Exhibit 10
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PACKAGING DYNAMICS CORPORATION
2002 LONG-TERM INCENTIVE STOCK PLAN
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), made effective as of the 31st day
of December 31, 2004 (hereinafter called the "Date of Grant"), between
PACKAGING DYNAMICS CORPORATION, a Delaware corporation (hereinafter called the
"Company"), and the employee named on the signature page hereto (hereinafter
called the "Optionee"):
R E C I T A L S:
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WHEREAS, the Company has adopted the Packaging Dynamics Corporation
2002 Long-Term Incentive Stock Plan (the "Plan"), which Plan is incorporated
herein by reference and made a part of this Agreement. Capitalized terms not
otherwise defined herein shall have the same meanings as set forth in the
Plan;
WHEREAS, the Committee has determined that it would be in the best
interests of the Company and its stockholders to grant the option provided for
herein (the "Option") to the Optionee pursuant to the Plan and the terms set
forth herein; and
WHEREAS, the Optionee has agreed to abide by the obligations set
forth herein as reasonable and necessary restrictions in order to protect the
Company's goodwill, trade secrets and Confidential Information (as defined
below) and to ensure the long-term success and development of the Company and
its business.
NOW THEREFORE, in consideration of the mutual covenants set forth
hereinafter, the parties hereto, intending to be legally bound, agree as
follows:
1. Grant of the Option. The Company hereby grants to the Optionee an
Option to purchase, on the terms and conditions hereinafter set forth, the
number of Shares set forth on the last page hereof, at an exercise price equal
to the dollar amount per Share set forth on the last page hereof (the
"Exercise Price"). The Option is intended to be a nonqualified stock option,
and is not intended to be treated as an Incentive Stock Option, which complies
with Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Vesting.
(a) Subject to the Optionee's continued employment with the Company
and compliance with the provisions of this Agreement, the Option shall vest
and become exercisable annually in equal one-third (1/3) portions (rounded
down to the nearest whole share) over the three (3) year period commencing
with the first anniversary of the Date of Grant and shall be fully vested and
exercisable as of the third anniversary of the Date of Grant. At any given
time, the portion of the Option that has become vested and exercisable as
described above (or pursuant to Section 2(c) below) is hereinafter referred to
as the "Vested Portion."
(b) If the Optionee's employment with the Company is terminated for
any reason prior to the third anniversary of the Date of Grant, this Option
shall, to the extent not vested as of the last day of the Optionee's
employment, be cancelled by the Company without consideration and the Vested
Portion of the Option as of the Optionee's last day of employment shall remain
exercisable for the period set forth in Section 3(a), subject to the terms of
Section 10.
(c) Notwithstanding any other provision of this Agreement to the
contrary, in connection with any merger, consolidation, change in control or
similar reorganization (a "Corporate Transaction"), the Committee may in its
sole discretion:
(i) Provide that any acquiring or successor corporation will
assume the Option, to the extent then outstanding, or substitute an equivalent
option meeting the requirements of Section 424(a) of the Code for the
outstanding portion of the Option; or
(ii) Accelerate the vesting of any outstanding portion of
the Option which has not previously vested pursuant to Section 2(a) or provide
for the cancellation of the unvested portion of the Option; and/or
(iii) Provide for a cash payment to the Optionee equal to
the excess, if any, of the Fair Market Value of the number of Shares covered
by the Vested Portion of the Option then held by the Optionee over the
aggregate Exercise Price of the Vested Portion of such Option.
The Committee shall have no obligation to take any such action in
connection with a Corporate Transaction.
3. Exercise of Option.
(a) Period of Exercise. Subject to the provisions of the Plan and
this Agreement, the Optionee must exercise all or any part of the Vested
Portion of the Option at any time prior to the earliest to occur of:
(i) the seventh anniversary of the Date of Grant;
(ii) one (1) year following the date of the Optionee's
termination of employment due to death or "Disability";
(iii) six (6) months following the date of the Optionee's
termination of employment by the Company without "Cause" or by the employee
upon retirement;
(iv) thirty (30) days following the date of the Optionee's
termination of employment by the Company for "Cause" or by the Optionee for
any reason (other than retirement); or
(v) if determined by the Committee in its sole discretion,
the consummation of a Corporate Transaction; provided that the Committee shall
have notified the Optionee at least fifteen (15) days in advance of the
consummation of the Corporate Transaction of such a determination.
(b) Applicable Definitions. For purposes of this Agreement:
(i) "Cause" shall mean "Cause" as defined in any employment
agreement then in effect between the Optionee and the Company or if not
defined therein or, if there shall be no such agreement, (i) Optionee's
engagement in misconduct that is injurious to the Company or its Affiliates,
(ii) Optionee's failure to substantially perform his or her duties to the
Company, (iii) Optionee's dishonesty in the performance of his or her duties
to the Company, (iv) Optionee's commission of an act or acts constituting any
(x) fraud against, or misappropriation or embezzlement from the Company or any
of its Affiliates, (y) crime involving moral turpitude, or (z) a felony, or
the Optionee's conviction or commission of a lesser crime or offense that
adversely impacts upon the business or reputation of the Company or an
Affiliate or (v) Optionee's breach of any confidentiality or non-competition
covenant entered into between the Optionee and the Company, including as
provided in Section 10. The determination of the existence of Cause shall be
made by the Committee in good faith, which determination shall be conclusive
for purposes of this Agreement.
(ii) "Disability" shall mean "Disability" as defined in any
employment agreement then in effect between the Optionee and the Company, or
if not defined therein or if there shall be no such agreement, as defined in
the Company's long-term disability plan as in effect from time to-time, or if
there shall be no such plan or if not defined therein, the Optionee's becoming
physically or mentally incapacitated and therefore becoming unable for a
period of six (6) months in any twelve (12) consecutive month period to
perform his or her duties to the Company.
(c) Method of Exercise.
(i) Subject to the terms of this Agreement, the Vested
Portion of the Option may be exercised by delivering to the Company at its
principal office written notice of intent to so exercise; provided that, the
Option may be exercised with respect to whole Shares only. Such notice shall
specify the number of Shares for which the Option is being exercised and shall
be accompanied by payment in full of the Exercise Price. The payment of the
Exercise Price shall be made in cash or its equivalent, or, if and to the
extent permitted by the Committee, by exchanging Shares owned by the Optionee
(which are not the subject of any pledge or other security interest and which
have been owned by the Optionee for at least six (6) months), or by a
combination of the foregoing, provided that the combined value of all cash and
cash equivalents and the Fair Market Value of any such pre-owned Shares so
tendered to the Company as of the date of such tender is at least equal to the
aggregate Exercise Price.
(ii) Notwithstanding any other provision of the Plan or this
Agreement to the contrary, the Option may not be exercised prior to the
completion of any registration or qualification of the Option or the Shares
under applicable state and federal securities or other laws, or under any
ruling or regulation of any governmental body or national securities exchange
that the Committee shall in its sole discretion determine to be necessary or
advisable.
(iii) Upon the Company's determination that the Option has
been validly exercised as to any of the Shares, the Company shall issue
certificates in the Optionee's name for such Shares. However, the Company
shall not be liable to the Optionee for damages relating to any delays in
issuing such certificates to him or her, any loss of the certificates, or any
mistakes or errors in the issuance of the certificates or in the certificates
themselves.
(iv) In the event of the Optionee's death, the Vested
Portion of the Option shall remain exercisable by the Optionee's executor or
administrator, or the person or persons to whom the Optionee's rights under
this Agreement shall pass by will, or by the laws of descent and distribution
as the case may be, to the extent otherwise permitted under this Agreement.
Any heir or legatee of the Optionee shall take rights herein granted subject
to the terms and conditions hereof.
4. No Right to Continued Employment. Neither the Plan nor this
Agreement shall be construed as giving the Optionee the right to be retained
in the employ of, or in any consulting relationship to, the Company or any
Affiliate. Further, the Company or an Affiliate may at any time dismiss the
Optionee or discontinue any consulting relationship, free from any liability
or any claim under the Plan or this Agreement, except as otherwise expressly
provided herein.
5. Rights as a Stockholder. Neither the Optionee nor any successor in
interest shall have rights as a stockholder of the Company with respect to any
Shares subject to an Option granted hereunder until the date of issuance of a
certificate for such Shares.
6. Legend on Certificates. The certificates representing the Shares
purchased by exercise of the Option shall be subject to such stop transfer
orders and other restrictions as the Committee may deem advisable under the
Plan or the rules, regulations, and other requirements of the Securities and
Exchange Commission, any stock exchange upon which such Shares are listed, and
any applicable federal or state laws, and the Committee may cause a legend or
legends to be put on any such certificates to make appropriate reference to
such restrictions.
7. Transferability. The Option may not be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by the Optionee
otherwise than by will or by the laws of descent and distribution or pursuant
to a qualified domestic relations order ("QDRO"), and any such purported
assignment, alienation, pledge, attachment, sale, transfer or encumbrance
shall be void and unenforceable against the Company or any Affiliate; provided
that the designation of a beneficiary shall not constitute an assignment,
alienation, pledge, attachment, sale, transfer or encumbrance. No such
permitted transfer of the Option to heirs or legatees of the Optionee shall be
effective to bind the Company unless the Committee shall have been furnished
with written notice thereof and a copy of such evidence as the Committee may
deem necessary to establish the validity of the transfer and the acceptance by
the transferee or transferees of the terms and conditions hereof. During the
Optionee's lifetime, the Option is exercisable only by the Optionee or by his
or her legal representative or as otherwise provided by a QDRO.
8. Withholding. Subject to applicable law, the Optionee agrees to
make appropriate arrangements required by the Company for satisfaction of any
applicable federal, state or local income tax, withholding requirements or
like requirements, including the payment to the Company at the time of
exercise of, or other settlement in respect of, the Option of all such taxes
and requirements and the Company shall be authorized to take such action as
may be necessary in the opinion of the Company's counsel (including, without
limitation, withholding amounts from any compensation or other amount owing
from the Company to the Optionee) to satisfy all obligations for the payment
of such taxes.
9. Securities Laws. Upon the acquisition of any Shares pursuant to
the exercise of the Option, the Optionee will make or enter into such written
representations, warranties and agreements as the Committee may reasonably
request in order to comply with applicable securities laws or with this
Agreement.
10. Confidentiality, Non-Compete, Non-Solicitation, Non-Interference
and Return of Company Property.
(a) Confidentiality. At all times during and after the Optionee's
employment with the Company or its Affiliates, the Optionee will not use,
disclose, sell or otherwise transfer or disseminate, directly or indirectly,
any Confidential Information, except as is necessary for the performance of
the Optionee's duties as an employee of the Company or its Affiliates, or as
is authorized in advance in writing by an executive officer of the Company.
For purposes of this Agreement, "Confidential Information" means any
confidential or proprietary information, materials or devices which the
Optionee may have acquired or may acquire during or by reason of the
Optionee's employment with the Company or its Affiliates which relates to the
Company or its Affiliates and/or their current or prospective business
activities, products, or services, including, but not limited to any of the
following: (i) information relating to the Company's research, development,
patent and copyright development and licensing thereof, trade secrets,
inventions, formulas, designs, drawings, specifications and engineering,
laboratory analysis, production processes, or equipment; (ii) information
related to the specific or unique marketing techniques, price lists, pricing
policies, sales, services, costs, business methods, formulas, product
specifications or business planning of the Company or its Affiliates; (iii)
information relating to the names of customers of the Company or its
Affiliates and their representatives, customer services, or the type, quantity
and specifications of products purchased by or from customers which came into
the Optionee's knowledge, possession, or control in connection with his or her
employment; and (iv) information relating to the specific or unique computer
techniques, equipment, programs and software of the Company or its Affiliates.
The term "Confidential Information" does not include information, materials or
devices which are generally known to the public (other than as a result of an
improper or unauthorized disclosure by the Optionee in violation of the terms
hereof) or information, materials or devices that are not competitively
sensitive to the Company or any of its Affiliates.
(b) Non-Compete. During the Optionee's employment with the Company or
its Affiliates and for a period of one year following the Optionee's
termination of employment for whatever reason, the Optionee will not engage in
"Competitive Activities" (as hereinafter defined) within the "Covered Area"
(as hereinafter defined) without first obtaining written permission from an
executive officer of the Company. For purposes of this Agreement, "Competitive
Activities" means rendering the same services or substantially the same
services, or being involved in the same capacity or substantially the same
capacity as the Optionee was, for the Company or any of its Affiliates,
whether as an officer, director, employee, consultant, agent, owner or
shareholder (excluding ownership of less than 5% of the stock of a publicly
traded company), in the manufacture, development, promotion, distribution or
sale of any product or service which is the same as or competitive with any
products or services of any of the businesses of the Company or its Affiliates
in which the Optionee has participated in any material respect during the
Optionee's last twelve (12) months of employment (including any products or
services known to the Optionee to be in development or which the Optionee knew
the Company or its Affiliates had plans to sell within the succeeding twelve
(12) months) (the "Covered Products"). The Optionee acknowledges that products
of the Company and its Affiliates are sold and marketed throughout North
America and the United Kingdom. Accordingly, for purposes of this Agreement,
"Covered Area" means any state, county, city, town, province or comparable
unit of local government where the Covered Products are manufactured,
marketed, distributed or sold by the Company or any of its Affiliates.
(c) Non-Solicit/Non-Interference. During the Optionee's employment
with the Company or its Affiliates and for a period of one year following the
Optionee's termination of employment for whatever reason, the Optionee will
not: (i) directly or indirectly solicit, induce or influence (or attempt to
solicit, induce or influence) any customers or suppliers of the Company or its
Affiliates with which the Optionee was involved as part of the Optionee's job
responsibilities during the Optionee's last twelve (12) months of employment
to divert their business to any direct competitor of the Company or to
terminate his, her or its relationship with the Company; (ii) interfere with
or damage (or attempt to interfere with or damage) any relationship and/or
agreement between any of the Company or its Affiliates and a past or present
known customer, vendor or supplier of any of the Company or its Affiliates; or
(iii) otherwise intentionally interfere with or damage the business or
accounts of the Company or its Affiliates.
(d) Employee Non-Solicit. During the Optionee's employment with the
Company or its Affiliates and for a period of one year following the
Optionee's termination of employment for whatever reason, the Optionee will
not: (i) directly or indirectly solicit, induce or cause (or attempt to
solicit, induce or cause) another person in the employ of the Company to
terminate his or her employment for the purposes of joining, associating or
becoming employed with any business or activity which is in competition with
any products sold, or any business or activity engaged in, by the Company or
its Affiliates; or (ii) make known to any potential employer, firm,
corporation, association, or other entity the names or addresses of, or any
information pertaining to, any current or former employee of the Company or
its Affiliates.
(e) Return of the Company's Property and Confidential Information.
Upon request by the Company at any time, and, in any event, upon the
termination of the Optionee's employment, whether voluntary or involuntary,
the Optionee will return to the Company all copies of documents, materials and
devices belonging to the Company or containing Confidential Information,
including (but not limited to) computer files, notes, memoranda, reports,
letters, and manuals. This provision is intended to include all documents,
materials and devices, made or compiled by the Optionee, as well as all
materials furnished to the Optionee by any third party. At the Company's
request, the Optionee will confirm in writing his or her compliance with the
requirements of this provision.
(f) Cancellation of Options and "Clawback" of Proceeds. In the event
of a breach of the restrictions and obligations contained in this Section 10
of this Agreement by the Optionee, or if such restrictions and obligations are
found to be unenforceable for any reason, in addition and without prejudice to
any other remedies the Company may have, the Option shall be rescinded and the
Optionee (or, if applicable, his or her heirs, beneficiaries or estate) shall
promptly, at the Company's request (i) sell back to the Company all "Acquired
Shares" (as defined below) held by the Optionee (or, if applicable, his or her
heirs, beneficiaries or estate) for a per share price equal to the per share
Exercise Price paid by the Optionee to acquire such shares, and (ii) to the
extent such Acquired Shares have previously been sold or otherwise disposed of
by the Optionee (or, if applicable, by his or her heirs, beneficiaries or
estate), repay to the Company the excess of (x) the aggregate Fair Market
Value of such Acquired Shares on the date of such sale or disposition over (y)
the aggregate Exercise Price of such Acquired Shares. For purposes of this
Paragraph 10(f), the amount of the repayment described herein shall not be
affected by whether the Optionee (or, if applicable, his or her heirs,
beneficiaries or estate) actually received such Fair Market Value with respect
to such sale or other disposition. For purposes of this Agreement, "Acquired
Shares" shall mean shares of Company common stock that were acquired upon
exercise of any Option granted to the Optionee by the Company.
(g) Acknowledgements. The Optionee acknowledges the importance of the
restrictions and obligations contained in this Section 10 and that (i)
Confidential Information is valuable proprietary information of the Company
which the Company has devoted and will continue to devote substantial
resources to developing and protecting, (ii) the business of the Company is
intensely competitive and the use or disclosure of Confidential Information
could be damaging to the Company's business operations, particularly if such
disclosure is by or to a competitor, customer or vendor of the Company, (iii)
the Optionee provides unique and extraordinary services to the Company which
involve the Optionee's use and access to particularly sensitive and valuable
Confidential Information, (iv) the Company invests a substantial amount of
time and money in developing customer relationships as well as in recruiting
and training its employees, (v) the restrictions and obligations contained in
this Section 10 are reasonable and necessary to safeguard the Company's
legitimate protectable interests and are in addition to and do not limit or
supercede any preexisting obligations Optionee may have to the Company or its
Affiliates concerning such matters, including confidentiality, competition,
solicitation of customers and employees, non-interference and return of
Company property, and (vi) the Optionee has or will come into contact with
Confidential Information and develop relationships with customers of the
Company or its Affiliates solely due to the Optionee's employment with the
Company or its Affiliates. In addition, the Optionee recognizes and agrees
that any breach or threatened or anticipated breach of any part of this
Section 10 will result in irreparable harm and continuing damage to the
Company, and that the remedy at law for any such breach or threatened or
anticipated breach will be inadequate. Accordingly, in addition to any other
legal or equitable remedies that may be available to the Company or its
Affiliates, the Optionee acknowledges and agrees that the Company shall be
entitled to seek and obtain an injunction or injunctions, without bond or
other security, to prevent any breach or threatened or anticipated breach of
any such section.
11. Notices. Any notice necessary under this Agreement shall be
addressed to the Company in care of its Secretary at the principal executive
office of the Company and to the Optionee at the address appearing in the
personnel records of the Company for such Optionee or to either party at such
other address as either party hereto may hereafter designate in writing to the
other. Any such notice shall be deemed effective upon receipt thereof by the
addressee.
12. Governing Law and Forum. THE OPTIONEE AGREES AND ACKNOWLEDGES
THAT: (A) THE COMPANY'S OTHER OPTIONEES ARE SUBJECT TO A FORM OF AGREEMENT
SIMILAR TO THIS AGREEMENT; (B) OTHER INDIVIDUALS INVOLVED WITH THE COMPANY,
INCLUDING FUTURE EMPLOYEES, MAY EXECUTE A FORM OF AGREEMENT SIMILAR TO THIS
AGREEMENT; (C) THE FOREGOING OPTIONEES AND INDIVIDUALS LIVE AND WORK IN
XXXXXXX XXXXXXXXX XXXXXX XXX XXXXXX XXXXXX; AND (D) THE COMPANY HAS A
LEGITIMATE INTEREST IN THE UNIFORM LEGAL INTERPRETATION AND APPLICATION OF
THIS AGREEMENT. ACCORDINGLY, THE INTERPRETATION, PERFORMANCE AND ENFORCEMENT
OF THIS AGREEMENT AND ANY DISPUTES BETWEEN THE OPTIONEE AND THE COMPANY
ARISING UNDER IT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE, THE SITE OF THE COMPANY'S INCORPORATION,
WITHOUT REGARD TO ITS CONFLICT OF LAW RULES. THE PARTIES FURTHER HEREBY
IRREVOCABLY CONSENT TO THE JURISDICTION OF THE FEDERAL AND STATE COURTS
LOCATED WITHIN THE STATE OF DELAWARE IN ANY SUIT, ACTION OR PROCEEDING SEEKING
TO ENFORCE ANY PROVISION OF, OR BASED ON ANY MATTER ARISING OUT OF OR IN
CONNECTION WITH, THIS AGREEMENT. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE
SERVICE OF ANY AND ALL PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING BY THE
DELIVERY OF SUCH PROCESS TO SUCH PARTY AT THE ADDRESS SPECIFIED FOR NOTICES
UNDER THIS AGREEMENT.
13. Severability. In the event that any one or more of the provisions
of this Agreement shall be held to be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remainder of the agreement shall
not in any way be affected or impaired thereby. Moreover, without limiting the
generality of the foregoing, if any one or more of the provisions contained in
this agreement shall be held to be unreasonable or unenforceable in any
respect, including excessively broad as to duration, activity or subject, such
provisions shall be construed by limiting and reducing them so as to be
enforceable to the maximum extent allowed by applicable law.
14. Entire Agreement; Option Subject to Plan. This Agreement and the
Plan contain the entire understanding and agreement of the parties concerning
the subject matter hereof, and supersede all earlier negotiations and
understandings, written or oral, between the Parties with respect thereto,
except as is otherwise expressly provided herein. The Option and this
Agreement are subject to all of the terms and conditions of the Plan. By
entering into this Agreement the Optionee agrees and acknowledges that the
Optionee has received and read a copy of the Plan. The terms and provisions of
the Plan as it may be amended from time-to-time are hereby incorporated herein
by reference. In the event of a conflict between any term or provision
contained herein and a term or provision of the Plan, the applicable terms and
provisions of the Plan will govern and prevail.
15. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Agreement shall in no way be
construed to be a waiver of such provision or of any other provision hereof.
16. Assignment. The Company may assign its rights and delegate its
duties under this Agreement. If any such assignment or delegation requires
consent of any state securities authorities, the parties agree to cooperate in
requesting such consent. This Agreement shall inure to the benefit of the
successors and assigns of the Company and, subject to the restrictions on
transfer herein set forth, be binding upon the Optionee, his or her heirs,
executors, administrators, successors and assigns.
17. Amendments. This Agreement may be amended or modified at any time
by an instrument in writing signed by the parties hereto.
18. Signature in Counterparts. This Agreement may be signed in
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
19. Authority of the Committee. The Committee shall have full
authority in its discretion to interpret and construe the terms of the Plan
and this Agreement. The determination of the Committee as to any such matter
of interpretation or construction shall be final, binding and conclusive.
[Signature page follows.]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement.
By execution of this Agreement, the Optionee acknowledges receipt of a copy of
the Plan.
PACKAGING DYNAMICS CORPORATION
By:
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Name:
Title:
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[Employee]
_____ options at an Exercise Price of $______
