's core tissue business.
Income from operations for the consolidated global tissue business increased
126% compared to the same period last year. All regions reported increased
sales and significantly higher earnings. The overall operating margin for the
tissue business increased to a new record level of 16.5%, primarily due to
higher selling prices and reduced manufacturing costs resulting from the 1994
restructuring as well as aggressive execution of strategic cost reductions.
These positive factors more than offset higher pulp prices and other
inflationary pressures.
Income from operations for the U.S. tissue business increased approximately 130%
from the same quarter in 1994, while sales revenue increased 20% on 8% higher
unit volume. During the quarter, price increases were implemented across all
markets and additional price increases have been announced.
Outside the U.S., earnings of the European tissue business increased 150% from
1994. Sales revenue increased more than 20% compared with 1994, due to higher
prices while volumes were essentially level with 1994.
In the combined Pacific and Latin American area, income from operations
increased 57% over the 1994 level. Sales revenue increased by more than 20%,
with volume increasing 14% above the prior year level. During the quarter, the
Company also announced it had signed a letter of intent to establish a joint
venture with Pudumjee Argo Industries Ltd., India's sole producer of tissue
paper, to produce Scott's products for the Indian market. The Company also
announced it had received regulatory approval for its previously announced joint
venture in China.
Scott's share of earnings from its equity affiliates was $5.6 million compared
to $7.0 million in 1994. The 1995 results include a charge of $5.6 million
related to the impact of the devaluation of the Mexican peso.
With the completion of the four-point revitalization program announced in 1994,
the Company announced a new four-part plan to:
1. Implement a global growth strategy
2. Accelerate product innovation, presentation and extension
3. Build a strong financial position and
4. Drive earnings growth and shareholder value.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
Financial Condition
- -------------------
Liquidity and Capital Resources
- -------------------------------
Cash used for operations during the first three months of 1995 was $267 million
compared with cash provided by operations of $8.2 million in the first three
months of 1994. The cash used by operations was due to higher net income being
more than offset by increased postretirement benefits funding and higher working
capital. The increase in working capital was due to a reduction in accrued
taxes on income due to tax payments made related to the 1994 sales of S. D.
Warren and other non-core assets of approximately $200 million as well as higher
receivables balances due to increased sales and decreases in payables to
suppliers and others. Accruals for restructuring programs also decreased
primarily due to the continuation of severance payments related to the work
force reductions made as part of the 1994 restructuring program.
Capital expenditures were $65 million during the first three months of 1995
compared with $87.8 million during the same period in 1994. During 1995 and
1996, the Company plans to invest $550-650 million in capital projects. The
projects include continued spending on the tissue mill in Owensboro, Kentucky,
the new converting facility in Arizona, and other projects designed to sustain
existing operations and reduce costs. The Company expects to finance this
spending from internally generated funds.
During the first quarter of 1995, the Company also completed the sale of its
foodservice businesses in the U.S. and U.K. and its remaining interest in Scott
Health Care. The Company also announced that it had signed a letter of intent
to sell its Chester, Pa. cogeneration facility to CRSS Inc., an independent
power and industrial energy project developer, for $170 million, subject to
certain adjustments and regulatory approvals. The Company also announced that
it had signed a letter of intent to sell its Corporate headquarters complex to
the Koll Company for $39 million. As part of its strategy to focus on its core
tissue business and reduce capital intensity, the Company has also announced
plans to divest various pulp mill and timber assets.
Total debt at April 1, 1995, was $1,219.8 million compared with $2,585 million
at March 26, 1994, and $1,857.9 million at December 31, 1994. During the first
three months of 1995, the Company's financing activities included the retirement
of $711.6 million in debt. In addition, as part of the Company's previously
announced share repurchase plan, approximately 765,000 shares (1,530,000 shares
after giving effect to the two-for-one stock split effective in May 1995) were
repurchased at a cost of approximately $61.2 million.
On April 18, 1995, the Board of Directors authorized a two-for-one stock split
of common shares. The additional common shares were issued on May 12, 1995, to
shareholders of record on April 28, 1995.
To maintain financing flexibility, the Company maintains two long-term revolving
credit agreements totaling $775 million, all unused at April 1, 1995.
The Company's debt to equity ratios at April 1, 1995, December 31, 1994, and
March 26, 1994, are set forth below:
<TABLE>
<CAPTION>
April 1, 1995 December 31, 1994 March 26, 1994
------------- ----------------- --------------
<S> <C> <C> <C>
Debt to equity 68% 106% 162%
</TABLE>
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS (Continued)
April 1, 1995, Compared with March 26, 1994
- -------------------------------------------
Total assets were $4,676.2 million at April 1, 1995, a decrease of $1,873.4
million or 29% compared with total assets of $6,549.6 million at March 26, 1994.
The decrease was primarily due to the 1994 sales of S. D. Warren and other non-
core businesses.
Total liabilities were $2,870.5 million at April 1, 1995, a decrease of $2,082.4
million or 42% compared with total liabilities of $4,952.9 million at March 26,
1994. The decrease was primarily due to the 1994 sales of S. D. Warren and
other non-core assets, as well as the Company's debt retirement program.
Common shareholders' equity at April 1, 1995, was $1,798.6 million, an increase
of $209 million compared with the March 26, 1994, balance of $1,589.6 million
due primarily to net income, foreign currency translation adjustments and the
exercise of stock options, which were partially offset by the Company's
previously announced share repurchase program and dividends paid.
April 1, 1995, Compared with December 31, 1994
- ----------------------------------------------
Total assets at April 1, 1995, were $4,676.2 million, a decrease of $949.9
million or 17% compared with total assets of $5,626.1 million at December 31,
1994. This was primarily due to a decrease in cash and cash equivalents related
to the Company's debt retirement program and income tax payments made related to
the 1994 sales of S. D. Warren and other non-core assets.
Total liabilities were $2,870.5 million at April 1, 1995, a decrease of $1,003.2
million or 26% compared with total liabilities of $3,873.7 million at December
31, 1994. The decrease was primarily due to significantly lower debt levels due
to the Company's debt retirement program and reductions in balances of accrued
taxes on income due to tax payments.
Common shareholders' equity at April 1, 1995, of $1,798.6 million was $53.3
million higher than the balance at December 31, 1994 of $1,745.3 million due
primarily to net income, foreign currency translation adjustments and the
exercise of stock options, which were partially offset by the Company's
previously announced share repurchase program and dividends.
10
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
In Item 3 of the Company's Form 10-K for 1994, it was stated that the
federal actions relating to breast implants had been consolidated in the
Northern District of Alabama for pretrial purposes. On April 25, 1995, the Court
granted the Company's motion for summary judgment and dismissed with prejudice
all claims pending against the Company and the purchaser of the Company's former
Foam Division. While it is probable that this decision will be appealed by the
plaintiffs, the Company continues to believe its defenses to these claims are
meritorious and that the final results of these claims, while they cannot be
predicted with certainty, will not have a material adverse effect on the
Company's financial condition.
Item 4. Submission of Matters to a vote of Security Holders
---------------------------------------------------
At the Annual Meeting of the Company's Shareholders held on April 18,
1995, the following persons were duly nominated and elected to serve as
Directors on the Company's Board of Directors. The numbers of votes for and
withheld for each individual Director are set forth opposite his or her name:
<TABLE>
<CAPTION>
For Withheld
--- --------
<S> <C> <C>
William A. Andres 66,396,514 332,769
Gilberte E. Beaux 66,298,778 430,505
Mark C. Davis 66,062,125 667,158
Albert J. Dunlap 66,351,105 378,178
John F. Fort, III 66,384,798 344,485
Peter Harf 66,412,853 316,430
Howard G. Kristol 65,617,712 1,111,571
Richard K. Lochridge 66,383,928 345,355
Gary L. Roubos 66,384,134 345,149
</TABLE>
A proposal to approve the adoption of the Non-Employee Directors'
Compensation Plan was adopted with 58,022,936 votes in favor, 6,988,861 votes
against and 1,717,486 votes abstaining.
A proposal to approve the adoption of a performance goal applicable to
restricted stock grants under the 1994 Long-Term Incentive Plan was adopted with
63,996,803 votes in favor, 1,002,388 votes against and 1,730,097 votes
abstaining.
A proposal to approve the action of the Board of Directors in appointing
Coopers & Lybrand, independent accountants, to be the Company's auditors for the
year 1995 was adopted with 66,458,143 votes in favor, 110,731 votes opposed and
160,409 votes abstaining.
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits:
<TABLE>
<CAPTION>
Number Description
- ------ -----------
<S> <C>
3(b) The Company's Bylaws, amended February 21, 1995,
effective April 18, 1995
10(a) Form of Restricted Stock Agreement dated as of
September 16, 1994 between the Company and grantees
of restricted shares under the 1994 Long-Term
Incentive Plan
10(b) The Company's Performance Plan, including Schedule
1 thereto, as amended effective January 1, 1995
10(c) The Company's Performance Award Deferral Plan, as
amended effective January 1, 1995
10(d) The Company's Deferred Compensation Plan, as amended
effective January 1, 1995
10(e) Amendment to Employment Agreement between the
Company and Albert J. Dunlap dated February 24, 1995
10(f) Form of Agreement dated March 6, 1995 between the Company
and each of Basil L. Anderson, Russell A. Kersh, John P.
Murtagh, Richard R. Nicolosi and P. Newton White
10(g) Form of Agreement dated February 24, 1995 between the
Company and each of Basil L. Anderson, Russell A. Kersh,
John P. Murtagh, Richard R. Nicolosi and P. Newton White
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the first quarter of 1995.
12
<PAGE>
SIGNATURES
----------
Pursuant to the requirements 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.
Scott Paper Company
-------------------------------
(Registrant)
DATE: May 15, 1995 /s/ Edward B. Betz
---------------- --------------------------------
Edward B. Betz
Vice President & Controller
(Authorized Signer and
Chief Accounting Officer)
13
<PAGE>
EXHIBIT INDEX
Number Description
- ------ -----------
3(b) The Company's Bylaws, amended February 21, 1995, effective
April 18, 1995
10(a) Form of Restricted Stock Agreement dated as of September 16, 1994
between the Company and grantees of restricted shares under the 1994
Long-Term Incentive Plan
10(b) The Company's Performance Plan, including Schedule 1 thereto, as
amended effective January 1, 1995
10(c) The Company's Performance Award Deferral plan, as amended effective
January 1, 1995
10(d) The Company's Deferred Compensation plan, as amended effective
January 1, 1995
10(e) Amendment to Employment Agreement between the Company and
Albert J. Dunlap dated February 24, 1995
10(f) Form of Agreement dated March 6, 1995 between the Company and each of
Basil L. Anderson, Russell A. Kersh, John P. murtagh, Richard R.
Nicolosi and P. Newton White
10(g) Form of Agreement dated February 24, 1995 between the Company and
each of Basil L. Anderson, Russell A. Kersh, John P. Murtagh, Richard
R. Nicolosi and P. Newton White
<PAGE>
Exhibit 3(b)
- ------------
BYLAWS
of
SCOTT PAPER COMPANY
(a Pennsylvania Registered Corporation)
[As Amended Effective April 18, 1995]
ARTICLE I
Offices and Fiscal Year
Section 1.01. Registered Office. The registered office of the corporation
-----------------
in the Commonwealth of Pennsylvania shall be at Industrial Highway at Tinicum
Island Road, Delaware County, until otherwise established by the Board of
Directors and a record of such change is filed with the Department of State in
the manner provided by law, and the post office address shall be Scott Plaza,
Philadelphia, Pennsylvania 19113.
Section 1.02. Other Offices. The corporation may also have offices at
-------------
such other places within or without the Commonwealth of Pennsylvania as the
Board of Directors may from time to time appoint or the business of the
corporation may require.
Section 1.03. Fiscal Year. The fiscal year of the corporation shall end
-----------
on the last Saturday in December of each year.
ARTICLE II
Notice, Waivers and Meetings Generally
Section 2.01. Manner of Giving Notice.
-----------------------
(a) General Rule. Whenever written notice is required to be given to any
------------
person under the provisions of the Business Corporation Law or by the articles
or these bylaws, it may be given to the person either personally or by sending a
copy thereof by any class of mail permitted under the Business Corporation Law,
postage prepaid, or by telegram (with messenger service specified), or courier
service, charges prepaid, or by telecopier, to the address (or to the telecopier
or telephone number) of the person appearing on the books of the corporation or,
in the case of Directors, supplied by the Director to the corporation for the
purpose of notice. If the notice is sent by mail, telegraph or courier service,
it shall be deemed to have been given to the person entitled thereto when
deposited in the United States mail or with a telegraph office or courier
service for delivery to that person or, in the case of telecopier, when
transmitted. A notice of meeting shall specify the place, day and hour of the
meeting and any other information required by any other provision of the
Business Corporation Law, the articles or these bylaws.
(b) Adjourned Shareholder Meetings. When a meeting of shareholders is
------------------------------
adjourned, it shall not be necessary to give any notice of the adjourned meeting
or of the business to be transacted at an adjourned meeting, other than by
announcement at the meeting at which the adjournment is taken, unless the Board
of Directors fixes a new record date for the adjourned meeting.
Section 2.02. Notice of Meetings of Board of Directors. Notice of a
----------------------------------------
regular meeting of the Board of Directors need not be given. Notice of every
special meeting of the Board of Directors shall be given to each Director by
1
<PAGE>
telephone or in writing at least 24 hours (in the case of notice by telephone)
or 48 hours (in the case of notice by telecopier, telegram, courier service or
express mail) or three days (in the case of notice by first-class mail) before
the time at which the meeting is to be held. Every such notice shall state the
date, time and place of the meeting. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in a notice of the meeting.
Section 2.03. Notice of Meetings of Shareholders.
----------------------------------
(a) General Rule. Written notice of every meeting of the shareholders
------------
shall be given by, or at the direction of, the Secretary to each shareholder of
record entitled to vote at the meeting at least (1) ten days prior to the day
named for a meeting called to consider amendment of the articles or adoption of
a plan of merger, consolidation, exchange, asset transfer, division or
conversion or adoption of a proposal of dissolution or (2) five days prior to
the day named for the meeting in any other case. If the Secretary neglects or
refuses to give notice of a meeting, the person or persons calling the meeting
may do so. In the case of a special meeting of shareholders, the notice shall
specify the general nature of the business to be transacted.
(b) Notice of Action by Shareholders on Bylaws. In the case of a meeting
------------------------------------------
of shareholders that has as one of its purposes action on the bylaws, written
notice shall be given to each shareholder that the purpose, or one of the
purposes, of the meeting is to consider the adoption, amendment or repeal of the
bylaws. There shall be included in, or enclosed with, the notice a copy of the
proposed amendment or a summary of the changes to be effected thereby.
Section 2.04. Waiver of Notice.
----------------
(a) Written Waiver. Whenever any written notice is required to be given
--------------
under the provisions of the Business Corporation Law, the articles or these
bylaws, a waiver thereof in writing, signed by the person or persons entitled to
the notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of the notice. Except as otherwise required by this
subsection, neither the business to be transacted at, nor the purpose of, a
meeting need be specified in the waiver of notice of the meeting. In the case of
a special meeting of shareholders, the waiver of notice shall specify the
general nature of the business to be transacted.
(b) Waiver by Attendance. Attendance of a person at any meeting shall
--------------------
constitute a waiver of notice of the meeting except where a person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting was not lawfully called
or convened.
Section 2.05. Use of Conference Telephone and Similar Equipment. One or
-------------------------------------------------
more persons may participate in a meeting of the Board of Directors, and if so
specified by a resolution of the Board of Directors with respect to a meeting of
the shareholders of the corporation, by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other. Participation in a meeting pursuant to this
section shall constitute presence in person at the meeting.
ARTICLE III
Shareholders
Section 3.01. Place of Meetings. All meetings of the shareholders of the
-----------------
corporation shall be held at the registered office of the corporation unless
another place has been designated by the Board of Directors and is set forth in
the notice of such meeting.
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Section 3.02. Annual Meeting. The Board of Directors may fix and
--------------
designate the date and time of the annual meeting of the shareholders, but if no
such date and time is fixed and designated by the Board of Directors, the
meeting for any calendar year shall be held on the third Tuesday of April in
such year, if not a legal holiday under the laws of Pennsylvania, and, if a
legal holiday, then on the next succeeding business day, at ten o'clock a.m.,
and at said meeting the shareholders then entitled to vote shall elect Directors
and shall transact such other business as may properly be brought before the
meeting. If the annual meeting shall not have been called and held within six
months after the designated time, any shareholder may call the meeting at any
time thereafter.
Section 3.03. Special Meetings. Special meetings of the shareholders may
----------------
be called at any time by resolution of the Board of Directors, which may fix the
date, time and place of the meeting. If the Board does not fix the date, time
or place of the meeting, it shall be the duty of the Secretary to do so. A date
fixed by the Secretary shall not be more than 60 days after the date of the
adoption of the resolution of the Board calling the special meeting.
Section 3.04. Quorum and Adjournment.
----------------------
(a) General Rule. A meeting of shareholders of the corporation duly
------------
called shall not be organized for the transaction of business unless a quorum is
present. The presence of shareholders entitled to cast at least a majority of
the votes that all shareholders are entitled to cast on a particular matter to
be acted upon at the meeting shall constitute a quorum for the purposes of
consideration and action on the matter. Shares of the corporation owned,
directly or indirectly, by it and controlled, directly or indirectly, by the
Board of Directors of this corporation, as such, shall not be counted in
determining the total number of outstanding shares for quorum purposes at any
given time.
(b) Withdrawal of a Quorum. The shareholders present at a duly organized
----------------------
meeting can continue to do business until adjournment notwithstanding the
withdrawal of enough shareholders to leave less than a quorum.
(c) Adjournments Generally. Any regular or special meeting of the
----------------------
shareholders, including one at which Directors are to be elected and one which
cannot be organized because of absence of a quorum, may be adjourned for such
period and to such place as the shareholders present and entitled to vote shall
direct.
(d) Electing Directors at Adjourned Meeting. Those shareholders entitled
---------------------------------------
to vote who attend a meeting called for the election of Directors that has been
previously adjourned for lack of a quorum, although less than a quorum as fixed
in this section, shall nevertheless constitute a quorum for the purpose of
electing Directors.
(e) Other Action in Absence of Quorum. Those shareholders entitled to
---------------------------------
vote who attend a meeting of shareholders that has been previously adjourned for
one or more periods aggregating at least 15 days because of an absence of a
quorum, although less than a quorum as fixed in this section, shall nevertheless
constitute a quorum for the purpose of acting upon any matter set forth in the
notice of the meeting if the notice states that those shareholders who attend
the adjourned meeting shall nevertheless constitute a quorum for the purpose of
acting upon the matter.
Section 3.05. Action by Shareholders. Except as otherwise provided in the
----------------------
Business Corporation Law or the articles or these bylaws, whenever any corporate
action is to be taken by vote of the shareholders of the corporation, it shall
be authorized by a majority of the votes cast at a duly organized meeting of
shareholders by the holders of shares entitled to vote thereon. Except when
acting by unanimous consent to remove a Director or Directors, the shareholders
of the corporation may act only at a duly organized meeting.
3
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Section 3.06. Organization. At every meeting of the shareholders, the
------------
Chairman of the Board, if there be one, or in the case of vacancy in office or
absence of the Chairman of the Board, one of the following officers present in
the order stated: the Vice Chairman of the Board, if there be one, the
President, the Vice Presidents in their order of rank and seniority, or a
Chairman chosen by vote of the shareholders present, shall act as Chairman. The
Secretary, or, in the absence of the Secretary, an Assistant Secretary, or in
the absence of both the Secretary and every Assistant Secretary, a person
appointed by the Chairman shall act as Secretary.
Section 3.07. Voting Rights of Shareholders. Unless otherwise provided in
-----------------------------
the articles, every shareholder of the corporation shall be entitled to one vote
for every share standing in the name of the shareholder on the books of the
corporation.
Section 3.08. Determination of Shareholders of Record.
---------------------------------------
(a) Fixing Record Date. The Board of Directors may fix a time prior to
------------------
the date of any meeting of shareholders as a record date for the determination
of the shareholders entitled to notice of, or to vote at, the meeting, which
time, except in the case of an adjourned meeting, shall be not more than 90 days
prior to the date of the meeting of shareholders. Only shareholders of record
on the date fixed shall be so entitled notwithstanding any transfer of shares on
the books of the corporation after any record date fixed as provided in this
subsection. The Board of Directors may similarly fix a record date for the
determination of shareholders of record for any other purpose. When a
determination of shareholders of record has been made as provided in this
section for purposes of a meeting, the determination shall apply to any
adjournment thereof unless the Board of Directors fixes a new record date for
the adjourned meeting.
(b) Determination When No Record Date Fixed. If a record date is not
---------------------------------------
fixed:
(1) The record date for determining shareholders entitled to notice
of or to vote at a meeting of shareholders shall be at the close of business on
the day immediately preceding the day on which notice is given.
(2) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
(c) Certification by Nominee. The Board of Directors may adopt a
------------------------
procedure whereby a shareholder of the corporation may certify in writing to the
corporation that all or a portion of the shares registered in the name of the
shareholder are held for the account of a specified person or persons. Upon
receipt by the corporation of a certification complying with the procedure, the
persons specified in the certification shall be deemed, for the purposes set
forth in the certification, to be the holders of record of the number of shares
specified in place of the shareholder making the certification.
Section 3.09. Voting and Other Action by Proxy.
--------------------------------
(a) General Rule.
------------
(1) Every shareholder entitled to vote at a meeting of
shareholders may authorize another person to act for the shareholder by proxy.
(2) The presence of, or vote or other action at a meeting of
shareholders by a proxy of a shareholder shall constitute the presence of, or
vote or action by the shareholder.
4
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(3) Where two or more proxies of a shareholder are present, the
corporation shall, unless otherwise expressly provided in the proxy, accept as
the vote of all shares represented thereby the vote cast by a majority of them
and, if a majority of the proxies cannot agree whether the shares represented
shall be voted or upon the manner of voting the shares, the voting of the shares
shall be divided equally among those persons.
(b) Minimum Requirements. Every proxy shall be executed in writing by
--------------------
the shareholder or by the duly authorized attorney-in-fact of the shareholder
and filed with the Secretary of the corporation. A proxy, unless coupled with an
interest, shall be revocable at will, notwithstanding any other agreement or any
provision in the proxy to the contrary, but the revocation of a proxy shall not
be effective until written notice thereof has been given to the Secretary of the
corporation. An unrevoked proxy shall not be valid after three years from the
date of its execution unless a longer time is expressly provided therein. A
proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of the
death or incapacity is given to the Secretary of the corporation.
(c) Expenses. The corporation shall pay the reasonable expenses of
--------
solicitation of votes, proxies or consents of shareholders by or on behalf of
the Board of Directors or its nominees for election to the Board, including
solicitation by professional proxy solicitors and otherwise.
Section 3.10. Voting by Corporations.
----------------------
(a) Voting by Corporate Shareholders. Any corporation that is a
--------------------------------
shareholder of this corporation may vote at meetings of shareholders of this
corporation by any of its officers or agents, or by proxy appointed by any
officer or agent, unless some other person, by resolution of the Board of
Directors of the other corporation or a provision of its articles or bylaws, a
copy of which resolution or provision certified to be correct by one of its
officers has been filed with the Secretary of this corporation, is appointed its
general or special proxy in which case that person shall be entitled to vote the
shares.
(b) Controlled Shares. Shares of this corporation owned, directly or
-----------------
indirectly, by it and controlled, directly or indirectly, by the Board of
Directors of this corporation, as such, shall not be voted at any meeting and
shall not be counted in determining the total number of outstanding shares for
voting purposes at any given time.
Section 3.11. Voting Lists.
------------
(a) General Rule. The officer or agent having charge of the transfer
------------
books for shares of the corporation shall make a complete list of the
shareholders entitled to vote at any meeting of shareholders, arranged in
alphabetical order, with the address of and the number of shares held by each.
The list shall be produced and kept open at the time and place of the meeting
and shall be subject to the inspection of any shareholder during the whole time
of the meeting for the purposes thereof except that, if the corporation has
5,000 or more shareholders, in lieu of the making of the list the corporation
may make the information required therein available at the meeting by any other
means.
(b) Effect of List. Failure to comply with the requirements of this
--------------
section shall not affect the validity of any action taken at a meeting prior to
a demand at the meeting by any shareholder entitled to vote thereat to examine
the list. The original share register or transfer book, or a duplicate thereof
kept in the Commonwealth of Pennsylvania, shall be prima facie evidence as to
who are the shareholders entitled to examine the list or share register or
transfer book or to vote at any meeting of shareholders.
5
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Section 3.12. Judges of Election.
------------------
(a) Appointment. In advance of any meeting of shareholders of the
-----------
corporation, the Board of Directors may appoint judges of election, who need not
be shareholders, to act at the meeting or any adjournment thereof. If judges of
election are not so appointed, the presiding officer of the meeting may, and on
the request of any shareholder shall, appoint judges of election at the meeting.
The number of judges shall be one or three. A person who is a candidate for an
office to be filled at the meeting shall not act as a judge.
(b) Vacancies. In case any person appointed as a judge fails to
---------
appear or fails or refuses to act, the vacancy may be filled by appointment made
by the Board of Directors in advance of the convening of the meeting or at the
meeting by the presiding officer thereof.
(c) Duties. The judges of election shall determine the number of
------
shares outstanding and the voting power of each, the shares represented at the
meeting, the existence of a quorum, the authenticity, validity and effect of
proxies, receive votes or ballots, hear and determine all challenges and
questions in any way arising in connection with the right to vote, count and
tabulate all votes, determine the result and do such acts as may be proper to
conduct the election or vote with fairness to all shareholders. The judges of
election shall perform their duties impartially, in good faith, to the best of
their ability and as expeditiously as is practical. If there are three judges of
election, the decision, act or certificate of a majority shall be effective in
all respects as the decision, act or certificate of all.
(d) Report. On request of the presiding officer of the meeting or of
------
any shareholder, the judges shall make a report in writing of any challenge or
question or matter determined by them, and execute a certificate of any fact
found by them. Any report or certificate made by them shall be prima facie
evidence of the facts stated therein.
Section 3.13. Nominations for Director.
------------------------
A nomination for election of a Director may be made by any shareholder
entitled to vote for the election of Directors only if written notice (the
"Notice") of such shareholder's intent to nominate a Director at the meeting is
given by the shareholder and received by the Secretary of the corporation in the
manner and within the time specified herein. The Notice shall be delivered to
the Secretary of the corporation not less than 60 days prior to the date fixed
by these bylaws for the annual meeting of shareholders; provided, however, that
if Directors are to be elected by the shareholders at any other time, the Notice
shall be delivered to the Secretary of the corporation not later than the
seventh day following the day on which notice of the meeting was first mailed to
shareholders. In lieu of delivery to the Secretary of the corporation, the
Notice may be mailed to the Secretary of the corporation by certified mail,
return receipt requested, but shall be deemed to have been given only upon
actual receipt by the Secretary of the corporation.
The Notice shall be in writing and shall contain or be accompanied by:
(a) the name and residence of such shareholder;
(b) a representation that the shareholder is a holder of the corporation's
voting stock and intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the Notice:
(c) such information regarding each nominee as would have been required to
be included in a proxy statement filed pursuant to Regulation 14A of the rules
and regulations established by the Securities Exchange Act of 1934 (or pursuant
to any successor act or regulation) had proxies been solicited with respect to
such nominee by the management or Board of Directors of the corporation:
6
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(d) a description of all arrangements or understandings among the
shareholder and each nominee and any other person or persons (naming such person
or persons) pursuant to which such nomination or nominations are to be made by
the shareholder; and
(e) the consent of each nominee to serve as Director of the corporation if
so elected.
The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that any nomination made at the meeting was not made in
accordance with the foregoing procedures and, in such event, the nomination
shall be disregarded.
The Board of Directors shall determine in good faith whether the proposed
nominee meets the qualifications for Director as set forth in these bylaws or in
a resolution approved by the Board of Directors or the committee of the Board of
Directors responsible for identifying candidates for Director.
ARTICLE IV
Board of Directors
Section 4.01. Powers; Personal Liability.
--------------------------
(a) General Rule. Unless otherwise provided by the Business
------------
Corporation Law, all powers vested by law in the corporation shall be exercised
by or under the authority of, and the business and affairs of the corporation
shall be managed under the direction of, the Board of Directors.
(b) Personal Liability of Directors.
-------------------------------
A Director shall not be personally liable for monetary damages, as
such, for any action taken, or any failure to take any action, unless the
Director has breached or failed to perform the duties of his or her office under
Section 1721 of the Business Corporation Law and the breach or failure to
perform constitutes self-dealing, willful misconduct or recklessness. The
provisions of this subsection shall not apply to the responsibility or liability
of a Director pursuant to any criminal statute or the liability of a Director
for the payment of taxes pursuant to local, state or federal law.
(The provisions of this subsection (b) were first adopted by the shareholders of
the corporation on April 21, 1987 and referenced the predecessor to Section 1721
of the Business Corporation Law.)
(c) Notation of Dissent. A Director who is present at a meeting of the
-------------------
Board of Directors, or of a committee of the Board, at which action on any
corporate matter is taken shall be presumed to have assented to the action taken
unless his or her dissent is entered in the minutes of the meeting or unless the
Director files a written dissent to the action with the Secretary of the meeting
before the adjournment thereof or transmits the dissent in writing to the
Secretary of the corporation immediately after the adjournment of the meeting.
The right to dissent shall not apply to a Director who voted in favor of the
action. Nothing in this section shall bar a Director from asserting that
minutes of the meeting incorrectly omitted his or her dissent if, promptly upon
receipt of a copy of such minutes, the Director notifies the Secretary, in
writing, of the asserted omission or inaccuracy.
Section 4.02. Qualifications and Selection of Directors.
-----------------------------------------
(a) Qualifications. No person shall be eligible to serve as a Director
--------------
(1) unless he or she is a natural person of full age, (2) unless he or she is a
shareholder of the corporation, (3) after the termination of his or her service
as an officer of the corporation, unless his or her further service as a
Director is approved by resolution of the Board, or (4) after the Annual
7
<PAGE>
Meeting of Shareholders coincident with or next following his or her attainment
of age seventy (70). When any person serving as a Director shall cease to be
eligible to serve as such pursuant to item (2), (3) or (4) of the foregoing
requirements, he or she shall immediately cease to be a Director and his or her
office shall thereupon become vacant.
(b) Selection. Except as otherwise provided in these bylaws, Directors
---------
of the corporation shall be elected by the shareholders. If prior to any such
election the Chairman or the Secretary shall receive notice that any person, who
is listed as a nominee for the office of Director in the proxy statement that is
mailed to the shareholders in connection with such meeting, has for any reason
become unable or unwilling to serve as a Director, the number of Directors to be
elected at such meeting shall automatically be reduced by the number of such
persons, but without limiting the authority of the Board of Directors to
increase or further decrease the number of Directors either prior or subsequent
to such meeting.
Section 4.03. Number and Term of Office.
-------------------------
(a) Number. The Board of Directors shall consist of such number of
------
Directors, not less than seven (7) nor more than nine (9), as may be determined
from time to time by resolution of the Board of Directors.
(b) Term of Office. Each Director shall hold office for one year and
--------------
until the expiration of the term for which he or she was selected and until a
successor has been selected and qualified or until his or her earlier death,
resignation or removal. A decrease in the number of Directors shall not have
the effect of shortening the term of any incumbent Director.
(c) Resignation. Any Director may resign at any time upon written
-----------
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as shall be specified in
the notice of resignation.
Section 4.04. Vacancies. Vacancies in the Board of Directors, including
---------
vacancies resulting from an increase in the number of Directors, may be filled
by a majority vote of the remaining members of the Board of Directors though
less than a quorum, or by a sole remaining Director, and each person so selected
shall be a Director to serve until a successor has been selected and qualified
or until his or her earlier death, resignation or removal.
Section 4.05. Removal of Directors.
--------------------
(a) Removal by the Shareholders. The entire Board of Directors or any
---------------------------
individual Director may be removed from office by vote of the shareholders
entitled to vote thereon without assigning any cause. In case the Board or any
one or more Directors are so removed, new Directors may be elected at the same
meeting.
(b) Removal by the Board. The Board of Directors may declare vacant
--------------------
the office of a Director who has been judicially declared of unsound mind or who
has been convicted of an offense punishable by imprisonment for a term of more
than one year or if, within 60 days after notice of his or her selection, the
Director does not accept the office either in writing or by attending a meeting
of the Board of Directors.
Section 4.06. Place of Meetings. Meetings of the Board of Directors may
-----------------
be held at such place within or without the Commonwealth of Pennsylvania as the
Board of Directors may from time to time appoint or as may be designated in the
notice of the meeting.
Section 4.07. Organization of Meetings. At every meeting of the Board of
------------------------
Directors, the Chairman of the Board, if there be one, or, in the case of a
vacancy in the office or absence of the Chairman of the Board, any other officer
8
<PAGE>
then serving as Chief Executive Officer, that Vice Chairman of the Board who is
most senior in his or her service as a Director and is present, the President,
that Vice President who is most senior in his or her service as a Director and
is present, or a Chairman chosen by a majority of the Directors present, shall
preside. The Secretary, or, in the absence of the Secretary, an Assistant
Secretary, or in the absence of the Secretary and every Assistant Secretary, any
person appointed by the Chairman of the meeting, shall act as Secretary.
Section 4.08. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held six times per year. The meetings shall be held at such
time and place as shall be designated from time to time by resolution of the
Board of Directors or by the Chairman of the Board in a notice given in
accordance with these bylaws. The Chairman of the Board may postpone any
regular meeting by giving notice, provided that two consecutive regular meetings
may not be postponed unless authorized by a resolution of the Board of
Directors.
Section 4.09. Special Meetings. Special meetings of the Board of
----------------
Directors shall be held whenever called by the Chairman or by two or more of the
Directors.
Section 4.10. Quorum of and Action by Directors.
---------------------------------
(a) General Rule. A majority of the Directors in office of the
------------
corporation shall be necessary to constitute a quorum for the transaction of
business and the acts of a majority of the Directors present and voting at a
meeting at which a quorum is present shall be the acts of the Board of
Directors.
(b) Action by Written Consent. Any action required or permitted to be
-------------------------
taken at a meeting of the Directors may be taken without a meeting if, prior or
subsequent to the action, a consent or consents thereto by all of the Directors
in office is filed with the Secretary of the corporation.
Section 4.11. Committees of the Board.
-----------------------
(a) Establishment and Powers. The Board of Directors may, by
------------------------
resolution adopted by a majority of the Directors in office, establish one or
more committees to consist of one or more Directors of the corporation. Any
committee, to the extent provided in the resolution of the Board of Directors,
shall have and may exercise all of the powers and authority of the Board of
Directors except that a committee shall not have any power or authority as to
the following:
(1) The submission to shareholders of any action requiring
approval of shareholders under the Business Corporation Law.
(2) The creation or filling of vacancies in the Board of
Directors.
(3) The adoption, amendment or repeal of these bylaws.
(4) The amendment or repeal of any resolution of the Board of
Directors that by its terms is amendable or repealable only by the Board of
Directors.
(5) Action on matters committed by a resolution of the Board of
Directors to another committee of the Board of Directors.
(b) Alternate Committee Members. The Board may designate one or more
---------------------------
Directors as alternate members of any committee who may replace any absent or
disqualified member at any meeting of the committee or for the purposes of any
written action by the committee. In the absence or disqualification of a member
and alternate member or members of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not
constituting a quorum, may unanimously appoint another Director to act at the
9
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meeting in the place of the absent or disqualified member.
(c) Term. Each committee of the Board of Directors shall serve at the
----
pleasure of the Board of Directors.
(d) Committee Procedures. The term "Board of Directors" when used in
--------------------
any provision of these bylaws relating to the organization or procedures of or
the manner of taking action by the Board of Directors, shall be construed to
include and refer to any committee of the Board of Directors.
Section 4.12. Compensation. The Board of Directors shall have the
------------
authority to fix the compensation of Directors for their services as Directors
and a Director may be a salaried officer of the corporation.
Section 4.13. Exercise of Fiduciary Duty. In taking action in the best
--------------------------
interests of the Company, the Board shall consider the long-term interests of
shareholders, in addition to considering any other factors that may be
pertinent, and shall always endeavor to take such action in a manner that
enhances the long-term interests of shareholders.
ARTICLE V
Officers
Section 5.01. Officers Generally.
------------------
(a) Number, Qualifications and Designation. The officers of the
--------------------------------------
corporation shall be a President, one or more Vice Presidents (of whom, if there
are more than one, one or more may be an Executive Vice President, Vice
President and Group Executive, Senior Vice President, or bear such other title
as may be designated by the Board of Directors), a Secretary, a Treasurer, a
Controller and such other officers as may be elected in accordance with the
provisions of Section 5.03. Officers may but need not be Directors or
shareholders of the corporation. The President and Secretary shall be natural
persons of full age. The Treasurer may be a corporation but, if a natural
person, shall be of full age. The Board of Directors may elect from among the
members of the Board a Chairman of the Board and one or more Vice Chairmen of
the Board, all of whom shall be officers of the corporation. Any number of
offices may be held by the same person, except that the same person shall not be
Treasurer and Controller.
(b) Bonding. The corporation may secure the fidelity of any or all of
-------
its officers by bond or otherwise.
Section 5.02. Election, Term of Office and Resignations.
-----------------------------------------
(a) Election and Term of Office. The officers of the corporation,
---------------------------
except those elected by delegated authority pursuant to Section 5.03, shall be
elected annually by the Board of Directors, and each such officer shall hold
office for a term of one year and until a successor has been selected and
qualified or until his or her earlier death, resignation or removal.
(b) Resignations. Any officer may resign at any time upon written
------------
notice to the corporation. The resignation shall be effective upon receipt
thereof by the corporation or at such subsequent time as may be specified in the
notice of resignation.
Section 5.03. Subordinate Officers, Committees and Agents. The Board of
-------------------------------------------
Directors may from time to time elect such other officers and appoint such
committees, employees or other agents as the business of the corporation may
require, including one or more Assistant Secretaries and one or more Assistant
Treasurers, each of whom shall hold office for such period, have such authority,
and perform such duties as are provided in these bylaws, or as the Board of
Directors may from time to time determine. The Board of Directors may delegate
10
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to any officer or committee the power to elect subordinate officers and to
retain or appoint employees or other agents, or committees thereof, and to
prescribe the authority and duties of such subordinate officers, committees,
employees or other agents.
Section 5.04. Removal of Officers and Agents. Any officer, committee,
------------------------------
employee or agent of the corporation may be removed, with or without cause, by
the Board of Directors and, if elected by an officer or committee given such
power by Section 5.03, by such officer or committee. The removal shall be
without prejudice to the contract rights, if any, of any person so removed.
Election or appointment of an officer, committee, employee or agent shall not of
itself create contract rights.
Section 5.05. Vacancies. A vacancy in any office because of death,
---------
resignation, removal, disqualification, or any other cause, may be filled by the
Board of Directors or by the officer or committee to which the power to fill
such office has been delegated pursuant to Section 5.03, as the case may be, and
if the office is one for which these bylaws prescribe a term, shall be filled
for the unexpired portion of the term.
Section 5.06. Authority. All officers of the corporation, as between
---------
themselves and the corporation, shall have such authority and perform such
duties in the management of the corporation as may be provided by or pursuant to
resolutions or orders of the Board of Directors or, in the absence of
controlling provisions in the resolutions or orders of the Board of Directors,
as may be determined by or pursuant to these bylaws.
Section 5.07. The Chief Executive Officer. The Chief Executive Officer of
---------------------------
the corporation shall have general supervision over the business and operations
of the corporation, subject however, to the control of the Board of Directors.
The Chief Executive Officer shall sign, execute and acknowledge, in the name of
the corporation, deeds, mortgages, bonds, contracts or other instruments,
authorized by the Board of Directors, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of Directors, or by
these bylaws, to some other officer or agent of the corporation; and, in
general, shall perform all duties incident to the office of a president of a
corporation and such other duties as from time to time may be assigned by the
Board of Directors. If a Chief Executive Officer has not been elected by the
Board of Directors and a President of the corporation has been elected, the
President shall perform the duties of the Chief Executive Officer.
Section 5.08. The Chairman and Vice Chairman of the Board. The Chairman
-------------------------------------------
of the Board or in the absence of the Chairman, the Vice Chairman of the Board,
shall preside at all meetings of the shareholders and of the Board of Directors,
and shall perform such other duties as may from time to time be requested by the
Board of Directors.
Section 5.09. The Vice Presidents. In the absence or unavailability of
-------------------
the Chief Executive Officer or the President, if there be one, the Vice
Presidents shall perform the duties of the President and such other duties as
may from time to time be assigned to them by the Board of Directors, the Chief
Executive Officer and the President.
Section 5.10. The Secretary. The Secretary or an Assistant Secretary
-------------
shall attend all meetings of the shareholders and of the Board of Directors and
shall record all the votes of the shareholders and of the Board of Directors and
the minutes of the meetings of the shareholders and of the Board of Directors
and of committees of the Board in a book or books to be kept for that purpose;
shall see that notices are given and records and reports properly kept and filed
by the corporation as required by law; shall be the custodian of the seal of the
corporation and see that it is affixed to all documents to be executed on behalf
of the corporation under its seal; and, in general, shall perform all duties
incident to the office of Secretary, and such other duties as may from time to
time be assigned by the Board of Directors, the Chief Executive Officer and the
11
<PAGE>
President.
Section 5.11. The Treasurer. The Treasurer or an Assistant Treasurer
-------------
shall have or provide for the custody of the funds or other property of the
corporation; shall collect and receive or provide for the collection and receipt
of moneys earned by or in any manner due to or received by the corporation;
shall deposit all funds in his or her custody as Treasurer in such banks or
other places of deposit as the Board of Directors may from time to time
designate; shall, whenever so required by the Board of Directors, render an
account showing all transactions as Treasurer, and the financial condition of
the corporation; and, in general, shall perform all duties incident to the
office of Treasurer and such other duties as may from time to time be assigned
by the Board of Directors, the Chief Executive Officer and the President.
Section 5.12. The Controller. The Controller shall have charge of the
--------------
accounts of the corporation and shall perform all duties incident to the office
of Controller and such other duties as may from time to time be assigned by the
Board of Directors, the Chief Executive Officer and the President.
Section 5.13. Assistant Officers. Each Assistant Officer shall, in the
------------------
absence or disability of his superior in office, perform the duties and exercise
the powers of such superior as directed by such superior, by the Chief Executive
Officer, or by the Board of Directors, and shall also have such other powers and
shall perform such other duties as may be granted to or required of him or her
in accordance with this Article or by his or her superior in office.
Performance of any of the duties or the exercise of any of the powers of his or
her superior in office by any such Assistant Officer shall, as to third parties,
be conclusive evidence of his or her authority to act in such respect.
Section 5.14. Salaries. The salaries of the officers elected by the Board
--------
of Directors shall be fixed from time to time by the Board of Directors or by
such committee as may be designated by resolution of the Board of Directors.
The salaries or other compensation of any other officers, employees and other
agents shall be fixed from time to time by the committee or officer as may be
designated by resolution of the Board. No officer shall be prevented from
receiving such salary or other compensation by reason of the fact that the
officer is also a Director of the corporation.
ARTICLE VI
Certificates of Stock, Transfer, Etc.
Section 6.01. Share Certificates. Certificates for shares of the
------------------
corporation shall be in such form as approved by the Board of Directors, and
shall state that the corporation is incorporated under the laws of the
Commonwealth of Pennsylvania, the name of the person to whom issued, and the
number and class of shares and the designation of the series (if any) that the
certificate represents. The share record books and blank share certificates
shall be kept by the Treasurer or by any transfer agent or registrar designated
by the Board of Directors for that purpose.
Section 6.02. Issuance. The share certificates of the corporation shall
--------
be numbered and registered in the share ledger and transfer books of the
corporation as they are issued. They shall be signed by the Chairman of the
Board, a Vice Chairman of the Board, the President or a Vice President and by
the Secretary or an Assistant Secretary or the Treasurer or an Assistant
Treasurer, and shall bear the corporate seal, which may be a facsimile, engraved
or printed; but where such certificate is signed by a transfer agent or a
registrar the signature of any corporate officer upon such certificate may be a
facsimile, engraved or printed. In case any officer who has signed, or whose
facsimile signature has been placed upon any share certificate shall have ceased
to be such officer because of death, resignation or otherwise, before the
12
<PAGE>
certificate is issued, it may be issued with the same effect as if the officer
has not ceased to be such at the date of its issue. The provisions of this
Section 6.02 shall be subject to any inconsistent or contrary agreement at the
time between the corporation and any transfer agent or registrar.
Section 6.03. Transfer. Transfers of shares shall be made on the books of
--------
the corporation upon surrender of the certificates therefor, endorsed by the
person named in the certificate or by an attorney lawfully constituted in
writing. No transfer shall be made inconsistent with the provisions of the
Uniform Commercial Code, 13 Pa.C.S. (S)(S)8101 et seq., and its amendments and
-- ----
supplements.
Section 6.04. Recordholder of Shares. The corporation shall be entitled
----------------------
to treat the person in whose name any share or shares of the corporation stand
on the books of the corporation as the absolute owner thereof, and shall not be
bound to recognize any equitable or other claim to, or interest in, such share
or shares on the part of any other person.
Section 6.05. Lost, Destroyed or Mutilated Certificates. The holder of
-----------------------------------------
any shares of the corporation shall immediately notify the corporation of any
loss, destruction or mutilation of the certificate therefor, and the Board of
Directors may, in its discretion, cause a new certificate or certificates to be
issued to such holder, in case of mutilation of the certificate, upon the
surrender of the mutilated certificate, or, in case of loss or destruction of
the certificate, upon satisfactory proof of such loss or destruction, and, if
the Board of Directors shall so determine, the deposit of a bond in such form
and in such sum, and with such surety or sureties, as it may direct.
ARTICLE VII
Indemnification of Directors, Officers and
Other Authorized Representatives
[Effective as to acts or omissions occurring after
April 20, 1976 and prior to April 21, 1987]
Section 7.01 Indemnification of Authorized Representatives in Third Party
------------------------------------------------------------
Proceedings. The corporation shall indemnify any person who was or is an
- -----------
"authorized representative" of the corporation (which shall mean for purposes of
this Article a Director, officer, employee or agent of the corporation or a
person serving at the request of the corporation as a director, officer,
partner, trustee, employee, or agent of another corporation, partnership, joint
venture, trust or other enterprise) and who was or is a party (which shall
include for purposes of this Article the giving of testimony or similar
involvement) or is threatened to be made a party to any "third party proceeding"
(which shall mean for purposes of this Article any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative,
or investigative, other than an action by or in the right of the corporation) by
reason of the fact that he or she was or is an authorized representative of the
corporation, against expenses (including attorneys' fees), judgments, penalties,
fines and amounts paid in settlement actually and reasonably incurred by him or
her in connection with such third party proceeding if he or she acted in good
faith and in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the corporation and, with respect to any criminal third
party proceeding (which shall include for the purposes of this Article any
administrative or investigative proceeding which could or does lead to a
criminal third party proceeding), had no reasonable cause to believe his or her
conduct was unlawful. The termination of any third party proceeding by
judgment, order, settlement, indictment, conviction or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- ----------
the authorized representative did not act in good faith and in a manner which he
or she reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to
13
<PAGE>
any criminal third party proceeding, had reasonable cause to believe that his or
her conduct was unlawful.
Section 7.02. Indemnification of Authorized Representatives in Derivative
-----------------------------------------------------------
Actions. The corporation shall indemnify any person who was or is an authorized
- -------
representative of the corporation and who was or is a party, or is threatened to
be made a party to any "derivative action" (which shall mean for purposes of
this Article any threatened, pending or completed action or suit by or in the
right of the corporation or procure a judgment in its favor) by reason of the
fact that he or she was or is an authorized representative of the corporation
against expenses (including attorneys' fees) actually and reasonably incurred by
him or her in connection with the defense or settlement of such derivative
action if he or she acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation
except that no indemnification shall be made in respect of any claim, issue or
matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation unless and only to the extent that the court of common pleas of the
county in which the registered office of the corporation is located or the court
in which such derivative action was pending shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such authorized representative is fairly and reasonably entitled to
indemnity for such expenses which the court of common pleas or such other court
shall deem proper.
Section 7.03. Mandatory Indemnification of Authorized Representatives.
-------------------------------------------------------
To the extent that an authorized representative of the corporation has been
successful on the merits or otherwise in defense of any third party proceeding
or derivative action or in defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith.
Section 7.04. Determination of Entitlement to Indemnification. Any
-----------------------------------------------
indemnification under Section 7.01., 7.02. or 7.03. of this Article (unless
ordered by a court) shall be made by the corporation only as authorized in the
specific case upon a determination that indemnification of the authorized
representative is proper in the circumstances because he or she has either met
the applicable standard of conduct set forth in Section 7.01. or 7.02. or has
been successful on the merits or otherwise as set forth in Section 7.03., and
that the amount requested has been actually and reasonably incurred. Such
determination shall be made:
(A) By the Board of Directors by a majority of a quorum consisting of
Directors who were not parties to such third party proceeding or derivative
action, or
(B) If such a quorum is not obtainable, or, even if obtainable a majority
vote of such a quorum so directs, by independent legal counsel in a written
opinion, or
(C) By the shareholders.
Section 7.05. Independent Legal Counsel. Independent legal counsel may be
-------------------------
appointed by the Board of Directors, even if a quorum consisting of Directors
who were not parties to the third party proceeding or derivative action is not
available, or by a person designated by the Board of Directors. Independent
legal counsel shall not include any employee of the corporation nor any law firm
which has rendered services to the corporation during the preceding three years.
If independent legal counsel shall determine in its written opinion that
indemnification is proper under this Article, it shall be made without further
action of the Board of Directors.
14
<PAGE>
Section 7.06. Advancing Expenses. Expenses actually and reasonably
------------------
incurred in defending a third party proceeding or derivative action shall be
paid on behalf of an authorized representative by the corporation in advance of
the final disposition of such third party proceeding or derivative action as
authorized in the manner provided in Section 7.04. of this Article upon receipt
of an undertaking by or on behalf of the authorized representative to repay such
amount unless it shall ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this Article. The financial
ability of such authorized representative to make such repayment shall not be a
prerequisite to the making of an advance.
Section 7.07. Scope of Article. The indemnification provided by this
----------------
Article shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any statute, agreement, vote of
shareholders or disinterested Directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be an authorized
representative and shall inure to the benefit of the heirs, executors and
administrators of such a person.
Section 7.08. Reliance on Provisions. Each person who shall act as an
----------------------
authorized representative of the corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided by this Article.
ARTICLE VIII
Indemnification of Directors, Officers and
Other Authorized Representatives
[Effective as to any act or failure to
act occurring on or after April 21, 1987]
Section 8.01. Indemnification of Authorized Representatives. The
---------------------------------------------
corporation shall indemnify any person who was or is an "authorized
representative" of the corporation (which shall mean for purposes of this
Article a Director, officer, employee or agent of the corporation, or a person
serving at the request of the corporation as a director, officer, partner,
trustee, employee, fiduciary or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other entity or enterprise) and who was
or is a party (which shall include for purposes of this Article the giving of
testimony or similar involvement) or is threatened to be made a party to any
"proceeding" (which shall mean for purposes of this Article any threatened,
pending or completed action, suit, appeal or proceeding of any nature, whether
civil, criminal, administrative, or investigative, whether formal or informal,
including an action by or in the right of the corporation or a class of its
security holders) by reason of the fact that he or she was or is an authorized
representative of the corporation, against any liability (which shall mean for
purposes of this Article any damage, judgment, penalty, fine, amount paid in
settlement, punitive damages, excise tax assessed with respect to an employee
benefit plan, or cost or expense of any nature [including, without limitation,
attorneys' fees and disbursements]) including, without limitation, liabilities
resulting from any actual or alleged breach or neglect of duty, error,
misstatement or misleading statement, negligence, gross negligence or act giving
rise to strict or products liability, except where such indemnification is for
acts or failures to act constituting self-dealing, willful misconduct or
recklessness. "Self-dealing" shall mean the receipt of a personal benefit from
the corporation to which the authorized representative is not legally entitled.
If an authorized representative is entitled to indemnification in respect of a
portion, but not all, of any liabilities to which such person may be subject,
the corporation shall indemnify such authorized representative to the maximum
extent for such portion of the liabilities. The termination of any proceeding
15
<PAGE>
by judgment, order, settlement, indictment or conviction or upon a plea of nolo
----
contendere or its equivalent, shall not, of itself, create a presumption that
- ----------
the authorized representative is not entitled to indemnification.
Section 8.02. Proceedings Initiated by Authorized Representatives.
---------------------------------------------------
Notwithstanding any other provision of this Article, the corporation shall not
indemnify under this Article an authorized representative for any liability
incurred in a proceeding initiated (which shall not be deemed to include
counter-claims or affirmative defenses) or participated in as an intervenor or
amicus curiae by the person seeking indemnification unless such initiation of or
- -------------
participation in the proceeding is authorized, either before or after its
commencement, by the affirmative vote of a majority of the Directors in office.
This section does not apply to successfully prosecuting or defending the rights
of an authorized representative granted by or pursuant to this Article.
Section 8.03. Advancing Expenses. Expenses (including attorneys' fees and
------------------
disbursements) incurred in good faith shall be paid by the corporation on behalf
of an authorized representative in advance of the final disposition of a
proceeding described in Section 8.01. of this Article upon receipt of an
undertaking by or on behalf of the authorized representative to repay such
amount if it shall ultimately be determined pursuant to Section 8.06. of this
Article that such person is not entitled to be indemnified by the corporation as
authorized in this Article. The financial ability of such authorized
representative to make such repayment shall not be a prerequisite to the making
of an advance.
Section 8.04. Securing of Indemnification Obligations. To further effect,
---------------------------------------
satisfy or secure the indemnification obligations provided herein or otherwise,
the corporation may maintain insurance, obtain a letter of credit, act as self-
insurer, create a reserve, trust, escrow, cash collateral or other fund or
account, enter into indemnification agreements, pledge or grant a security
interest in any assets or properties of the corporation, or use any other
mechanism or arrangement whatsoever in such amounts, at such costs, and upon
such other terms and conditions as the Board of Directors shall deem
appropriate. Absent fraud, the determination of the Board of Directors, with
respect to such amounts, costs, terms and conditions shall be conclusive against
all security holders, officers and Directors and shall not be subject to
voidability.
Section 8.05. Payment of Indemnification. An authorized representative
--------------------------
shall be entitled to indemnification within 30 days after a written request for
indemnification has been received by the Secretary of the corporation.
Section 8.06. Arbitration. Any dispute related to the right to
-----------
indemnification or advancement of expenses as provided under this Article,
except with respect to indemnification for liabilities arising under the
Securities Act of 1933 which the corporation has undertaken to submit to a court
for adjudication, shall be decided only by arbitration in the metropolitan area
in which the corporation's executive offices are located, in accordance with the
commercial arbitration rules then in effect of the American Arbitration
Association, before a panel of three arbitrators, one of whom shall be selected
by the corporation, the second of whom shall be selected by the authorized
representative and the third of whom shall be selected by the other two
arbitrators. In the absence of the American Arbitration Association or if for
any reason arbitration under the arbitration rules of the American Arbitration
Association cannot be initiated, or if the arbitrators selected by the
corporation and the authorized representative cannot agree on the selection of
the third arbitrator within 30 days after such time as the corporation and the
authorized representative have each been notified of the selection of the
other's arbitrator, the necessary arbitrator or arbitrators shall be selected by
the presiding judge of the court of general jurisdiction in such metropolitan
area. Each arbitrator selected as provided herein is required to be or have
been a director of a corporation whose shares of common stock were listed during
at least one year of such service on the New York Stock Exchange or the American
Stock Exchange or quoted on the National Association of Securities Dealers
16
<PAGE>
Automated Quotations Systems. The party or parties challenging the right of an
authorized representative to the benefits of this Article shall have the burden
of proof. The corporation shall reimburse an authorized representative for the
expenses (including attorneys' fees and disbursements) incurred in successfully
prosecuting or defending such arbitration. Any award entered by the arbitrators
shall be final, binding and nonappealable, and judgment may be entered thereon
by any party in accordance with applicable law in any court of competent
jurisdiction. This arbitration provision shall be specifically enforceable.
Section 8.07. Discharge of Duty. An authorized representative shall be
-----------------
deemed to have discharged such person's duty to the corporation if he or she has
relied in good faith on information, advice or an opinion, report or statement
prepared by:
(a) one or more officers or employees of the corporation whom such
authorized representative reasonably believes to be reliable and competent with
respect to the matter presented;
(b) legal counsel, public accountants or other persons as to matters
that the authorized representative reasonably believes are within the person's
professional or expert competence; or
(c) a committee of the Board of Directors on which he or she does not
serve as to matters within its area of designated authority, which committee he
or she reasonably believes to merit confidence.
Section 8.08. Contract Rights; Amendment or Repeal. All rights to
------------------------------------
indemnification under this Article shall be deemed a contract between the
corporation and the authorized representative pursuant to which the corporation
and each authorized representative intend to be legally bound. Any repeal,
amendment or modification hereof shall be prospective only and shall not affect
any rights or obligations then existing.
Section 8.09. Scope of Article. The indemnification and advancement of
----------------
expenses provided by, or granted pursuant to, this Article shall not be deemed
exclusive of any other rights to which a person seeking indemnification or
advancement of expenses may be entitled under any statute, certificate or
articles of incorporation, bylaw, agreement, vote of shareholders or Directors
or otherwise, both as to action in his or her official capacity and as to action
in any other capacity, and shall continue as to a person who has ceased to be an
authorized representative in respect of matters arising prior to such time and
shall inure to the benefit of the heirs, executors, administrators and personal
representatives of such a person.
Section 8.10. Reliance on Provisions. Each person who shall act as an
----------------------
authorized representative of the corporation shall be deemed to be doing so in
reliance upon the rights of indemnification provided by this Article.
ARTICLE IX
Miscellaneous
Section 9.01. Execution of Instruments. All checks, drafts, bills of
------------------------
exchange, acceptances, notes and other obligations and evidences of
indebtedness, deeds, conveyances, bills of sale, assignments and other
instruments of transfer and all other instruments and documents in writing of
any nature, may be signed, executed, accepted, endorsed, verified, acknowledged
or delivered on behalf of the corporation by such Officer or Officers or other
person or persons as the Board of Directors may from time to time designate.
The Board of Directors at its discretion may authorize the use of an appropriate
facsimile signature of any such Officer or person in lieu of his or her manual
signature.
17
<PAGE>
Section 9.02. Amendment of Bylaws. These bylaws may be amended or
-------------------
repealed, or new bylaws may be adopted, either (a) by vote of the shareholders
at any duly organized annual or special meeting of shareholders, or (b) with
respect to those matters which are not by statute committed expressly to the
shareholders and regardless of whether the shareholders have previously adopted
or approved the bylaw being amended or repealed, by vote of a majority of the
Board of Directors of the corporation in office at any regular or special
meeting of the Board of Directors. Any change in these bylaws shall take effect
when adopted unless otherwise provided in the resolution effecting the change.
18
<PAGE>
Exhibit 10(a)
- -------------
RESTRICTED STOCK AGREEMENT
SCOTT PAPER COMPANY
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
1. AWARD OF SHARES .................................................... 1
---------------
2. AWARD RESTRICTION .................................................. 1
-----------------
3. STOCK CERTIFICATES ................................................. 8
------------------
4. CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT .................... 9
-----------------------------------------------
5. WITHHOLDING TAXES .................................................. 10
-----------------
6. ADMINISTRATION ..................................................... 11
--------------
7. NO RIGHT TO CONTINUED EMPLOYMENT ................................... 11
--------------------------------
8. NON-COMPETITION .................................................... 11
---------------
9. NOTICE ............................................................. 13
------
10. ENTIRE AGREEMENT; CONFLICT WITH PLAN ............................... 13
------------------------------------
11. SHAREHOLDER APPROVAL; COMPENSATION LIMITATION ...................... 13
---------------------------------------------
12. FORCE AND EFFECT ................................................... 14
----------------
13. PREVAILING LAWS .................................................... 14
---------------
14. SUCCESSORS ......................................................... 14
----------
<PAGE>
RESTRICTED STOCK AGREEMENT
--------------------------
AGREEMENT, made as of _______________, 1994, by and between Scott
Paper Company, a Pennsylvania corporation (the "Company") and _______________
("Grantee");
WHEREAS, Scott Paper Company maintains the 1994 Long-Term Incentive
Plan ("Plan") under which the Compensation Committee of the Company's Board of
Directors ("Committee") may, among other things, award the Company's Common
Shares (the "Shares") to such employees of the Company and its United States
Subsidiaries as the Committee may determine, subject to such terms, conditions,
or restrictions as it may deem appropriate; and
WHEREAS, pursuant to the Plan, the Committee has awarded to the
Grantee a restricted stock award subject to the terms and conditions of this
Agreement.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. AWARD OF SHARES
---------------
In accordance with the provisions of the Plan, the Committee has
awarded to the Grantee on the date first set forth herein ("Initial Date") the
right to receive _______________ Shares ("Restricted Shares") subject to the
terms, conditions, and restrictions set forth herein and in the Plan.
Capitalized terms not otherwise defined herein shall be as defined in the Plan.
2. AWARD RESTRICTION
-----------------
(a) Ownership of the Restricted Shares shall not vest in the Grantee,
and such Restricted Shares shall be subject to forfeiture, until the conditions
of each of Sections 2(b) and 2(c) are fully satisfied. (The lapse of all of the
restrictions hereunder with respect to the Grantee's rights in the Restricted
Shares shall be hereafter referred to as "Vesting"; the period between the date
("Grant Date") upon which the Restricted Shares are awarded
<PAGE>
to the Grantee pursuant to Section 2(b) and the date of Vesting hereafter is
referred to as the "Restricted Period"; and the date of Vesting shall be
hereafter referred to as the "Vesting Date.")
(b) In order to be entitled to an award of Restricted Shares, the
Grantee must purchase Shares ("Qualifying Shares") in a Qualifying Transaction.
For these purposes, a Qualifying Transaction shall mean the acquisition of
Shares in which such Grantee owns the legal and beneficial interest by any means
other than through a Company program, including without limitation (x) Shares
received from the Company pursuant to a base salary or incentive award deferral
program, the exercise of stock options, Vesting in a Restricted Stock award or
the reallocation of Shares to the Grantee with respect to such an award or (y)
Shares purchased on behalf of the Grantee's account in the Company's 401(k),
savings or other qualified profit sharing plan; provided, further, that to be
treated as a Qualifying Share, an acquisition must increase the Grantee's actual
ownership of Shares by not less than the number of Shares acquired in the
Qualifying Transaction.
(i) Subject to the provisions hereof, the Grantee shall be awarded
three (3) Restricted Shares for each one (1) Qualifying Share acquired in a
Qualifying Transaction occurring on or after June 4, 1994 and before September
25, 1998; provided, however, that the maximum number of Restricted Shares which
may be awarded to the Grantee hereunder shall not exceed the number set forth in
Paragraph 1.
(ii) The Grantee may purchase all or any portion of the aggregate
number of Qualifying Shares required to obtain the maximum number of Restricted
Shares which may be awarded hereunder at any time on or after June 4, 1994 and
before September 25, 1998; provided, however, to the extent that the Grantee has
not previously purchased such maximum
- 2 -
<PAGE>
number of Qualifying Shares, the Grantee must purchase not less than five
hundred (500) Qualifying Shares on or before December 15, 1994 or, if
applicable, within the first 60 day period thereafter that the Grantee may
purchase Qualifying Shares without causing a violation of Federal or State
securities laws due to his or her status as an "insider" and an additional five
hundred (500) Qualifying Shares during the twelve month period ending on or
before each subsequent September 25 thereafter to and including September 25,
1998. In the event a minimum purchase is not made during any twelve month
period, the Grantee will forfeit his or her right to purchase Qualifying Shares
during any subsequent 12 month period. Vesting in Restricted Shares with
respect to which Qualifying Shares were purchased during the 12 month period(s)
prior to the period in which the failure to purchase (500) Qualifying Shares
occurs shall continue in accordance with the terms of this Agreement, however,
Shares purchased during such period shall not be considered Qualifying Shares
for purposes of this Agreement.
(iii) On or before December 15, 1994 and thereafter on or
before each date which is the earlier of (w) each following September 25 or the
(x) the date upon which one hundred percent (100%) of the Grantee's Restricted
Shares shall have Vested, the Grantee shall submit to the Committee a certified
statement, executed by the Grantee, which (y) sets forth, in detail, the facts
concerning the acquisition of the Qualifying Shares, and (z) affirms that the
Grantee has not sold, transferred or otherwise disposed of Qualifying Shares
previously acquired by the Grantee and that the aggregate number ("Grantee Share
Ownership Amount") of Shares owned by the Grantee (other than those described in
this Section 2(b)(x) and (y)) since the Initial Date is not less than the sum of
(u) the number of Shares owned on the Initial Date (other than those described
in this Section 2(b)(x) and (y)) and (v) the total
- 3 -
<PAGE>
number of Qualifying Shares acquired by the Grantee on or following the Initial
Date. For these purposes, the pledge of, or the granting of a security interest
in, Qualifying Shares in connection with a loan obtained by the Grantee to
acquire, carry or hold such shares shall not be treated as a sale, transfer or
disposition.
(iv) Within five (5) days following a Qualifying Transaction, the
Grantee shall notify the Committee in writing of such acquisition, including the
number of Qualifying Shares so acquired, and shall certify that the acquisition
is a Qualifying Transaction and the Grantee's Share Ownership Amount, determined
as of the date of such Qualifying Transaction, satisfies the requirements of
Section 2(b)(iii)(z). Upon receipt of such certificate, the Committee shall, as
soon as practicable, award the appropriate number of Restricted Shares to the
Grantee. For purposes of this Agreement, the Grant Date with respect to each
Restricted Share shall be the date upon which the Grantee engaged in a
Qualifying Transaction which resulted in the award of such Restricted Share.
(c) Twenty percent (20%) of the Restricted Shares awarded on each
Grant Date shall become vested in the Grantee on the June 30 shown as the
"initial vesting date" in Section 2(d) and on each of the first, second, third
and fourth anniversaries thereof, subject to the terms hereof, including but not
limited to the attainment of the Performance Goal described in Section 2(d), as
the Performance Goal is applied to each twenty percent (20%).
(d) Subject to the provisions of Sections 2(c), 2(d)(i) and Paragraph
4 an award of Restricted Shares made pursuant to Section 2(b) shall not vest in
the Grantee unless the Company shall have equalled or exceeded the Performance
Goal; provided, however, that if and to the extent that any Restricted Shares
have not vested on or before the September 15 occurring in
- 4 -
<PAGE>
the seventh calendar year following the Grant Date because of the failure to
satisfy the Performance Goal with respect to such Restricted Shares, the Grantee
shall forfeit all of his or her rights to such Restricted Shares. For purposes
of Grants awarded on or prior to December 15, 1994 or, if applicable, within the
first 60 day period thereafter that the Grantee may purchase Qualifying Shares
without causing a violation of Federal or State securities laws due to his or
her status as an "insider," the Performance Goal shall mean that (x) the
cumulative increase, calculated on an annualized basis, in the Fair Market Value
of the Shares during fifteen (15) out of the twenty (20) consecutive trading
days ("Test Days") (on which the New York Stock Exchange is open) immediately
preceding and including each June 30 (beginning on June 30, 1995) over the Fair
Market Value of the Company's Shares on July 1, 1994 (each such period
hereinafter is referred to as the "Measuring Period") exceeds (y) the cumulative
increase calculated on an annualized basis in the Standard and Poor's 500 Index
("S&P Index") for the same Measuring Period, by not less than one (1) percentage
point. For purposes of Grants awarded after December
- 5 -
<PAGE>
15, 1994, the Measuring Period shall commence on the applicable July 1st in
accordance with the following schedule:
<TABLE>
<CAPTION>
Dates Grant of Commencement Initial
Restricted Shares Awarded of Measuring Period Vesting Date
------------------------- ------------------- ------------
<S> <C> <C>
December 16, 1994 - September 25, 1995 July 1, 1995 June 30, 1996
September 26, 1995 - September 25, 1996 July 1, 1996 June 30, 1997
September 26, 1996 - September 25, 1997 July 1, 1997 June 30, 1998
September 26, 1997 - September 25, 1998 July 1, 1998 June 30, 1999
</TABLE>
The Performance Goal shall be calculated in accordance with the same methodology
set forth in this Section 2(d)(x) and (y) above.
(i) The Committee shall compare the increase (calculated on an
annualized basis) in the Fair Market Value of a Share during such Measuring
Period with the increase (calculated on annualized basis) in the S&P Index for
such Measuring Period for each Test Day occurring at the end of such Measuring
Period. In the event that, with respect to not less than fifteen (15) of the
twenty (20) Test Days the annualized increase in the Fair Market Value of the
Shares exceeds the annualized increase in the S&P Index by not less than one (1)
percentage point, the Company shall be deemed to have achieved the Performance
Goal for such Measuring Period. In the event the Performance Goal is not
achieved in any initial Measuring Period and the Performance Goal is achieved at
any time during a subsequent Measuring Period (i.e., Test Days are any (20)
----
consecutive trading days during the subsequent Measuring Period, not just the 20
days ending on June 30), the Grantee shall vest in all Restricted Shares for
which he or she has satisfied the requirements
- 6 -
<PAGE>
of Section 2(b) with respect to any earlier Measuring Period in which the
Performance Goal was not achieved with Vesting to occur on the date the
Performance Goal is achieved. For the then current Measuring Period, the Test
Days will be those days immediately preceding and including the June 30th, which
shall be considered the Initial Vesting Date for that period.
(ii) In the event that on any June 30, the Shares are no longer
listed on the New York Stock Exchange or the S&P Index no longer is readily
available, the Committee shall select a readily available and appropriate stock
index to utilize in calculating the Performance Goal.
(e) Subject to the provisions of Section 5(a), upon the Vesting of the
Restricted Shares, the Grantee shall own the Restricted Shares free and clear of
all restrictions imposed by this Agreement, and the Grantee shall be free to
hold or dispose of such shares at will. The Qualifying Shares shall at all
times be owned by the Grantee free and clear of any restrictions or conditions
related to this Agreement, or the Restricted Shares awarded hereunder, and the
Grantee shall be free to sell, assign, transfer, pledge or otherwise dispose of
the Qualifying Shares, although such transaction may adversely affect his or her
rights hereunder.
(f) During the Restricted Period, the Restricted Shares may not be
transferred or encumbered by the Grantee by means of sale, assignment, mortgage,
transfer, exchange, pledge, or otherwise. The levy of any execution,
attachment, or similar process upon the Shares shall be null and void.
- 7 -
<PAGE>
3. STOCK CERTIFICATES
------------------
(a) Restricted Shares shall be evidenced by one or more stock
certificates registered in the name of the Grantee or a nominee or nominees
therefor. Prior to Vesting, the Company shall prepare and issue a certificate
for the Restricted Shares (the "Share Certificate"), which shall be registered
in the name of the Grantee and which shall bear the following restrictive
legend, in addition to such other legends (if any) as the Company may deem
necessary or desirable under any applicable law:
"Restricted Shares"
-------------------
The shares represented by this certificate
are subject to the restrictions and other conditions
contained in the Scott Paper Company 1994 Long Term
Incentive Plan and the Restricted Stock Agreement
dated September 16, 1994 between Scott Paper Company
and the person named on this certificate, including
restrictions on the sale, encumbrance or transfer of
the shares represented by this certificate.
(b) The Grantee shall execute and deliver to the Director,
Corporate Compensation & Benefits (the "Escrow Agent") a stock power designating
the Company as the transferee of an unspecified number of Shares, which stock
power may be completed by the Escrow Agent as specified herein. The Grantee and
the Company each waive the requirement that the signature of the Grantee on the
stock power be guaranteed. Upon receipt of a copy of this Agreement and the
stock power, each signed by the Grantee, the Escrow Agent shall promptly notify
the proper officers of the Company who shall cause the Share Certificate to be
deposited with the Escrow Agent, to be held in accordance with the terms of this
Agreement.
(c) Upon Vesting, the Company shall cause to be delivered to the
Grantee (i) a certificate for the Shares which have vested free and
- 8 -
<PAGE>
clear of restrictive legends and (ii) any stock powers signed hereunder by the
Grantee remaining in its possession. In the event that the Grantee dies after
Vesting and before delivery of the certificate, such certificate shall be
delivered to, and registered in the name of, the Grantee's beneficiary or
estate, as the case may be. In lieu of any fractional share, the Company shall
pay to the Grantee, the Grantee's beneficiary or estate, as the case may be, in
cash, an amount equal to the Fair Market Value of such fractional share on the
date of delivery of such certificate.
(d) Except as otherwise provided in Section 2 and this Section 3,
during the Restricted Period and after the certificates for the Restricted
Shares have been issued, the Grantee shall be entitled to all rights of a
stockholder of the Company, including the right to vote and the right to receive
dividends, with respect to the Restricted Shares subject to this Agreement.
Subject to applicable withholding requirements, dividends on the Restricted
Shares shall be paid to the Grantee when earned.
(e) The Escrow Agent is hereby authorized by the Grantee to
utilize the stock power delivered by the Grantee to transfer all forfeited
Shares to the Company.
4. CHANGE OF CONTROL AND TERMINATION OF EMPLOYMENT
-----------------------------------------------
(a) In the event that a Change of Control shall occur during the
Restricted Period any Restricted Shares awarded more than six (6) months prior
to the date of such Change of Control shall automatically Vest and any
Restricted Shares awarded not earlier than six (6) months prior to such Change
of Control shall Vest upon the lapse of six months and one day following the
Grant Date with respect to such Restricted Shares.
(b) Except as otherwise provided in subparagraph (a) of this
paragraph 4, in the event of the termination of the Grantee's active
- 9 -
<PAGE>
employment with the Company (whether voluntarily or involuntarily through death,
retirement, disability, or otherwise) prior to the end of the Restricted Period,
all of the Grantee's rights in and to the Restricted Shares then credited to
such Grantee's account shall be forfeited as of the date of termination. Any
reference herein to active employment with the Company shall be deemed to
include employment with any subsidiary.
(c) The Grantee shall be the only person who may effectuate a
Qualifying Transaction, and the Grantee must effectuate the same while he or she
is still employed by the Company.
5. WITHHOLDING TAXES
-----------------
(a) In connection with the delivery of any stock certificates, or
the making of any payment in accordance with the provisions of this Agreement,
the Company shall withhold Shares or cash amounts (for fractional Shares) equal
to the taxes then required by applicable federal, state and local law to be so
withheld (taking into account any election made by the Grantee in accordance
with Section 5(b)).
(b) In the event that the Grantee shall elect to recognize income
with respect to Restricted Shares in accordance with Section 83(b) of the
Internal Revenue Code of 1986, as amended, the Grantee (i) shall furnish the
Committee with a copy of such election within ten days of its filing; and (ii)
shall pay to the Company the taxes which the Company is required to withhold as
a result of such election, in the amount and on such terms and conditions as the
Committee may determine.
- 10 -
<PAGE>
6. ADMINISTRATION
--------------
In addition to the administrative authority set forth in the Plan
itself, the Committee shall have full authority and sole discretion (subject
only to the express provisions of the Plan) to decide all matters relating to
the administration and interpretation of this Agreement. All such Committee
determinations shall be final, conclusive, and binding upon the Company, the
Grantee, the Grantee's Estate and any and all other interested parties. The
Grantee hereby acknowledges receipt of the Company's Prospectus which includes
the text of the Plan.
7. NO RIGHT TO CONTINUED EMPLOYMENT
--------------------------------
Nothing in the Plan or this Agreement shall confer on the Grantee any
right to continue as an employee of the Company or in any way affect the
Company's or any subsidiary's right to terminate the Grantee's employment at any
time.
8. NON-COMPETITION
---------------
In consideration of the award of shares under the Plan, Grantee agrees
as follows:
(a) During Grantee's employment by the Company and for a period of
24 months following the termination of such employment for any reason, Grantee
will not, without the written consent of the Company, either as principal,
agent, consultant, employee, director, or otherwise, engage in any competitive
work or other competitive activity. For purposes of this Agreement, "competitive
work or other competitive activity" means engaging in the manufacture,
development, advertising, promotion, or sale of any product which is the same or
similar to or competitive with any products of the Company with respect to which
Grantee's work has been directly concerned at any time during the 24 months
preceding the termination of Grantee's
- 11 -
<PAGE>
employment or with respect to which during the same time period Grantee acquired
knowledge of trade secrets or other confidential information. For purposes of
this Agreement, the definition of the term "Confidential Information" contained
in the Employee's Agreement signed by the Grantee is incorporated by reference.
Grantee will consult with the Company when considering entering into any
activity which might violate this paragraph. Grantee will refrain from the
activity described in the paragraph within such geographic area as is necessary
to protect the interests of the Company.
(b) Should the Company determine it is necessary to enforce
restrictions on Grantee's activities following the termination of Grantee's
employment by the Company, the Company may, in its sole discretion, elect to
proceed under one or more of this Agreement, the Employee's Agreement signed by
the Grantee, or any other agreement between the Company and Grantee containing
such restrictions. To the extent the Company elects not to proceed under the
Employee's Agreement, Grantee hereby surrenders Grantee's rights under the
Employee's Agreement and will not seek performance by the Company under the
Employee's Agreement.
(c) In the event a court of competent jurisdiction finds that the
provisions of this paragraph are too burdensome on the Grantee as to length of
time or geographic location, the provisions of this paragraph shall not be
stricken from the Agreement but rather shall be modified to conform to the
findings of the court.
- 12 -
<PAGE>
9. NOTICE
------
Any notice to the Company hereunder shall be in writing addressed to:
Director, Corporate Compensation & Benefits
Scott Paper Company
Scott Plaza
Philadelphia, Pennsylvania 19113
Any notice to the Grantee hereunder shall be in writing addressed to:
______________________________
______________________________
______________________________
or such other address as the Grantee shall notify the Company in
writing.
10. ENTIRE AGREEMENT; CONFLICT WITH PLAN
------------------------------------
(a) This Agreement contains the entire understanding of the
parties and shall not be modified or amended except in writing and duly signed
by each of the parties hereto. No waiver by either party of any default under
this Agreement shall be deemed a waiver of any later default thereof.
(b) The Restricted Shares awarded hereunder are awarded pursuant
and subject to the Plan. This Agreement is intended to supplement and carry out
the terms of the Plan. It is subject to all terms and provisions of the Plan
and, in the event of a direct conflict, the Plan shall prevail.
11. SHAREHOLDER APPROVAL; COMPENSATION LIMITATION
---------------------------------------------
The Grantee agrees that if, in the opinion of the Company's counsel,
the applicable provisions of Section 162(m) of the Code and Prop. Treas. Reg.
(S) 1.162-27 (or any applicable final regulation) shall require the approval of
the Company's shareholder for all or any portion of this
- 13 -
<PAGE>
Agreement, this Agreement shall terminate, and any Restricted Shares awarded
hereunder shall be forfeited, unless the Company's shareholders shall timely
approve such matters as counsel shall determine are required under the Code and
Regulations. The Company hereby agrees that, if such shareholder approval is
deemed to be necessary, it shall seek such approval at the Company's next annual
meeting of its shareholders. The Grantee further agrees that the Compensation
Committee shall have the authority to defer Vesting in any Restricted Shares
awarded hereunder to the extent that the Compensation Committee in its sole
discretion determines that Vesting in Restricted Shares would cause the maximum
deductible compensation limitation set forth in Section 162(m) of the Code to be
exceeded. The Compensation Committee shall designate March 31 of the next
calendar year as the deferred Vesting date. The Grantee shall only vest in the
Restricted Shares, as to which Vesting is deferred, if he or she is still in the
employ of the Company on the applicable March 31.
12. FORCE AND EFFECT
----------------
The various provisions of this Agreement are severable in their
entirety. Any determination of invalidity or unenforceability of any one
provision shall have no effect on the continuing force and effect of the
remaining provisions.
13. PREVAILING LAWS
---------------
This Agreement shall be governed by the laws of the Commonwealth of
Pennsylvania applicable to contracts made, and to be enforced, within the
Commonwealth of Pennsylvania.
14. SUCCESSORS
----------
This Agreement shall be binding upon and inure to the benefits of the
successors, assigns and heirs of the respective parties.
- 14 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
_______________ ___, 1994, to be effective as of ________________ ___, 1994.
SCOTT PAPER COMPANY
By: ___________________________
Name:
Title:
GRANTEE
___________________________
Name:
- 15 -
<PAGE>
Exhibit 10(b)
- -------------
SCOTT PAPER COMPANY
PERFORMANCE PLAN
(Amended effective January 1, 1995)
1. THE PLAN
--------
The purpose of the Scott Paper Company Performance Plan (the "Plan") is to
provide incentive and reward to salaried and certain non-union hourly employees
of the Company and certain of its subsidiaries.
2. DEFINITIONS
-----------
(a) An employee shall be considered "actively employed" during only that
portion, if any, of a leave of absence for which he or she receives a salary or
salary continuation payments.
(b) "Award date" shall mean the date on which awards are granted under the Plan
for an incentive year as provided in Section 5(a).
(c) "Beneficiary" shall mean the beneficiary designated by the participant
under the Company Basic Group Life Insurance.
(d) "Board of Directors" shall mean the Board of Directors of Scott Paper
Company.
(e) "Company" shall mean Scott Paper Company.
(f) "Employee" shall mean any person employed on a full-time or regular part-
time salaried basis, or any person employed on a full-time hourly basis at
the Company facilities at San Antonio, Texas no later than October 1 of the
relevant incentive year by the Company, or by any U.S. subsidiary or
designated foreign subsidiary; provided that persons employed at any
location or in any organization of the Company or any such subsidiary which
is (i) excluded from participation in the Plan by the Operating Committee
prior to the relevant incentive year or (ii) covered by another incentive
or bonus plan, shall not be considered employees for purposes of the Plan.
(g) "Operating Committee" shall mean the Operating Committee of the Company.
(h) "Incentive year" shall mean a Company fiscal year for which awards are
granted under the Plan.
(i) "Compensation Committee" shall mean the Compensation Committee appointed by
the Board of Directors and consisting of Directors.
(j) "Participant" shall mean any employee to whom an award has been granted
under the Plan.
<PAGE>
(k) "Plan Administrator" shall mean the Company's Vice President - Human
Resources.
(l) "Qualified Domestic Relations Order" shall have the meaning given to it
under the Retirement Equity Act of 1984 and regulations promulgated with
respect thereto.
(m) "Schedule" shall mean each Schedule to the Plan adopted and amended from
time to time pursuant to Section 4.
3. ADMINISTRATION OF THE PLAN
--------------------------
The Plan shall be administered by the Plan Administrator. Subject to the
express provisions of the Plan and the Schedules, the Plan Administrator shall
have complete authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to it, and to make all other determinations
necessary or advisable for the administration of the Plan. All actions and
determinations of the Plan Administrator shall be subject to review by the
Operating Committee.
4. INITIAL CALCULATION OF AWARDS
-----------------------------
The Compensation Committee shall adopt one or more Schedules to the Plan
providing for the initial calculation of awards, and may amend or discontinue
one or more of such Schedules at any time or from time to time; provided that
each Employee shall be covered by one Schedule at any point in time. Such
Schedules will be used by the Chief Executive Officer and the Corporate
Compensation and Benefits Department in determining the total amount of awards
and the amount of each individual award which they will recommend to the
Compensation Committee or submit to the executive in charge of the operating
division or corporate staff function to which the employee is assigned, as
provided by Section 5. Nothing in this Plan or any such Schedule shall require
the Chief Executive Officer to recommend an award for any particular individual
or group of individuals. The foregoing shall be subject to Section 7.
5. DETERMINATION AND GRANT OF AWARDS
---------------------------------
(a) The total amount of all awards granted under the Plan for an incentive year
shall be subject to review and approval by the Compensation Committee. In the
event of any adjustment in such total, each committee empowered to grant awards
shall make appropriate adjustment in the individual awards it is empowered to
grant.
(b) All employees who, as of October 1 of an incentive year, report directly to
the Chief Executive Officer shall be granted awards, if any, for such incentive
year by the Compensation Committee not later than February of the year following
the incentive year and such committee shall have full discretion with respect to
the granting of awards and the amounts thereof.
2
<PAGE>
(c) All employees who, as of October 1 of an incentive year, do not report to
the Chief Executive Officer shall be granted awards, if any, for such incentive
year as follows. At the close of each incentive year, and in accordance with the
provisions of the Plan, the applicable Schedules and the rules relating thereto,
the Corporate Compensation and Benefits Department shall calculate an award for
each employee for such year, the award so calculated to be submitted to the
executive in charge of the employee's operating division or corporate staff
function for such modification (including elimination) as he or she deems
appropriate in his or her sole discretion. After review and modification of such
awards by the Operating Committee, if it exercises its right to do so, the
awards approved hereunder will be granted on the award date.
(d) Notwithstanding the foregoing, no award granted to any person covered by
Schedule 1 under this Plan shall exceed twice such person's rate of base salary
in effect on October 1 of the incentive year for which the grant is made.
(e) All grant decisions, recommendations and calculations under this Section 5
shall be subject to Section 7.
6. PAYMENT OF AWARDS
-----------------
(a) Cash Awards
-----------
Except as provided in one or more Schedules to the Plan, each award shall be
paid in cash prior to April of the year in which the award is granted. In the
event of the death of a participant, the amount of any award which has not then
been paid shall be paid to his or her beneficiary.
(b) Wage Stabilization and Withholding Taxes
----------------------------------------
The grant and payment of awards under the Plan shall be subject to any
applicable wage and salary stabilization regulations that may be in effect from
time to time, and to any tax withholding requirements of applicable federal,
state or local law or regulation.
(c) Non-Alienation
--------------
During a participant's lifetime, the payment of any award under the Plan shall
be made only to him or to her. No award or other interest under the Plan shall
be subject in any manner to anticipation, alienation, sale, transfer,
assignment, pledge, encumbrance or charge, and any attempt by a participant or
any other beneficiary under the Plan to do so shall be void. In the event of
any such attempt by or the bankruptcy of a participant or beneficiary, such
award or other interest may in the discretion of the Plan Administrator be
terminated. No award or other interest under the Plan shall in any manner be
liable for or subject to the debts, contracts, liabilities, engagements or torts
of a participant or beneficiary entitled thereto. However, the
3
<PAGE>
foregoing provisions of this subsection (c) shall be inapplicable to any award
to or interest of a participant under the Plan to the extent provided in any
qualified domestic relations order.
7. PROTECTION OF EARNED BENEFITS
-----------------------------
The purpose of this Section 7 is to protect the earned benefits of employees
under the Plan as of the date of a Change of Control. Notwithstanding anything
else contained in the Plan or any Schedule, each person who is an employee on
the date of a Change of Control shall be granted an award for the incentive year
during which the Change of Control occurs which shall not be less than (a) the
amount he or she would have been awarded on the basis that (i) all provisions in
the applicable Schedule permitting adjustments in calculations or the factors
relating thereto had been deleted as of the date of the Change of Control, (ii)
any reduction in his or her target award percentage, similar factor or pay level
under the applicable Schedule after the Change of Control shall not be taken
into account, and (iii) the text of the Plan and the applicable Schedule, as in
effect immediately before the Change of Control, had otherwise remained
unchanged, multiplied by (b) a fraction, the numerator of which shall be the
number of days in the incentive year before the Change of Control during which
such person was an employee and the denominator of which shall be 365.
In the event of a Change of Control of the Company, the Company shall pay all of
the legal fees and expenses reasonably incurred by an employee or such
employees' beneficiary (or by any legal defense trust created by the Company) to
enforce his or her rights under the Plan, as in effect immediately before such
Change of Control. The Company shall pay such fees and expenses promptly after
bills therefor are submitted from time to time by attorneys representing the
claimant. However, the Company will not be obligated to pay such fees and
expenses if it proves in a court of law that the claimant's claim is not well
grounded in fact and warranted by existing law or a good faith argument for the
extension, modification or reversal of existing law. In any such proceeding,
the burden of proof shall be on the Company. Notwithstanding anything else
contained in the Plan, the rights of employees and their beneficiaries under
this paragraph shall survive amendment of this paragraph, as well as termination
of the Plan, after a Change of Control, regardless of whether such rights arise
before or after the date of amendment or termination.
"Change of Control" shall mean the first to occur of the following events:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than Scott Paper
Company or an entity controlled by the Company (including an employee plan
established primarily for the benefit of the Company employees or employees
of any entity controlled by the Company), acquires beneficial ownership of,
or, acting alone or in concert with others, acquires voting power over
voting shares of the Company that
4
<PAGE>
would entitle the holders thereof to cast at least 20% of the votes that
all shareholders would be entitled to cast in an election of Directors of
the Company; or
(b) At any time within any period of two consecutive years, persons who (i)
at the beginning of such period constitute the Board of Directors, or (ii)
become Directors after the beginning of such period and whose election, or
nomination for election by the shareholders of the Company, was approved by
a vote of at least two-thirds of the persons who were Directors at the
beginning of such period, cease for any reason to constitute at least a
majority of such Board of Directors; provided that any person who ceases to
be a Director by reason of death or disability shall be excluded from the
numerator and the denominator in all calculations hereunder.
8. AMENDMENT; TERMINATION
----------------------
Subject to Section 7, the Plan may be suspended or terminated at any time by the
Board of Directors and shall continue until so terminated. Subject to Section
7, (a) the Board of Directors may at any time amend Section 7 or this Section 8
of the Plan; (b) the Compensation Committee may at any time amend any Schedule
or the Plan, other than Section 7 or this Section 8; and (c) the Operating
Committee may at any time amend the Plan, other than Section 5, Section 7 or
this Section 8, or any Schedule. Notwithstanding the above, no amendment,
suspension or termination shall affect the payment of awards theretofore granted
under the Plan.
5
<PAGE>
SCOTT PAPER COMPANY
PERFORMANCE PLAN
(The "Plan")
SCHEDULE NO. 1
(As Amended effective January 1, 1995)
A. Definitions
-----------
1. "The Schedule 1 unit" includes all business units referenced in the
Plan's definition of "Employee", other than sales organizations.
2. "A Schedule 1 business unit" means each division, subdivision or
corporate staff organization within the Schedule 1 unit designated as a Schedule
1 business unit for each incentive year by the Operating Committee.
Terms defined in the Plan are used herein as so defined.
B. Applicability
-------------
1. For each incentive year, this Schedule applies to all employees who, at
any time on or before October 1 of such year, are actively employed by a
Schedule 1 business unit.
2. An employee shall not be eligible for an award calculated under this
Schedule for any incentive year during which (i) he voluntarily terminates his
employment, or (ii) the Company terminates his employment; provided that an
employee may be eligible for such an award at the sole discretion of the Company
if his or her employment is terminated pursuant to (a) a mutual agreement with
the Company, (b) being classified as "Agreed Workforce Reduction" under a
separation program adopted by the Company, or (c) the disposition or closure of
the business unit of which the employee is a part.
C. Initial Calculation of Awards
-----------------------------
The initial calculation of each employee's award for each incentive year
shall be made as follows.
1. Each employee's award opportunity, based on his or her pay level as of
October 1 of the incentive year, shall be determined by reference to the grid
set forth on Exhibit A, assuming that the employee is employed by the Company in
the same Schedule 1 business unit for the entire incentive year.
2. If an employee is employed in a Schedule 1 business unit for less than
the entire incentive year, his or her award opportunity with respect to that
Schedule 1 business unit shall be prorated appropriately.
3. The award opportunities of all employees in the same Schedule 1
business unit shall be added together, and may be
<PAGE>
reallocated among such employees by the executive in charge of the employee's
Schedule 1 business unit, in the discretion of such executive, subject to review
in accordance with the Plan.
2
<PAGE>
EXHIBIT A
---------
I. CORPORATE STAFF
- -- ---------------
<TABLE>
<CAPTION>
Pay Level % of NI Greater Than 10% of AE*
- --------- -------------------------------
<S> <C>
14 0.3
13 0.25
12 0.125
11 0.1
10 0.08
9 0.06
8 0.05
7 0.03
6 0.02
5 0.0082, but not more than $12,500
4 0.0082, but not more than $10,000
3 0.0082, but not more than $7,500
2 0.0082, but not more than $5,000
1 0.0082, but not more than $3,240
- -----------------
</TABLE>
* "NI" means the Company's net income, as reported in its audited financial
statements for the incentive year. "AE" means the Company's average
shareholders' equity for the incentive year, determined by averaging the
shareholders' equity, at the end of the prior fiscal year and at the end of
the incentive year, in each case as reported on the Company's audited
financial statements.
II. BUSINESS UNITS
- --- --------------
<TABLE>
<CAPTION>
Pay Level Award Opportunity as
- --------- ---------------------
Percent of Base Salary
----------------------
<S> <C>
14 45%
13 40%
12 35%
11 30%
10 25%
9 20%
8 17.5%
7 15%
6 12.5%
5 10%
4 7.5%
3 5%
1-2 3.5%
</TABLE>
The "award opportunity" shall be multiplied by the applicable amount shown in
Attachment 1 to obtain the amount of the award.
<PAGE>
ATTACHMENT I
- ------------
<TABLE>
<CAPTION>
========================================================================================================================
1995 INCENTIVE PLAN
BUSINESS UNIT PLAN
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating Income
$MM USD
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Actual Operating Greater 80 90 100 110 120 125 130 140 150 175 200
Income as a % Than 80
of Plan
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Bonus as a % 0 60 80 100 120 140 150 160 180 200 300 400
of Plan
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Bonus Opportunity 0 0.6X 0.8X 1X 1.2X 1.4X 1.5X 1.6X 1.8X 2X 3X 4X
========================================================================================================================
</TABLE>
* Unit Capital Budget = $______
* Unit Working Capital Budget = $_____
NOTES:
* Actual operating income attained will determine the actual bonus
opportunity for the business unit
* All performance measures - operating income, capital and working capital
budgets are to be established and measured in U.S. dollars
* Overall criteria must be met before business unit plans payout
<PAGE>
Exhibit 10(c)
- -------------
SCOTT PAPER COMPANY
PERFORMANCE AWARD DEFERRAL PLAN
(As amended effective January 1, 1995)
1. THE PLAN
--------
The purpose of the Scott Paper Company Performance Award Deferral Plan (the
"Plan") is to permit certain highly compensated employees who receive awards
under the Scott Paper Company Performance Plan (the "Performance Plan") to defer
receipt of their awards under the Performance Plan.
2. DEFINITIONS
-----------
(a) Terms used herein shall be defined as follows:
1. "Active Employment" shall mean the current performance of services by
an employee on a regularly scheduled basis for which he or she is paid or
entitled to payment by the Company or any subsidiary referred to in the
definition of "Employee" under the Performance Plan.
2. "Market price" of Shares shall mean the mean between the highest and
lowest quoted selling prices for Shares on the New York Stock Exchange on a
specified date or, if Shares are not then traded there, on the most recent prior
date when Shares were traded there.
3. "Participant" with respect to an incentive year shall mean any employee
declared eligible to participate in the Plan pursuant to Section 3.
4. "Rights Agreement" shall mean the Rights Agreement dated as of July 15,
1986 between the Company and Morgan Guaranty Trust Company of New York.
5. "Shares" shall mean Common Shares of the Company. "Shares" shall
include the Rights distributed or issued pursuant to the Rights Agreement with
respect to all Shares credited to each participant's Deferred Shares Award
Account pursuant to an election made under Section 4(a) prior to the
Distribution Date under the Rights Agreement, until such time as the Rights
expire in accordance with their terms or are redeemed by the Company.
(b) All definitions contained in the Performance Plan are incorporated
herein by reference.
<PAGE>
3. PARTICIPATION
-------------
Each employee whose pay level is 10 or greater and who is eligible to receive
awards under the Performance Plan for an incentive year will be eligible to
defer any awards granted under the Plan for such incentive year.
4. DEFERRAL AND PAYMENT OF AWARDS
------------------------------
Notwithstanding Section 5(a) of the Performance Plan, each eligible employee may
defer receipt of his award for the applicable incentive year and may receive
such award either wholly as a payment from the Deferred Cash Award Account or
wholly as a cash payment from the Deferred Shares Award Account, as provided
below.
(a) Elections
---------
By notice given to the Corporate Compensation and Benefits Department prior to
January 1 of the incentive year for which he or she is eligible to participate
hereunder (or, if he or she is first employed during the incentive year,
promptly upon hire), a participant may elect (i) that payment of any multiple of
10% of any award which might thereafter be granted to him or her for such
incentive year be deferred until the first calendar quarter of the year
following the year of his or her retirement or other termination of active
employment, and (ii) that all of any such deferred award shall be paid to him at
such time in either wholly as a payment from the Deferred Cash Award Account or
wholly as a cash payment from the Deferred Shares Award Account, each such
election, once made, to be irrevocable.
(b) Cash Awards
-----------
Unless the participant has made a timely deferral election, each award shall be
paid in cash prior to April of the year in which the award is granted. In the
event of the death of a participant, the amount of any award which has not then
been paid shall be paid to his or her beneficiary.
(c) Deferred Cash Award
-------------------
An unfunded "Deferred Cash Award Account" shall be set up on the books of the
Plan for each participant who has elected a deferred cash option to which
Account shall be credited the amount of such deferred award.
As of the end of each fiscal quarter thereafter, until payment of the balance in
such Account has been completed pursuant to sub-section (e) below, interest
shall be credited to such Account on the then outstanding balance therein
(including any interest previously credited thereto). Such interest for each
period from
-2-
<PAGE>
January 1 through June 30 and July 1 through December 31 shall equal one percent
(1%) plus the rate shown for U.S. Treasury Notes with a remaining maturity
closest to, but not exceeding, seven (7) years, in the "representative mid-
afternoon over the counter quotations supplied by the Federal Reserve Bank of
New York City, based on transactions of $1 million or more," as reported in The
---
Wall Street Journal published on the last business day preceding the December 1
- -------------------
or the June 1 immediately preceding each such period.
Each participant shall receive a statement of his or her Deferred Cash Award
Account as of the end of each calendar year.
(d) Deferred Shares Award
---------------------
A "Deferred Shares Award Account" shall be set up on the books of the Plan for
each participant who has elected a deferred shares option to which Account shall
be credited that number of full and fractional Shares which could have been
purchased with such award, had it been paid in cash, at the market price of
Shares on the award date.
As of each dividend payment date thereafter, until payment from such Account has
been completed pursuant to subsection (e) below, there shall be credited to such
Account that additional number of full and fractional Shares which could have
been purchased at the market price of Shares on such date with the dividends
that would then have been payable to the participant if the number of full and
fractional Shares credited to the Account on the record date for such dividend
payment had then been registered in his name. In the event a Triggering Event
occurs under the Rights Agreement, the Deferred Shares Award Account of each
participant shall be credited on the date (the "Crediting Date") thirty (30)
days before the date the Rights expire, with that additional number of full and
fractional Shares (exclusive of Rights) which could have been purchased at the
market price of Shares (exclusive of Rights) on the Crediting Date with an
amount equal to the number of Rights included in such participant's Deferred
Shares Award Account multiplied by the fair market value, as determined by the
Committee in good faith, of Rights on the Crediting Date. After the Crediting
Date, the term "Shares" shall be deemed not to include Rights.
In the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering or any other
change in the corporate structure or Shares of the Company, the Committee shall
make such adjustment, if any, as it may deem appropriate in the number and kinds
of Shares credited to each Deferred Shares Award Account.
Promptly after a Change of Control as defined in Section 5, the Company shall
give written notice to each Participant having a
-3-
<PAGE>
Deferred Shares Award Account that such Deferred Shares Award Account shall be
converted to a Deferred Cash Award Account as of the date of the Change of
Control, unless the Participant gives written instruction to the Company within
thirty (30) days of receipt of such notice that his or her Deferred Shares Award
Account is not to be so converted. The valuation of a Deferred Shares Award
Account to be converted as herein provided shall utilize (i) the minimum value
specified in Section 910.E of the Pennsylvania Business Corporation Law (the
"BCL"), and (ii) if any adversarial proceeding under BCL Section 910.E results
in an incremental value being determined, such incremental value.
As of the date of a "business combination" with an "interested shareholder" as
such terms are defined in BCL Section 911 and which "business combination" is
covered by BCL 911.B(2) or (4), each Deferred Shares Award Account shall be
converted to a Deferred Cash Award Account. The valuation of a Deferred Shares
Award Account to be converted as herein provided shall be made in accordance
with the method of valuation provided in BCL Section 911.B(4)(i).
In any event described in the third paragraph of this Section 4(d) after which
the Shares shall no longer exist and if not covered by the fourth or fifth
paragraph hereof, each Deferred Shares Award Account shall be valued by a
reputable investment banking firm which shall have given due consideration to
all relevant factors in rendering such opinion. After the date of such event,
each Deferred Shares Award Account shall be credited with interest in the same
manner as if it were a Deferred Cash Award Account.
Each participant shall receive a statement of his or her Deferred Shares Award
Account as of the end of each calendar year.
(e) Time of Payment of Deferred Awards
----------------------------------
The Company shall pay to each participant, in one installment as provided in the
first paragraph of Section 4(a), except as otherwise provided below, an amount
in cash equal to the amount of cash then credited to such participant's Deferred
Cash Award Account (including interest accrued to the date of payment) or the
value of the full and fractional Shares then credited to such participant's
Deferred Shares Award Account (valued at the market price of Shares as of a date
not more than seven (7) days before the date of payment). Each participant may
elect prior to the end of the year of his or her retirement or other termination
of active employment to receive such amount in substantially equal annual
installments over a period of not more than fifteen years.
The Operating Committee, in its sole discretion, may (i) authorize the payment
from any participant's Deferred Cash Award Account and Deferred Shares Award
Account in such amount as in its opinion is sufficient to permit such
participant to meet any proven financial necessity during or following the
termination of his or her active
-4-
<PAGE>
employment, and (ii) in the event of the death of a participant, accelerate the
payment of such amount to his or her beneficiary or estate.
5. CHANGE OF CONTROL
-----------------
In the event of a Change of Control of Scott Paper Company, Scott Paper Company
shall pay all of the legal fees and expenses reasonably incurred by a
participant or such participant's beneficiary (or by any legal defense trust
created by the Company) to enforce his or her rights under the Plan, as in
effect immediately before such Change of Control. Scott Paper Company shall pay
such fees and expenses promptly after bills therefor are submitted from time to
time by attorneys representing the claimant. However, Scott Paper Company will
not be obligated to pay such fees and expenses if it proves in a court of law
that the claimant's claim is not well grounded in fact and warranted by existing
law or a good faith argument for the extension, modification or reversal of
existing law. In any such proceeding, the burden of proof shall be on Scott
Paper Company. Notwithstanding anything else contained in the Plan, the rights
of participants and their beneficiaries under this paragraph shall survive
amendment of this paragraph, as well as termination of the Plan, after a Change
of Control, regardless of whether such rights arise before or after the date of
amendment or termination.
"Change of Control" shall mean the first to occur of the following events"
(a) Any person within the meaning of Section 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than Scott Paper
Company or any entity controlled by Scott Paper Company (including an
employee plan established primarily for the benefit of Scott Paper Company
employees or employees of any entity controlled by Scott Paper Company),
acquires beneficial ownership of, or, acting alone or in concert with
others, acquires voting power over voting shares of Scott Paper Company
that would entitle the holders thereof to cast at least 20% of the votes
that all shareholders would be entitled to cash in an election of Directors
of Scott Paper Company; or
(b) At any time within any period of two consecutive years, persons who (i)
at the beginning of such period constitute the Board of Directors, or (ii)
become Directors after the beginning of such period and whose election, or
nomination for election by the shareholders of Scott Paper Company, was
approved by a vote of at least two-thirds of the persons who were Directors
at the beginning of such period, cease for any reason to constitute at
least a majority of such Board of Directors; provided that any person who
ceases to be a
-5-
<PAGE>
Director by reason of death or disability shall be excluded from the
numerator and the denominator in all calculations hereunder.
6. AMENDMENT; TERMINATION
----------------------
Subject to Section 5, the Plan may be amended, suspended or terminated at any
time by the Operating Committee of the Company and shall continue until so
terminated. The Operating Committee may delegate its authority to make certain
amendments the Plan to the Vice President - Human Resources. Specifically, the
Plan may be amended at any time to accelerate all remaining distributions to all
participants or to accelerate all distributions to all participants of awards
deferred in one or more incentive years. However, no such amendment or
termination may diminish the Company's obligation to pay the amount of awards
already deferred by a participant or reduce the accrual of interest or dividends
thereon. If the Plan is terminated or amended, the Plan Administrator shall
promptly notify all participants affected thereby.
7. EFFECT OF AMENDMENT ON PRIOR DEFERRALS
--------------------------------------
The amendment of the Plan effective January 1, 1995 shall not affect the
calculation or method of payment of any award deferred for any incentive year
before 1995 based on the text of the Plan in effect immediately before January
1, 1995.
-6-
<PAGE>
Exhibit 10(d)
- -------------
SCOTT PAPER COMPANY DEFERRED COMPENSATION PLAN
(As amended effective January 1, 1995)
This Plan (the "Plan") has been adopted by Scott Paper Company, a
Pennsylvania corporation (the "Company"), to enable certain employees of the
Company and its wholly-owned U.S. subsidiaries to defer part of their salaries
upon the terms and conditions set forth herein.
1. Administration
--------------
The Plan shall be administered by or at the direction of the Vice President -
Human Resources (the "Plan Administrator"). The Plan Administrator shall have
full power and authority to interpret and administer the Plan.
2. Authorization of Plan Years; Eligibility of Employees
-----------------------------------------------------
Unless the Compensation Committee of the Board of Directors (the "Committee")
determines otherwise more than thirty (30) days before the beginning of a
calendar year, such calendar year shall be a Plan Year. Each employee whose pay
level is 10 or greater at the beginning of the Plan Year or on the first day of
employment during such Plan Year shall be eligible to participate in the Plan
during such Plan Year (the "Participants"). The Plan Administrator shall cause
each Participant to be notified promptly of his or her selection as such, and
shall identify the Company representative to whom he or she may deliver his or
her election form referred to in Section 3.
3. Salary Deferrals
----------------
Within thirty (30) days after having been notified of his or her selection as
such, each Participant may irrevocably elect to defer receipt of part of his or
her salary payable during the Plan Year, and to receive the portion of salary so
deferred either wholly as a payment from the Deferred Cash Account or wholly as
a cash payment from the Deferred Shares Account. The portion of salary so
deferred shall be 5% thereof, 10% thereof or an integral multiple of 10%
thereof, rounded to the nearest whole dollar. However, the portion of salary so
deferred shall not have the effect of reducing the Participant's compensation
payable during the entire Plan Year to less than the Social Security wage base
in effect under Section 3121 of the Internal Revenue Code of 1986, for such Plan
Year. Each Participant's election shall be effective when actually received by
the Company representative identified to
<PAGE>
the Participant. For each Participant for each Plan Year, an unfunded Deferred
Cash Account or an unfunded Deferred Shares Account shall be set up on the books
of the Company, to which shall immediately be credited the amount of salary
deferred hereunder during such Plan Year.
4. Company Match
-------------
On each date that a salary deferral is credited to a Participant's unfunded
Deferred Cash Account or an unfunded Deferred Shares Account for a Plan Year,
the Company shall increase such Account by an amount equal to 20% of the salary
so deferred, but such increase shall not exceed 2% of such Participant's salary
with respect to which such deferral is credited.
5. Deferred Cash Accounts
----------------------
As of the end of each fiscal quarter after any amount is credited to a
Participant's Deferred Cash Account, until payment of the balance in such
Account has been completed pursuant to Section 7, interest shall be credited to
such Account on the then outstanding balance therein (including any interest
previously credited thereto). Such interest for each period from January 1
through June 30 and July 1 through December 31 shall equal one percent (1%) plus
the rate shown for U.S. Treasury Notes with a remaining maturity closest to, but
not exceeding, seven (7) years, in the "representative mid-afternoon over the
counter quotations supplied by the Federal Reserve Bank of New York City, based
on transactions of $1 million or more," as reported in The Wall Street Journal
-----------------------
published on the last business day preceding the December 1 or the June 1
immediately preceding each such period.
Each participant shall receive a statement of his or her Deferred Cash Account
as of the end of each calendar year.
6. Deferred Shares Accounts
------------------------
There shall be credited to each Participant's Deferred Shares Account that
number of full and fractional Shares which could have been purchased with
amounts credited to such Account. As of each dividend payment date thereafter,
until payment from such Account has been completed pursuant to Section 7 below,
there shall be credited to such Account that additional number of full and
fractional Shares which could have been purchased at the market price of Shares
on such date with the dividends that would then have been payable to the
Participant if the number of full and fractional Shares credited to the Account
on the record date for such dividend payment had then been registered in his
name. In the event a Triggering Event occurs under the Rights Agreement dated
as of July 15, 1986 between the Company and Morgan Guaranty Trust Company of New
York, the Deferred Shares Account of each
<PAGE>
Participant shall be credited on the date (the "Crediting Date") thirty (30)
days before the date the Rights expire, with that additional number of full and
fractional Shares (exclusive of Rights) which could have been purchased at the
market price of Shares (exclusive of Rights) on the Crediting Date with an
amount equal to the number of Rights included in such Participant's Deferred
Shares Account multiplied by the fair market value, as determined by the
Committee in good faith, of Rights on the Crediting Date. After the Crediting
Date, the term "Shares" shall be deemed not to include Rights.
In the event of a reorganization, recapitalization, stock split, stock dividend,
combination of shares, merger, consolidation, rights offering or any other
change in the corporate structure or Shares of the Company, the Committee shall
make such adjustment, if any, as it may deem appropriate in the number and kinds
of Shares credited to each Deferred Shares Account.
Promptly after a Change of Control as defined in Section 8, the Company shall
give written notice to each Participant having a Deferred Shares Account that
such Deferred Shares Account shall be converted to a Deferred Cash Account as of
the date of the Change of Control, unless the Participant gives written
instruction to the Company within thirty (30) days of receipt of such notice
that his or her Deferred Shares Account is not to be so converted. The
valuation of a Deferred Shares Account to be converted as herein provided shall
utilize (i) the minimum value specified in Section 910.E of the Pennsylvania
Business Corporation Law (the "BCL"), and (ii) if any adversarial proceeding
under BCL Section 910.E results in an incremental value being determined, such
incremental value.
As of the date of a "business combination" with an "interested shareholder" as
such terms are defined in BCL Section 911 and which "business combination" is
covered by BCL 911.B(2) or (4), each Deferred Shares Account shall be converted
to a Deferred Cash Account. The valuation of a Deferred Shares Account to be
converted as herein provided shall be made in accordance with the method of
valuation provided in BCL Section 911.B(4)(i).
In any event described in the second paragraph of this Section 6 after which the
Shares shall no longer exist and if not covered by the third or fourth paragraph
hereof, each Deferred Shares Account shall be valued by a reputable investment
banking firm which shall have given due consideration to all relevant factors in
rendering such opinion. After the date of such event, each Deferred Shares
Account shall be credited with interest in the same manner as if it were a
Deferred Cash Account.
Each participant shall receive a statement of his or her Deferred Shares Account
as of the end of each calendar year.
7. Distributions
-------------
<PAGE>
The Company shall pay to each Participant, in one installment, an amount in cash
equal to the amount of cash then credited to such participant's Deferred Cash
Account (including interest accrued to the date of payment) and the value of the
full and fractional Shares then credited to such participant's Deferred Shares
Account (valued at the market price of Shares as of a date not more than seven
(7) days before the date of payment). If the Participant dies before receiving
the distribution hereunder, the amount thereof shall be paid to the beneficiary
designated under the Company's basic group life insurance, or if none is so
designated, to the Participant's estate.
8. Change of Control
-----------------
In the event of a Change of Control of the Company, the Company shall pay all of
the legal fees and expenses reasonably incurred by a Participant or such
Participant's beneficiary (or by any legal defense trust created by the Company)
---
to enforce his or her rights under the Plan, as in effect immediately before
such Change of Control. The Company shall pay such fees and expenses promptly
after bills therefor are submitted from time to time by attorneys representing
the claimant. However, the Company will not be obligated to pay such fees and
expenses if it proves in a court of law that the claim is not well grounded in
fact and warranted by existing law or a good faith argument for the extension,
modification or reversal of existing law. In any such proceeding, the burden of
proof shall be on the Company. Notwithstanding anything else contained in the
Plan, the rights of Participants and their beneficiaries under this paragraph
shall survive amendment of this paragraph, as well as termination of the Plan,
after a Change of Control, regardless of whether such rights arise before or
after the date of amendment or termination.
"Change of Control" shall mean the first to occur of the following events:
(a) Any person within the meaning of Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the "1934 Act"), other than the Company or
any entity controlled by the Company (including an employee plan
established primarily for the benefit of the Company employees or employees
of any entity controlled by the Company), acquires beneficial ownership of,
or, acting alone or in concert with others, acquires voting power over
voting shares of the Company that would entitled the holders thereof to
cast at least 20% of the votes that all shareholders would be entitled to
cast in an election of Directors of the Company; or
(b) At any time within any period of two consecutive years, persons who (i)
at the beginning of such period constitute the Board of Directors, or (ii)
become Directors after the beginning of such period and whose election, or
nomination for election by the shareholders of the Company, was approved by
<PAGE>
a vote of at least two-thirds of the persons who were Directors at the
beginning of such period, cease for any reason to constitute at least a
majority of such Board of Directors; provided that any person who ceases to
be a Director by reason of death or disability shall be excluded from the
numerator and the denominator in all calculations hereunder.
9. Amendments; Termination
-----------------------
The Board of Directors may at any time or from time to time amend, suspend or
terminate the Plan in whole or in part. The Board of Directors may delegate its
authority to amend the Plan to the Compensation Committee, which in turn may
delegate to the Vice President - Human Resources the authority to make certain
amendments to the Plan. Specifically, the Plan may be amended at any time to
accelerate all remaining distributions to all Participants or to accelerate all
distributions to all Participants of salary deferred in one or more Plan Years.
However, no such amendment or termination may diminish the Company's obligation
to pay the amount of salary already deferred by a Participant or reduce the
accrual of interest or dividends thereon. If the Plan is terminated or amended,
the Plan Administrator shall promptly notify all Participants affected thereby.
10. Miscellaneous
-------------
(a) The Plan Administrator's interpretations hereof and actions hereunder
shall be binding and conclusive on all persons for all purposes. No officer or
employee of the Company shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his own willful misconduct or lack of good faith.
(b) The Company shall not be obligated to set aside any funds to pay
amounts deferred or matched hereunder, or interest thereon. The Company's
obligation hereunder shall constitute a general unsecured obligation, payable
solely out of its general assets, and no Participant shall have any right to
specific assets.
(c) The right of a Participant or any other person to a payment hereunder
shall not be assigned, transferred, pledged or encumbered except as provided in
Section 7.
(d) Nothing herein shall be construed as conferring on any Participant the
right to continue in the employ of the Company in any capacity.
(e) The Plan shall be binding on and inure to the benefit of the Company,
its successors and assigns and each Participant and his or her heirs, executors,
administrators and legal representatives, provided that continuance of the Plan
is not
<PAGE>
assumed as a contractual obligation of the Company.
(f) This Plan shall be construed in accordance with, and governed by, the
laws of the Commonwealth of Pennsylvania.
<PAGE>
Exhibit 10(e)
- -------------
AMENDMENT TO
EMPLOYMENT AGREEMENT
This Agreement ("Amendment") amends the Employment Agreement dated as of
April 19, 1994 between Scott Paper Company and Albert J. Dunlap (the "Employment
Agreement"). All terms used herein have the meanings designated or defined in
the Employment Agreement. It is agreed that:
1. Section 9(d) of the Employment Agreement is amended and restated to read in
its entirety as follows:
"(d) If the Executive's employment shall be terminated pursuant to Section
8(d) hereof, or if the Executive shall terminate his employment
pursuant to Section 8(e) hereof, then (i) the Company shall pay to the
Executive his full Base Salary through the Date of Termination at the
rate in effect at the time Notice of Termination is given, plus the
unpaid reimbursable expenses of the Executive through the Date of
Termination, the Incentive Bonus under Section 4(c) for the preceding
calendar year or years to the extent not theretofore paid and the
Termination Bonus under Section 4(c) hereof; (ii) in lieu of any
further salary payments to the Executive for periods subsequent to the
Date of Termination, the Company shall pay as liquidated damages, and
not as a penalty, to the Executive within thirty (30) days following
the Date of Termination, a lump sum amount equal to the aggregate
amount of Base Salary that would have been payable to the Executive
pursuant to Section 4(a), calculated on the basis of the Base Salary
that from time to time would have been in effect as specified in said
Section, throughout the period commencing on the date immediately
succeeding the Date of Termination and extending through the fifth
anniversary of the Commencement Date hereunder or, if applicable, the
expiration of a Renewal Period; (iii) all outstanding options whether
or not then exercisable shall immediately become exercisable and may
be exercised by the Executive at any time thereafter, in whole or in
part, for three years after the Date of Termination (the "Additional
Period"); and (iv) any restricted shares subject to a restriction
which lapses over time or upon a subsequent event shall immediately be
free of such restriction. The Company shall maintain in full force
and effect, for the continued benefit of the Executive for the full
term of the Additional
<PAGE>
Period, all employee benefit plans and programs in which the Executive
was entitled to participate immediately prior to the Date of
Termination. If the Executive shall be ineligible to participate in
any of the Company's fringe benefit plans or arrangements as a result
of his ceasing to be an employee of the Company, then the Company
shall arrange to provide the Executive with substantially equivalent
benefits as if he remained employed by the Company throughout the
Additional Period or provide their economic equivalent."
2. A new Section 9(f) is added, as follows:
"(f) In the event any payments received by the Executive, whether
resulting from the operation of Section 9 or any other plan,
arrangement or agreement, are subject to excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), the Company shall pay to the Executive an additional amount
as a gross-up payment so that the net amount retained by the Executive
with respect to such payment, after deduction of any such excise tax
or any income or excise tax payable by the Executive in respect of the
receipt of any amount payable under this Section 9(f), shall be equal
to the full amount of such payment but for the application of the
excise tax and such income tax. For purposes of determining the
gross-up payment, (i) any other payments or benefits received or to be
received by the Executive in connection with a Change in Control or
the Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement
with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person)
shall be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments" within the
meaning of Section 280G of the Code shall be treated as subject to the
excise tax, unless in the opinion of tax counsel selected by the
Company's independent auditors and reasonably acceptable to the
Executive, such other payments or benefits (in whole or in part) do
not constitute parachute payments, or are otherwise not subject to the
excise tax, and (ii) the Executive shall be deemed to pay federal
income tax at the highest marginal rate applicable in the calendar
year in which the gross-up payment is made, and state and local income
taxes at the highest marginal rate of taxation in the state and
locality of the Executive's residence on the Date of Termination, net
of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the event
the actual excise tax or such income tax is more or less than the
amount used to calculate the gross-up
<PAGE>
payment, the Executive or the Company, as the case may be, shall pay
to the other an amount reflecting the actual excise tax or such income
tax, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code."
3. The Employment Agreement, as amended by this Amendment, continues in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
February 24, 1995.
SCOTT PAPER COMPANY
By:
- --------------------------- ---------------------------
Albert J. Dunlap
<PAGE>
Exhibit 10(f)
- -------------
March 6, 1995
Mr. ______________
Scott Paper Company
Scott Plaza
Philadelphia PA 19113
Dear _____:
In consideration of your continued employment and valuable services to the
Company, Scott Paper Company (the "Company" or "Scott") agrees that in the event
your employment is involuntarily terminated by the Company without cause, you
will receive the following:
1. A lump sum payment in cash in an amount equal to three times your annual
base salary at the time of termination paid to you within 30 days of the
effective date of any termination.
2. A lump sum payment in cash in an amount equal to the previous year's
incentive payment, multiplied by a fraction, the numerator of which is the
number of whole months from the beginning of the calendar year to the date
of termination and the denominator of which is 12.
3. All outstanding unvested stock options shall become vested on the effective
date of any termination, and restrictions on any restricted stock shall be
removed on such effective date, or, at the Company's option, you shall be
paid the cash equivalent of the value of such unvested options and
restricted stock as of such date using the share price at the close of
business on such date.
4. Continuation of health and life insurance benefits provided to Company
executives from time to time for a period of up to three years from the
date of termination, provided that the Company may provide substantially
equivalent benefits to you in the event your continued participation in the
Company's benefit plans is inappropriate after you have terminated
employment, and provided that the benefits shall be reduced to the extent
you become entitled to substantially similar benefits through subsequent
employment or otherwise at no cost or a similar cost to you.
"Cause," as used herein, shall include the following actions or omissions:
the continued failure to perform your duties as a senior executive, including
but not limited to meeting expectations and performance goals; the failure to
implement proper directions or engaging in insubordination; or engaging in
conduct injurious to the Company, monetarily or otherwise.
<PAGE>
The benefits provided under this Letter Agreement are in lieu of any
benefits payable to you under the Company's Termination Pay Plan. This
Agreement does not change, alter or amend any agreement regarding a termination
resulting from or following a "change in control" which is the subject of a
separate agreement with you and, following a change in control, such separate
agreement shall supercede this agreement. In addition, this agreement does not
supersede or change any other agreements, including those relating to
confidentiality and to restrictions on your ability to work for a competitor
after your termination. This Letter Agreement also does not constitute an
agreement to employ you for any specified period of time, but only provides for
certain benefits upon termination of that employment by the Company.
Please signify your acceptance by signing the enclosed extra copy of this
Letter Agreement and returning one fully executed copy to me.
Very truly yours,
SCOTT PAPER COMPANY
By:
------------------------
Accepted
- -------------------------
<PAGE>
Exhibit 10(g)
- -------------
AGREEMENT
---------
THIS AGREEMENT dated as of February 24, 1995, is made by and between
Scott Paper Company, a Pennsylvania corporation (the "Company"), and John P.
Murtagh (the "Executive").
WHEREAS the Company considers it essential to the best interests of
its shareholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly-held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its shareholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their
<PAGE>
assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of the termination of their
employment or a Change in Control;
NOW THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
-------------
Agreement is provided in the last Section hereof.
2. Term of Agreement. This Agreement shall commence on the date
-----------------
hereof and shall continue in effect through December 31, 1997; provided,
however, that commencing on January 1, 1997 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company or the
Executive shall have given notice not to extend this Agreement or a Change in
Control shall have occurred prior to such January 1; provided, however, if a
Change in Control shall have occurred during the term of this Agreement, this
Agreement shall continue in effect for a period of not less than thirty-six (36)
months beyond the month in which such Change in Control occurred.
2
<PAGE>
3. Company's Covenants Summarized. In order to induce the Executive
------------------------------
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the "Severance Payments"
described in Section 6.01 hereof and the other payments and benefits described
herein in the event the Executive's employment with the Company is terminated
following a Change in Control and during the term of this Agreement. No amount
or benefit shall be payable under this Agreement unless there shall have been
(or, under the terms hereof, there shall be deemed to have been) a termination
of the Executive's employment with the Company following a Change in Control.
This Agreement shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between the Executive
and the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
-------------------------
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of
3
<PAGE>
(i) a date which is three (3) months from the date of such Potential Change of
Control, (ii) the date of a Change in Control, (iii) the date of termination by
the Executive of the Executive's employment for Good Reason (determined by
treating the Potential Change in Control as a Change in Control in applying the
definition of Good Reason), by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason.
5. Compensation Other Than Severance Payments.
------------------------------------------
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control
4
<PAGE>
and during the term of this Agreement, the Company shall pay the Executive's
full salary to the Executive through the Date of Termination at the rate in
effect at the time the Notice of Termination is given, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of any compensation or benefit plan, program or
arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
------------------
6.01 Subject to Section 6.02 hereof, the Company shall pay the
Executive the payments described in this Section 6.01 (the "Severance Payments")
upon the termination of the Executive's employment following a Change in Control
and during the term of this Agreement, in addition to the payments and benefits
described in
5
<PAGE>
Section 5 hereof, unless such termination is (i) by the Company for Cause, (ii)
by reason of death, Disability or Retirement, or (iii) by the Executive without
Good Reason. The Executive's employment shall be deemed to have been terminated
following a Change in Control by the Company without cause or by the Executive
with Good Reason if the Executive's employment is terminated prior to a Change
in Control without cause at the direction of a Person who has entered into an
agreement with the Company the consummation of which will constitute a Change in
Control or if the Executive terminates his employment with Good Reason prior to
a Change in Control (determined by treating a Potential Change in Control as a
Change in Control in applying the definition of Good Reason) if the circumstance
or event which constitutes Good Reason occurs at the direction of such Person.
(A) In lieu of any further salary payments to the Executive
for periods subsequent to the Date of Termination and in lieu of any
severance benefit otherwise payable to the Executive, the Company
shall pay to the Executive a lump sum severance payment, in cash,
equal to three times the lesser of (i) the Executive's Base Amount or
(ii) the sum of (a)
6
<PAGE>
the Executive's annual base salary in effect immediately prior to the
Change in Control and (b) the amount paid to the Executive pursuant to
any incentive compensation plan in which the Executive participated in
the year preceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of the incentive plan,
the Company shall pay to the Executive a lump sum amount, in cash,
equal to the sum of (i) any incentive compensation which has been
allocated or awarded to the Executive for a completed fiscal year or
other measuring period preceding the Date of Termination under the
plan but has not yet been paid (pursuant to Section 5.02 hereof or
otherwise), and (ii) an amount equal to the product of (a) the
incentive compensation earned by the Executive with respect to the
last completed fiscal year prior to the Date of Termination and (b) a
fraction, the numerator of which is the number of days elapsed between
the end of such year and the date of termination and the denominator
of which is 365;
7
<PAGE>
(C) For a thirty-six (36) month period after the Date of
Termination, the Company shall arrange to provide the Executive with
life, disability, accident and health insurance benefits substantially
similar to those which the Executive is receiving immediately prior to
the Notice of Termination (without giving effect to any reduction in
such benefits subsequent to a Change in Control which reduction
constitutes Good Reason). Benefits otherwise receivable by the
Executive pursuant to this Section 6.01(C) shall be reduced to the
extent comparable benefits are actually received by or made available
to the Executive without cost during the thirty-six (36) month period
following the Executive's termination of employment (and any such
benefits actually received by the Executive shall be reported to the
Company by the Executive). If the benefits provided to the Executive
under this Section 6.01(C) shall result in a decrease, pursuant to
Section 6.02, in the Severance Payments and these Section 6.01(C)
benefits are thereafter reduced pursuant to the
8
<PAGE>
immediately preceding sentence because of the receipt of comparable
benefits, the Company shall, at the time of such reduction, pay to the
Executive the lesser of (a) the amount of the decrease made in the
Severance Payments pursuant to Section 6.02, or (b) the maximum amount
which can be paid to the Executive without being, or causing any other
payment to be, nondeductible by reason of section 280G of the Code.
6.02 Whether or not the Executive becomes entitled to the Severance
Payments, if any of the Total Payments (as defined below) will be subject to the
Excise Tax, the Company shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Executive, after
deduction of any Excise Tax on the Severance Payments and any federal, state and
local income tax and Excise Tax upon the payment provided for by this Section
6.02, shall be equal to the Severance Payments. For purposes of determining
whether any of the Severance Payments will be subject to the Excise Tax and the
amount of such Excise Tax, (i) any other payments or benefits (together with the
Severance Payments, the "Total Payments") received or to be received by the
9
<PAGE>
Executive in connection with a Change in Control or the Executive's termination
of employment (whether pursuant to the terms of this Agreement or any other
plan, arrangement or agreement with the Company, any Person whose actions result
in a change in control or any Person affiliated with the Company or such Person)
shall be treated as "parachute payments" within the meaning of section
280G(b)(2) of the Code, and all "excess parachute payments" within the meaning
of section 280G(b)(l) of the Code shall be treated as subject to the Excise Tax,
unless in the opinion of tax counsel selected by the Company's independent
auditors and reasonably acceptable to the Executive such other payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of Section 280G(b)(4)(A) of the Code, or such excess parachute
payments (in whole or in part) represent reasonable compensation for services
actually rendered, within the meaning of section 280G(b)(4)(B) of the Code, in
excess of the Base Amount allocable to such reasonable compensation, or are
otherwise not subject to the Excise Tax, (ii) the amount of the Severance
Payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Severance Payments or (B) the amount
of excess parachute
10
<PAGE>
payments within the meaning of section 280G(b)(l) of the Code (after applying
clause (i), above), and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay federal income taxes at the highest marginal rate of federal
income taxation in the calendar year in which the Gross-Up Payment is to be made
and state and local income taxes at the highest marginal rate of taxation in the
state and locality of the Executive's residence on the Date of Termination, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time of termination of the Executive's employment, the Executive shall
repay to the Company, at the time that the amount of such reduction in Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the Gross-
11
<PAGE>
Up Payment being repaid by the Executive to the extent that such repayment
results in a reduction in Excise Tax and/or a federal, state or local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder at the time of the
termination of the Executive's employment (including by reason of any payment
the existence or amount of which cannot be determined at the time of the Gross-
Up Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Severance Payments.
6.03 The payments provided for in Section 6.01 (other than
Section 6.01(C)) and 6.02 hereof shall be made not later than the fifth day
following the Date of Termination, provided, however, that if the amounts of
such payments cannot be finally determined on or before
12
<PAGE>
such day, the Company shall pay to the Executive on such day an estimate, as
determined in good faith by the Company, of the minimum amount of such payments
to which the Executive is clearly entitled and shall pay the remainder of such
payments (together with interest at the rate provided in section 1274(b)(2)(B)
of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
13
<PAGE>
6.04 The Company also shall pay to the Executive all reasonable legal
fees and expenses incurred by the Executive in seeking in good faith to obtain
or enforce any benefit or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to the application of
section 4999 of the Code to any payment or benefit provided hereunder). Such
payments shall be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such evidence of fees
and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.01 Notice of Termination. After a Change in Control and during the
---------------------
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of
14
<PAGE>
the Executive's employment under the provision so indicated. Further, a Notice
of Termination for Cause is required to include a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which was called and
held for the purpose of considering such termination (after reasonable notice to
the Executive and an opportunity for the Executive, together with the
Executive's counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and specifying the
particulars thereof in detail.
7.02 Date of Termination. "Date of Termination", with respect to any
-------------------
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination
15
<PAGE>
(which, in the case of a termination by the Company, shall not be less than
thirty (30) days (except in the case of a termination for Cause) and, in the
case of a termination by the Executive, shall not be less than fifteen (15) days
nor more than sixty (60) days, respectively, from the date such Notice of
Termination is given).
7.03 Dispute Concerning Termination. If within fifteen (15) days
------------------------------
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree of a court of competent
jurisdiction (which is not appealable or with respect to which the time for
appeal therefrom has expired and no appeal has been perfected); provided further
that the Date of Termination shall be extended by a notice of dispute only if
such notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
16
<PAGE>
7.04 Compensation During Dispute. If a purported termination occurs
---------------------------
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.03 hereof. Amounts paid under this Section 7.04 are
in addition to all other amounts due under this Agreement (other than those due
under Section 5.02 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
-------------
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04. Further, the amount of any payment or benefit provided for in
17
<PAGE>
Section 6 (other than Section 6.01(C)) or Section 7.04 shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.01 In addition to any obligations imposed by law upon any successor
to the Company, the Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. Failure of the Company to obtain such assumption and agreement
prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for Good
Reason after a Change in Control, except that, for purposes of implementing the
foregoing, the date on
18
<PAGE>
which any such succession becomes effective shall be deemed the Date of
Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
-------
other communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed, if to the
Executive, at the most recent location indicated in the personnel records of the
Company and, if the Company, to the address set forth below, or to such other
address as either party may have furnished to the other in writing in accordance
19
<PAGE>
herewith, except that notice of change of address shall be effective only upon
actual receipt:
To the Company:
Scott Paper Company
Scott Plaza
Philadelphia, PA 19113
11. Miscellaneous. No provision of this Agreement may be modified,
-------------
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Pennsylvania. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sec-
20
<PAGE>
tions. Any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law and any additional
withholding to which the Executive has agreed. The obligations of the Company
and the Executive under Sections 6 and 7 shall survive the expiration of the
term of this Agreement.
12. Validity. The invalidity or unenforceability or any provision of
--------
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
---------------------- -----------
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Board shall afford a reasonable opportunity to
the Executive for a review of
21
<PAGE>
the decision denying a claim and shall further allow the Executive to appeal to
the Board a decision of the Board within sixty (60) days after notification by
the Board that the Executive's claim has been denied. Any further dispute or
controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Philadelphia, Pennsylvania in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that the Executive shall be entitled to seek specific performance of
the Executive's right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection with this
Agreement.
15. Definitions. For purposes of this Agreement, the following
-----------
terms shall have the meanings indicated below:
(A) "Base Amount" shall have the meaning defined in section
280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(C) "Board" shall mean the Board of Directors of the Company.
22
<PAGE>
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.01) after a written demand for
substantial performance is delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company or its subsidiaries, monetarily or
otherwise. For purposes of clauses (i) and (ii) of this definition, no act, or
failure to act, on the Executive's part shall be deemed "willful" unless done,
or omitted to be done, by the Executive not in good faith and without reasonable
belief that the Executive's act, or failure to act, was in the best interest of
the Company.
23
<PAGE>
(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly
or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired
directly from the Company or its affiliates) representing 20% or more
of the combined voting power of the Company's then outstanding
securities; or
(II) during any period of two consecutive years (not
including any period prior to the execution of this Agreement),
individuals who at the beginning of such period constitute the Board
and any new director (other than a director designated by a Person who
has entered into an agreement with the Company to effect a transaction
described in clause (I), (III) or (IV) of this paragraph) whose
election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors
24
<PAGE>
at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to
constitute a majority thereof; or
(III) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than
(i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity), in
combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at
least 80% of the combined voting power of the voting securities of the
Company or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction)
in which no Person acquires more than 20% of the
25
<PAGE>
combined voting power of the Company's then outstanding securities; or
(IV) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's
assets.
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Scott Paper Company and any successor to
its business and/or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(E)
hereof, whether or not any Change in Control of the Company has occurred in
connection with such succession).
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
(I) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness (as determined under the Company's
long term disability plan), the Executive shall have been absent from the full-
time performance of
26
<PAGE>
the Executive's duties with the Company for a period of six (6) consecutive
months, the Company shall have given the Executive a Notice of Termination for
Disability, and, within thirty (30) days after such Notice of Termination is
given, the Executive shall not have returned to the full-time performance of the
Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(L) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's
27
<PAGE>
status as a senior executive officer of the Company or a substantial
adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change
in Control other than any such alteration primarily attributable to
the fact that the Company may no longer be a public company;
(II) a reduction by the Company in the Executive's annual
base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary
reductions similarly affecting all senior executives of the Company
and all senior executives of any Person in control of the Company;
(III) the Company's requiring the Executive to be based
anywhere other than the Company's principal executive offices except
for required travel on the Company's business to an extent
substantially consistent with the Executive's present business travel
obligations;
28
<PAGE>
(IV) the failure by the Company, without the Executive's
consent, to pay to the Executive any portion of the Executive's
current compensation except pursuant to an across-the-board
compensation deferral similarly affecting all senior executives of the
Company and all senior executives of any Person in control of the
Company, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within thirty (30) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately
prior to the Change in Control which is material to the Executive's
total compensation, including but not limited to the Company's stock
option, restricted stock, stock appreciation right, incentive
compensation, and bonus plans or any substitute plans adopted prior to
the Change in Control, unless an equitable arrangement (which is
embodied in an ongoing substitute or alternative plan but which need
not
29
<PAGE>
provide the Executive with equity-based incentives) has been made with
respect to such plan, or the failure by the Company to continue the
Executive's participation therein (or in such substitute or
alternative plan) on a basis not materially less favorable than the
benefits provided to other participants;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially
reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the Change in
Control, or the failure by the Company to provide the Executive with
the number of paid vacation days to which the Executive is entitled on
the basis of years of service with the Company in accordance with the
Company's
30
<PAGE>
normal vacation policy in effect at the time of the Change in Control;
or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination
satisfying the requirements of Section 9.01; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(P) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
31
<PAGE>
(Q) "Pension Plan" shall mean [insert name(s) of plan(s)].
(R) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof; however,
a Person shall not include (i) the Company or any of its subsidiaries, (ii) a
trustee or other fiduciary holding securities under an employee benefit plan of
the Company or any of its subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of stock of the Company.
(S) "Potential Change in Control" shall be deemed to have occurred if
the conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) the Company enters into an agreement, the consummation
of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to
32
<PAGE>
consider taking actions which, if consummated, would constitute a
Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company representing 10%
or more of the combined voting power of the Company's then outstanding
securities, increases such Person's beneficial ownership of such
securities by 5% or more over the percentage so owned by such Person
on the date hereof; or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has
occurred.
(T) "Retirement" shall be deemed the reason for the termination by
the Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(U) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
33
<PAGE>
(V) "Total Payments" shall mean those payments described in Section
6.02 hereof.
Scott Paper Company
By /s/ Albert J. Dunlap
-------------------------
Name: Albert J. Dunlap
Title: Chairman & CEO
-------------------------
34
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