EXHIBIT 99(C)(3)
MEMORANDUM OF AGREEMENT made as of the 16th day of June, 1997.
B E T W E E N:
XXXXXXXX XXXXXXXX,
of the City of Los Angeles,
in the State of California,
(hereinafter called the "Executive"),
OF THE FIRST PART,
- and -
CCL INDUSTRIES INC.,
a corporation continued under the
laws of Canada,
(hereinafter called "CCL")
OF THE SECOND PART,
- and -
SEDA SPECIALTY PACKAGING CORP.,
a corporation reincorporated under the
laws of Delaware,
(hereinafter called the "Corporation")
OF THE THIRD PART.
WHEREAS:
1. The Executive is the Chairman, President and Chief Executive Officer of
the Corporation.
2. Pursuant to an Agreement and Plan of Merger and Reorganization dated the
date hereof, Seawolf Acquisition Corporation, a wholly-owned indirect subsidiary
of CCL ("Seawolf"), has agreed to make, and CCL has agreed to cause Seawolf to
make, as soon as reasonably practicable but on or before June 23, 1997, a tender
offer in accordance with applicable laws in the United States of America (the
"Offer") for all of the outstanding shares of common stock (the "Common Shares")
of the Corporation and thereafter on successful completion of the Offer,
Seawolf will merge with and into the Corporation (the "Merger"), with the
Corporation being the corporation surviving the Merger.
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3. Pursuant to a Lock-Up Agreement (the "Lock-Up Agreement") dated June 16th,
1997 with CCL and Seawolf, the Executive, amongst others, has agreed, subject to
certain conditions, to tender 535,620 Common Shares into the Offer, vote his
517,713 remaining common shares (the "Remaining Shares") in favour of the Merger
and accept on the Merger for Remaining Shares the consideration described in the
Lock-Up Agreement, and has granted Seawolf the option to acquire, in the
circumstances specified in the Lock-Up Agreement, the Remaining Shares for the
consideration specified therein.
4. The value of the consideration paid or payable by Seawolf to the Executive
for the Common Shares of the Corporation to be acquired by Seawolf and the
Corporation pursuant to the Offer, the Option and the Merger will be at least
$27.67 million.
5. Under the Executive's control, direction, guidance and supervision the
Corporation has carried on the businesses of developing, manufacturing and
marketing specialty plastic packaging products to the personal care and
cosmetics, food and beverage, household and industrial chemical, and
pharmaceutical industries (the "Business") and has sold such products throughout
the United States and in Canada and Mexico from plants located in California and
New York.
6. The Executive, in the course of carrying out his responsibilities to the
Corporation in the past and hereafter, has had and will continue to have
fiduciary responsibilities to the Corporation and has had and will continue to
have access to and has been and will continue to be entrusted with the
confidential and proprietary information and trade secrets of the Corporation
including, without limitation, information not previously disclosed to the
public regarding the names, addresses, terms of contracts and other arrangements
with customers, suppliers, agents and employees of the Corporation; revenues,
expenses, costs, xxxx-ups, profit margins and other financial and budgeting
information; marketing and distribution plans and practices; manufacturing
processes, formulae, methods and facilities; research and development; manuals;
confidential reports; business plans, opportunities and projects; product
information including information entrusted to the Corporation by its customers
in confidence; and other information not generally known regarding the business,
affairs and plans of the Corporation (herein "Confidential Information"), the
unauthorized use or disclosure of which would be detrimental to the Corporation
and the Business and would reasonably be anticipated to materially impair the
value of the Corporation and the Business.
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7. The Executive has been and will be the principal representative of the
Corporation to customers and suppliers of the Business and has been and will be
responsible for maintaining those relations and the Corporation's goodwill and
has been and will be primarily responsible for the Corporation's business
success and profitability.
8. The right to maintain the Confidential Information and to preserve the
Corporation's goodwill constitute proprietary rights that the Corporation is
entitled to protect; failure to do so would result in irreparable harm to the
Corporation which could not be compensated for by monetary damages alone.
9. The entering into of this Agreement by the Executive is a fundamental and
material inducement to Seawolf making the Offer and completing the Merger and to
CCL in causing Seawolf to make the Offer.
10. The Executive and the Corporation wish to record the terms upon which the
Executive will continue to be employed by the Corporation.
11. CCL has agreed to be party to this Agreement for the purpose of granting
stock options to the Executive pursuant to section 3.5 of this Agreement and
purchasing or causing to be purchased key-man insurance pursuant to section 1.5.
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
covenants and agreements herein contained, the payments and inducements provided
by the Corporation to the Executive and for other good and valuable
consideration it is hereby agreed as follows:
1.0 EMPLOYMENT
1.1 POSITION - The Executive shall hold the position of President of the
Corporation, and shall carry out such duties and functions, on behalf of the
Corporation and its subsidiaries and affiliates, as from time to time are vested
in him by the by-laws of the Corporation or assigned to him by the Board of
Directors of the Corporation (the "Board") consistent with the Executive's prior
responsibilities (but recognizing that the Corporation will upon completion of
the Merger cease to be a "public company") and consistent with the position of
President, including, without limiting the generality of the foregoing,
supervising the day to day business and affairs of the Corporation and its
subsidiaries and affiliates. The Board shall, with due consultation with
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the Executive, develop an annual business plan, and once adopted by the Board,
the plan shall be implemented by the Executive. Any material change in such plan
or the implementation thereof shall require the approval of the Board. The
Executive shall generally report to Xxxx Xxxxxx, President of the Container
Division of CCL and shall also report to and be under the control and direction
of the Board. The Executive shall be located in and report from Los Angeles and
shall not be required to relocate from Los Angeles without his consent. The
Executive acknowledges that it is contemplated that the business carried on by
CCL and its subsidiaries and affiliates will be reorganized at an appropriate
time during the Term to create the CCL Specialty Packaging group and upon such
reorganization the Executive will have the responsibility for the day-to-day
operations of the plastic packaging division of CCL Specialty Packaging group,
reporting to the head of the CCL Specialty Packaging group on the terms set out
in this Agreement.
1.2 TIME TO BE DEVOTED - The Executive shall devote his full working time and
attention to carrying out his duties and responsibilities hereunder and shall
report to and be subject to the control and direction of the Board.
1.3 EMPLOYMENT OBLIGATIONS - During the continuance of his employment
hereunder, the Executive shall well and faithfully serve the Corporation and its
subsidiaries and affiliates (including, without limiting the generality of the
foregoing, by submitting to the Corporation all reports and other communications
whenever the same may be reasonably required by the Board) and shall use his
best efforts to promote the interests of the Corporation and its subsidiaries
and affiliates.
1.4 ACTIVE EMPLOYMENT - For the purposes hereof, "Active Employment" means the
employment of the Executive by the Corporation hereunder prior to the giving of
any notice of termination pursuant to subsection 2.2(b), subsection 2.2(c) or
subsection 2.2(d).
1.5 KEY-MAN INSURANCE - CCL, or any affiliate thereof, other than the
Corporation, shall have the right to obtain for its benefit such amount of life
insurance on the life of the Executive as CCL, or such affiliate, may in its
sole discretion determine, and the Executive shall, if requested by the Board,
make all reasonable efforts to assist CCL, or such affiliate, to obtain such
insurance, including submitting to a medical examination of the kind typically
required in similar circumstances.
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2.0 TERM AND TERMINATION
2.1 TERM - This Agreement, and the employment of the Executive by the
Corporation hereunder, shall commence on the day on which the Offer is completed
in accordance with the terms thereof and shall continue in full force and effect
for a term of three (3) years (the "Term"), unless terminated in accordance with
section 2.2. Until the commencement of the Term, the employment of the
Executive by the Corporation shall continue in accordance with the terms of his
existing employment agreement with the Corporation, which terms are summarized
in Schedule A hereto. If the Executive meets the conditions for earning the
bonus or benefits provided for in his existing employment agreement, the
Executive shall be entitled to a pro-rated portion of such bonus or benefits,
based on the portion of the fiscal year ending December 31, 1997 in respect of
which the Executive was employed pursuant to his existing employment agreement.
With respect to that portion of the 1997 fiscal year ending December 31, 1997 in
respect of which the Executive is employed pursuant to this Agreement, the
Executive shall be entitled to a pro-rated portion of the performance bonus
provided for in section 3.4 hereof. Any bonus or benefits accrued and payable
pursuant to the foregoing shall be payable within 60 days of the applicable
year-end. The parties agree that they shall, not less than six (6) months prior
to the end of the Term, enter into good faith negotiations with respect to the
continued employment of the Executive by the Corporation, provided that the
Executive shall have no obligation to accept any offer of employment by the
Corporation.
2.2 TERMINATION BY THE CORPORATION OR THE EXECUTIVE - During the Term of this
Agreement, the employment of the Executive may be terminated in the following
manner:
(a) by the Corporation, at any time, including during any Notice Period
(as hereinafter defined), by notice in writing from the Corporation to
the Executive for cause, which, for the purposes of this Agreement,
shall be deemed to occur upon (A) the willful failure by the Executive
to substantially perform his duties with the Corporation, other than
any such failure resulting from Disability (as hereafter defined) or
as a result of the termination of the employment of the Executive
pursuant to subsection 2.2(d), or (B) the willful engaging by the
Executive in gross misconduct materially injurious to the Corporation
or the commission of a criminal act which is materially injurious to
the Corporation or materially affects the Executive's ability to
perform his duties under this Agreement. For the purposes of this
paragraph, no act, or failure to act, on the Executive's part shall be
considered "willful" unless done, or omitted to be done,
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by the Executive not in good faith and without reasonable belief that
the Executive's action or omission was in the best interest of the
Corporation. Notwithstanding the foregoing, the Executive shall not be
deemed to have been terminated for cause unless and until there shall
have been delivered to the Executive a copy of a notice from the
Chairman of the Board after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel,
to be heard before the Chairman, finding that in the good faith
opinion of such executive the Executive was guilty of conduct set
forth above in clauses (A) or (B) of the first sentence of this
paragraph and specifying the particulars thereof in detail;
(b) by the Corporation, at any time, other than pursuant to subsection
2.2(a) or subsection 2.2(c), by prior written notice equal to the
period of time commencing on the date notice of termination of
employment is given, and ending the last day of the Term, less the
number of weeks of termination pay to which the Executive shall be
entitled pursuant to any applicable employment legislation as at the
effective date of termination (the "Notice Period");
(c) by the Corporation, if the Executive shall by reason of illness or
mental or physical disability or incapacity ("Disability") fail for
any six (6) consecutive calendar months, or nine (9) months in
aggregate (and not necessarily consecutive) in any two (2) year
period, to perform his duties hereunder; or
(d) by the Executive, for "Good Reason", which shall mean, without the
express written consent of the Executive, the occurrence of any of the
following events unless such events are corrected in all material
respects within 30 days following written notification by the
Executive to the Corporation that he intends to terminate his
employment hereunder for one of the reasons set forth below:
(i) any material alteration, reduction or diminution in the
duties, responsibilities and status of the Executive's
position as described in section 1.1 having regard to the
recognitions and acknowledgments of the Executive contained
therein;
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(ii) the Corporation's requiring the Executive to be based
anywhere other than at the Corporation's headquarters, or
anywhere outside of Los Angeles County, California;
(iii) a material breach by the Corporation of any provision of
this Agreement; or
(iv) the occurrence of a "Change of Control";
A "Change of Control" shall have occurred if, and only if, (w) a person, or
persons acting jointly and in concert pursuant to an agreement among them,
(other than one or more members of Xxxxxx X. Xxxx'x family), holds more than 50%
of the voting shares of CCL and, as a result, holds the right to elect a
majority of the members of the Board of Directors of CCL or (x) any merger or
consolidation of the Corporation with, or sale of all or substantially all of
the Corporation's assets or business to, another person (other than CCL or any
affiliate of CCL) or any similar transaction or combination of the foregoing
which would have substantially the same effect as any of the foregoing; or (y)
there is a sale of ownership of fifty percent (50%) or more of the voting
securities of the Corporation to another person, other than to CCL or an
affiliate thereof. If a Change of Control occurs the Executive shall have the
right, exercisable no earlier than three (3) months, but no later than four (4)
months, following a Change of Control, to give notice pursuant to subsection
2.2(d), and for a period of one (1) month after the giving of such notice the
Executive shall use his reasonable best efforts to assist the Corporation in
making an orderly transition to new management, whereupon his Active Employment
shall cease and the provisions of section 2.4 shall apply.
2.3 EFFECT OF TERMINATION FOR CAUSE PURSUANT TO SUBSECTION 2.2 (A) OR UPON
RESIGNATION NOT FOR GOOD REASON - Upon any notice being given pursuant to
subsection 2.2(a) or upon the resignation of the Executive otherwise than for
Good Reason, subject to section 8.4, this Agreement and the employment of the
Executive hereunder shall be wholly terminated, and the Executive, his heirs and
representatives, shall have no claim against the Corporation for damages or
otherwise except in respect of payment of the remuneration provided for in
section 3.1 to the effective date of such termination or resignation.
2.4 EFFECT OF TERMINATION PURSUANT TO SUBSECTION 2.2(B) OR SUBSECTION 2.2(D) -
Upon any notice being given pursuant to subsection 2.2(b) or subsection 2.2(d),
but subject to the provisions thereof including clause 2.2(d)(iv), effective as
of the commencement of the Notice Period, the Executive shall be relieved from
Active Employment, and this Agreement shall not be subject to renewal or
extension, and this Agreement shall, subject to section 8.4, expire at the
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end of the Notice Period, whereupon the employment of the Executive hereunder
shall be wholly at an end, and the Executive, his heirs and representatives,
shall have no claim against the Corporation for damages or otherwise, except in
respect of:
(a) payment of the Termination Salary and Termination Bonuses (as defined
in section 4.1) pursuant to section 4.1;
(b) entitlement to the Termination Benefits (as defined in section 4.2)
pursuant to section 4.2;
(c) entitlement to the Incentive Options (as defined in subsection
3.5(b)), if earned pursuant to subsection 3.5(b), in respect only of
the fiscal year in which notice of termination is given; and
(d) payment of any lump sum payment required to be made by the Corporation
to the Executive at the end of the Notice Period pursuant to any
applicable employment legislation.
2.5 EFFECT OF TERMINATION PURSUANT TO SUBSECTION 2.2(C) - Upon any notice being
given pursuant to subsection 2.2(c), effective as of the commencement of the
Notice Period, the Executive shall be relieved from Active Employment, and this
Agreement shall not be subject to any renewal or extension, but shall, subject
to section 8.4, expire at the end of the Notice Period, whereupon the employment
of the Executive hereunder shall be wholly at an end, and the Executive, his
heirs and representatives shall have no claim against the Corporation for
damages or otherwise, except in respect of:
(a) payment of the Termination Salary, subject to the deductions provided
for in section 2.7;
(b) entitlement to the Termination Bonuses (as defined in section 4.1) on
the same basis as the Executive would have been entitled thereto had
notice of termination been given pursuant to subsection 2.2 (b) or
subsection 2.2(d);
(c) entitlement to the Incentive Options (as defined in subsection 3.5(b))
on the same basis as the Executive would have been entitled thereto
had notice of termination been given pursuant to subsection 2.2(b) or
subsection 2.2(d);
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(d) entitlement to the Termination Benefits (as defined in section 4.2) on
the same basis as the Executive would have been entitled thereto had
notice of termination been given pursuant to subsection 2.2(b) or
subsection 2.2(d); and
(e) payment of any lump sum payment required to be made by the Corporation
to the Executive at the end of the Notice Period pursuant to any
applicable employment legislation.
2.6 TERMINATION OF OBLIGATIONS OF THE CORPORATION - For greater certainty,
notwithstanding anything to the contrary contained herein, the Executive hereby
expressly acknowledges and agrees that each and every obligation of the
Corporation contained in this Agreement including, without limitation, the
Corporation's obligations to make any payments in the nature of salary or
bonuses, and to provide any benefits shall, unless otherwise expressly provided
herein, expire effective as of the last day of the Term; provided that the
foregoing shall not affect the Corporation's obligation to pay all amounts owing
to the Executive in respect of periods prior to the last day of the Term or the
Notice Period, as the case may be or pursuant to any plan, policy or other
agreement with the Corporation.
2.7 DEDUCTION OF AMOUNTS TO WHICH EXECUTIVE BECOMES ENTITLED AS A RESULT OF
DISABILITY - For greater certainty, notwithstanding anything to the contrary
contained herein, the Executive shall, and shall be required to account to the
Corporation and the Corporation shall be entitled to withhold from any and all
payments made by the Corporation to the Executive during a Notice Period
relating to a termination pursuant to subsection 2.2(c), an amount equal to all
amounts to which the Executive becomes entitled as a result of or in connection
with his Disability from or under any disability plans maintained by the
Corporation.
3.0 REMUNERATION AND BENEFITS
3.1 REMUNERATION - During the Executive's Active Employment hereunder, the
salary payable to the Executive for his services hereunder shall be two hundred
and fifty thousand dollars ($250,000) per annum, payable in equal monthly
installments in arrears on the last business day of the month, the first of such
payments to be due the last business day of the month following the month in
which the Offer is completed in accordance with its terms. If the first month
is a part month such equal monthly instalment will be appropriately pro-rated.
There shall
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be deducted from all such payments all required deductions for income tax and
other withholdings. On or about each anniversary date of the Executive's Active
Employment hereunder, the Executive's salary will be reviewed in accordance with
the policies of the Corporation, but shall not be reduced.
3.2 BENEFITS - During the Term the Executive shall be entitled to the benefits
described in Schedule A hereto (the "Benefits").
3.3 RETENTION BONUS AND NON-COMPETITION PAYMENTS
(a) Provided that, and as long as, the Executive is not in default or
breach of any of his obligations pursuant to sections 5.3, 5.4 and
5.6, and no notice of termination of employment has been given to the
Executive by the Corporation under, or on a basis set forth in,
subsection 2.2(a) hereof, on the last business day of each of the
calendar years 1997, 1998 and 1999 if the Executive is in compliance
with his obligations pursuant to sections 5.3, 5.4 and 5.6 prior to
and up to the time of payment, the Corporation shall pay to the
Executive in equal monthly instalments, in arrears, less all required
withholdings, additional compensation in the form of a retention and
non-competition payment (the "R&N Payment") at the rate of two hundred
thousand dollars ($200,000) per annum.
(b) Should the Executive die while still employed by the Corporation prior
to all of the R&N Payments having been made to the Executive in
accordance with subsection (a) of this section 3.3 and without any
notice of termination of employment having been given to the Executive
by the Corporation under, or on a basis set forth in, subsection
2.2(a) hereof, the Corporation shall instead pay to the estate of the
Executive within six (6) weeks of receipt of proof of death an amount
equal to the aggregate of all such unpaid R&N Payments.
3.4 PERFORMANCE BONUS - Provided that the Executive is still employed by the
Corporation (and provided such employment is Active Employment) on the last
business day of each of the calendar years 1997, 1998 and 1999 (the "payment
dates") and no notice of termination of employment has been given to the
Executive by the Corporation under subsection 2.2 (a) hereof on or before a
particular payment date, the Corporation shall pay to the Executive additional
compensation in the form of a performance bonus (the "Performance Bonuses"),
based on the increase of EBITDA (as such term is defined in Schedule B hereto)
of the Corporation over the
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immediately proceeding fiscal year, commencing with the fiscal year ending
December 31, 1997 and ending with the fiscal year ending December 31, 1999, in
the following amounts:
EBITDA GROWTH OVER Bonus Amount
Prior Fiscal Year
15% 50% of Salary Amount
20% 100% of Salary Amount
21% or more 100% of Salary Amount plus 10% of Salary
Amount for each whole percentage point of
EBITDA above 20%
15-20% 50% of Salary Amount plus 10% of Salary
Amount for each whole percentage point of
EBITDA above 15%
The parties acknowledge that EBITDA of $20 million in respect of the fiscal year
ending December 31, 1997 represents growth of 20% over the prior fiscal year and
will, subject to the other terms of this section 3.4, entitle the Executive to a
Performance Bonus equal to 100% of the Salary Amount. For the purposes of this
section 3.4, "Salary Amount" means the remuneration paid to the Executive in
respect of the fiscal year then ended pursuant to section 3.1. Performance
Bonuses, if earned, shall be payable within 60 days of the applicable payment
date. Notwithstanding anything else in this section 3.4, the Performance Bonus,
if any, payable to the Executive in respect of the fiscal year ending December
31, 1997, shall be pro-rated in accordance with section 2.1 hereof.
3.5 OPTIONS
(a) During the Executive's employment hereunder, the Executive shall be
entitled to participate in CCL's Stock Option Plan on the same terms
and conditions (and on a comparable basis) as such plan is made
available to other senior executive officers of CCL, and shall be
entitled to such benefits thereunder as the compensation committee of
CCL, subject to the approval of the Board of Directors of CCL, shall
determine from time to time;
(b) In addition to the right of the Executive to participate in CCL's
Stock Option Plan, the Executive shall be entitled to receive and CCL
shall grant to the Executive immediately upon completion of the Offer
in accordance with its terms, additional options (the "Incentive
Options") to acquire 500,000 CCL Class B
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non-voting common shares ("Class B Shares"). The Incentive Options
shall vest and be exercisable as to 100,000 Class B Shares with
respect to each of the next five consecutive fiscal years commencing
with the fiscal year ending December 31, 1997, if and only if EBITDA
for a particular fiscal year is 20% greater than EBITDA for the prior
fiscal year. The parties acknowledge that the EBITDA target for the
vesting of the first 100,000 Incentive Options (for the fiscal year
ending December 31, 1997) is $20 million. For greater certainty (i)
the vesting of Incentive Options shall be based on EBITDA growth in a
fiscal year over EBITDA for the prior fiscal year, and EBITDA for any
other fiscal years shall not be relevant for such purpose; (ii) if in
respect of any fiscal year EBITDA is less than 20% of EBITDA for the
prior fiscal year, the 100,000 Incentive Options in respect of such
year shall not vest and shall be cancelled; (iii) Incentive Options
shall not vest or be exercisable but shall be cancelled if the
Executive is in breach of his obligations pursuant to sections 5.3,
5.4 or 5.6 hereunder; and (iv) Incentive Options which vest and become
exercisable in accordance with this subsection 3.5(b) shall expire on
the sixth anniversary of the date of the granting of the Incentive
Options hereunder. The exercise price of the Incentive Options shall
be equal to the simple average of the daily high and low board lot
trading prices for Class B Shares on The Toronto Stock Exchange for
the ten trading days commenced June 10, 1997 and ending June 23, 1997
(the "Option Price"). Notwithstanding the foregoing, any issuance of
Incentive Options will occur only upon (a) compliance by CCL with the
terms of Section 1.1, and by Xxxxx of Section 1.3, of the
Qualification and Listing of Shares Agreement (the "Rights Agreement")
dated June 16, 1997 between CCL and Xxxxx, but only insofar as such
terms relate to the issuance of Class B Shares issuable upon exercise
of the Incentive Options, or (b) waiver by Xxxxx of compliance by CCL
with such terms. Notwithstanding anything else in this section 3.5,
but provided that the Executive is not in breach of his obligations
pursuant to sections 5.3, 5.4 and 5.6, if the employment of the
Executive is terminated pursuant to subsection 2.2(b), subsection
2.2(c), subsection 2.2(d) or the Executive dies, only those Incentive
Options scheduled to vest in the fiscal year in which the Executive's
employment is terminated shall vest, and the remaining balance of the
unvested Incentive Options shall not vest or be exercisable and shall
be cancelled.
(c) Pursuant to an option agreement made as of the 16th day of June, 1997
between the Executive and CCL, CCL has agreed to xxxxx Xxxxx an
irrevocable option (the "Rollover Option") to purchase from CCL
545,000 Class B Shares (the "Rollover Option Shares"). Upon exercise
of the Rollover Option in the manner therein provided, CCL shall pay
to the Executive forthwith an amount in cash equal to the number of
Rollover Option Shares in respect of which the Rollover Option is to
be exercised multiplied by the amount by which the Option Price (less
Cdn. $10.35) exceeds Cdn $6.0225.
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3.6 REIMBURSEMENT FOR EXPENSES - During the Executive's Active Employment
hereunder, the Executive shall be reimbursed for all traveling and other out-of-
pocket expenses actually and properly incurred by him in connection with his
duties hereunder. For all such expenses, the Executive shall furnish to the
Corporation statements and vouchers as and when reasonably required by it.
3.7 VACATION - During the Executive's Active Employment hereunder, the
Executive shall be entitled to five (5) weeks vacation per calendar year, in
accordance with the Corporation's policy concerning vacations for senior
executives, as the same may exist from time to time. Such vacation may be taken
as the Executive may from time to time reasonably decide, provided such vacation
time does not materially interfere with his duties to the Corporation.
3.8 EXCHANGEABLE SHARES - Notwithstanding anything in this Agreement or in the
provisions attaching to the exchangeable shares of the Corporation or Seawolf,
as the case may be (the "Exchangeable Shares") to be issued to the Executive as
partial consideration for the Common Shares of the Corporation to be acquired by
Seawolf pursuant to the Merger, the Exchangeable Shares shall not be retractable
by the Executive prior to the third anniversary of the date of issue of the
Exchangeable Shares (the "Anniversary Date"); provided that if notice is given
pursuant to subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d) (subject
to the provisions thereof), upon the death of the Executive, or if a Change of
Control occurs, then the Exchangeable Shares shall thereafter be immediately
retractable by the Executive (or if applicable his heirs and representatives)
for Class B Shares. In the event the Executive is distributed Class B Shares
upon a liquidation of the Corporation, pursuant to the provisions attaching to
the Exchangeable Shares, the Executive covenants and agrees that he shall not
sell, assign, transfer, encumber or otherwise dispose of any of the Class B non-
voting shares ("Class B Shares") in the capital of CCL received upon such
distribution prior to the Anniversary Date. All share certificates evidencing
the Exchangeable Shares or, in the event of the distribution of Class B Shares
pursuant to the liquidation of the Corporation, the Class B Shares received upon
such distribution, shall bear a legend setting out the foregoing restrictions
provided that upon the expiration of such restrictions, such shares shall be
recertificated without such legend. The Executive shall use reasonable
commercial efforts to conduct all permitted dispositions of Exchangeable Shares
and Class B Shares in an orderly manner such that the market price of the Class
B Shares shall not be unduly affected by any such disposition, and the Executive
shall provide reasonable advance notice to CCL of any proposed disposition,
whereupon CCL shall have the right (which right CCL shall have the right to
assign to an institution, pension fund, mutual fund or similar purchaser,
provided that any such assignment shall not relieve CCL from its obligations
with
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respect to the exercise of such right, and provided that such assignment shall
not delay the right or ability of the Executive to so dispose of his Class B
Shares) but not the obligation, upon notice in writing to the Executive within
one business day of receipt by CCL of the Executive's notice, to purchase all or
part of such Class B Shares at a price per share equal to the closing price of
the Class B Shares on the TSE on the trading day immediately preceding the date
of notice by the Executive. Such purchase and sale shall be completed on the
third business day following the date of CCL's (or its assigns) notice to the
Executive. It shall be a condition, which the Executive may waive, to the right
of CCL (or its assigns) to purchase all or part of such Class B Shares that the
Executive receive a legal opinion that the sale of such shares to CCL (or its
assigns) shall not result in tax consequences to the Executive which are
materially less favourable than if the Executive were to sell such Class B
Shares in the open market. If such condition is not waived by the Executive, the
opinion shall be obtained at the expense of the Executive (and a copy delivered
to CCL (or its assigns)) not more than ten (10) business days following the
giving of notice by the Executive, in which case the time periods in which CCL
(or its assigns) is required to give notice of its intention to purchase such
shares, and to complete the purchase of such shares, shall not commence until
receipt of such opinion by CCL (or its assigns).
4.0 EXECUTIVE'S ENTITLEMENT ON NOTICE OF TERMINATION PURSUANT TO
SUBSECTION 2.2(B), SUBSECTION 2.2(C), SUBSECTION 2.2(D), DEATH OR
DISABILITY
4.1 TERMINATION PAYMENTS - Upon any notice of termination being given
pursuant to subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d)
(and subject to the provisions thereof) provided that, and as long as,
the Executive is not in default or breach of any of his obligations
pursuant to sections 5.4, 5.5 and 5.7, and provided that, and as long
as, no notice of termination has been given to the Executive pursuant
to subsection 2.2(a), the Corporation shall continue to pay, during
the Notice Period, the Executive's then current annual salary in
accordance with and in the manner prescribed by section 3.1 (the
"Termination Salary"); provided that the Executive shall be entitled
to receive, in addition to the Termination Salary, (i) all unpaid R&N
Payments, if earned in accordance with the provisions of section 3.3,
payable immediately; and (ii) the Performance Bonus, if earned in
accordance with the provisions of section 3.4, in respect only of the
fiscal year in which notice of termination has been given pursuant to
subsection 2.2(b), subsection 2.2(c) or subsection 2.2(d) (and subject
to the provisions thereof), and not in respect of subsequent fiscal
years, payable at such time as the Performance Bonus, if any, would
have been payable pursuant to subsection 3.4 to the Executive but for
notice of termination having been given pursuant to subsection 2.2
(b), subsection 2.2(c) or subsection 2.2(d) (and subject to the
provisions thereof); and
Page 15
provided that in no event or under any circumstances shall such
Performance Bonus for such fiscal year exceed 100% of the Salary
Amount. The R&N Payments and the Performance Bonuses payable pursuant
to this subsection 4.1 (a) are herein referred to as the "Termination
Bonuses".
4.2 BENEFITS DURING NOTICE PERIOD - Upon any notice of termination being
given pursuant to subsection 2.2(b) or subsection 2.2(d) (and subject to
the provisions thereof), provided that, and as long as, the Executive is
not in default or breach of any of his obligations pursuant to sections
5.3, 5.4 and 5.6, and provided that, and as long as, no notice of
termination has been given to the Executive pursuant to subsection 2.2(a),
the Executive shall continue to be entitled to the Benefits (collectively,
the "Termination Benefits") until the date of expiry of the Notice
Period; provided that if notice of termination is given pursuant to
subsection 2.2(c), the Corporation shall not be required to extend the
Benefits, if comparable benefits are provided to the Executive pursuant to
any disability plans maintained by the Corporation.
4.3 ENTITLEMENT ON DEATH Should the Executive die while still employed by the
Corporation without any notice of termination of employment having been given to
the Executive by the Corporation under, or on a basis set forth in, subsection
2.2(a) hereof, his heirs and representatives shall have no claim against the
Corporation for damages or otherwise, except that the Corporation shall pay to
the estate of the Executive the following:
(a) the amount of the Executive's salary in accordance with and in the
manner described in section 3.1, for the balance of the Term within
six (6) weeks of proof of death;
(b) the unpaid R&N Payments, within six (6) weeks of proof of death; and
(c) if the Executive died in the second half of a fiscal year, the
Incentive Options and Performance Bonus in respect only of the fiscal
year in which the Executive dies, provided that the entitlement to
such Incentive Options and Performance Bonus shall be calculated based
on the EBITDA for the first two quarters of the fiscal year (or the
first three quarters, if the Executive dies after the completion of
the third quarter) compared to EBITDA for the same period in the prior
year.
Page 16
4.4 VESTING AND EXERCISE OF STOCK OPTIONS UPON NOTICE OF TERMINATION PURSUANT
TO SUBSECTION 2.2(B), SUBSECTION 2.2(C) OR SUBSECTION 2.2(D) - Upon any notice
of termination being given pursuant to subsection 2.2(b), subsection 2.2(c) or
subsection 2.2(d) (and subject to the provisions thereof), notwithstanding
anything to the contrary contained in any Stock Option Plan of CCL in which the
Executive is entitled to participate, or in any agreement or certificate between
the Corporation and the Executive in respect thereof, but subject to any
required regulatory approvals, all stock options (other than the Rollover Option
and the Incentive Options) which would otherwise have become exercisable during
the Notice Period if the Executive had not received notice of termination, shall
immediately become exercisable and the Executive shall have the privilege of
exercising, within twelve (12) months of the date of commencement of the Notice
Period, all stock options which were exercisable and remained unexercised as at
the date of commencement of the Notice Period, and which have not expired,
together with all stock options which become exercisable at the commencement of
the Notice Period pursuant to this section 4.3; provided that the Executive's
right to exercise any such stock options shall expire at the end of such twelve
(12) month period. The vesting and exercise of the options granted to the
Executive in connection with the Merger shall be governed by the terms of the
agreement entered into between CCL and the Executive providing for the grant of
such options, and not by this section 4.4. The vesting and exercise of Incentive
Options shall be governed by subsection 3.5 (b) and not by this section 4.4.
4.5 ACCRUED BENEFITS - For greater certainty, notwithstanding anything else in
this Agreement, the Executive shall be entitled on notice of termination of this
Agreement to any benefits which have accrued and are payable to the Executive
pursuant to and in accordance with the terms of any benefit plan or similar
arrangement with the Corporation.
5.0 COVENANTS OF THE EXECUTIVE
5.1 OBLIGATION OF THE EXECUTIVE TO PROVIDE COUNSEL AND ADVICE - During any
Notice Period and the Consulting Period (as hereafter defined) hereunder, the
Executive covenants and agrees, upon each reasonable request by the Corporation,
to make himself available to the Corporation for the purpose of providing
counsel and advice, and such other consulting services as are requested from
time to time, provided that the Corporation pays or reimburses the Executive for
all out-of-pocket expenses incurred by him in connection with rendering such
services.
Page 17
5.2 ACKNOWLEDGMENT - The Executive acknowledges that the recitals to this
Agreement are true and correct. In addition, the Executive acknowledges that
the Corporation, its subsidiaries and affiliates have heretofore carried on and
will hereafter carry on the Business and that in the course of carrying out,
performing and fulfilling his responsibilities to the Corporation hereunder he
has had and will continue to have access to and has been and will continue to
be entrusted with the Confidential Information relating to the Business, and to
any other businesses now, or during the Term or Notice Period hereof, carried on
by the Corporation, its subsidiaries and affiliates, the disclosure of any of
which Confidential Information to competitors of the Corporation or to the
general public may be detrimental to the best interests of the Corporation. The
Executive further acknowledges that in the course of performing his obligations
to the Corporation hereunder he has been and will continue to be the principal
representative of the Corporation and as such has been and will continue to be
significantly responsible for maintaining or enhancing the goodwill of the
Corporation. The Executive acknowledges and agrees that the right to maintain
the confidentiality of such Confidential Information, and the right to preserve
its goodwill, constitute proprietary rights which the Corporation is entitled to
protect.
5.3 CONFIDENTIALITY - Accordingly, the Executive covenants and agrees with the
Corporation that he will not, either during the Term or, if applicable, any
Notice Period, of this Agreement, or at any time after the expiry thereof,
disclose any of such Confidential Information to any person other than to the
officers of the Corporation and the Board, nor shall he use the same for any
purpose other than those of the Corporation; provided, however, that the
foregoing shall not apply to any Confidential Information which is or becomes
known to the public or to the competitors of the Corporation otherwise than by a
breach of this Agreement by the Executive or which the Executive is required by
law to disclose pursuant to the order of any court of competent jurisdiction or
a governmental regulatory agency or body, in which case he will provide the
Corporation with prompt notice of such circumstance so that the Corporation may
seek a protective order or other appropriate remedy and/or waive compliance with
the provisions of this Agreement. In the event that such protective order or
other remedy is not obtained, or that the Corporation waives compliance with the
provisions of this Agreement, he will furnish only that portion of the
Confidential Information which he is advised by written opinion of counsel is
legally required. The Executive will exercise his reasonable best efforts to
obtain a protective order or other reasonable assurance that confidential
treatment will be accorded the Confidential Information.
Page 18
5.4 NON-COMPETITION - Accordingly, the Executive covenants and agrees with the
Corporation that he will not, during the Term or, if applicable, any Notice
Period, of this Agreement, nor at any time within a period of one (1) year after
the expiry thereof (or within a period of two (2) years after the expiry thereof
if such period is extended pursuant to section 5.9) (in either case, the
"Consulting Period"), either individually or in partnership or jointly or in
conjunction with any person or persons as principal, agent, shareholder,
trustee, beneficiary, or in any other manner whatsoever whether directly or
indirectly, carry on or be engaged in or concerned with or interested in, or
advise, lend money to, guarantee the debts or obligations of, or permit his name
or any part thereof to be used or employed by or associated with, any person or
persons, firm, association, syndicate, trust, company or corporation engaged in
or concerned with or interested in any business which is competitive with the
Business in any of the 58 counties in the State of California or in any of the
thousands of cities, counties and other political subdivisions of the largest of
the following geographical areas:
(a) Canada, the United States and Mexico; or
(b) Canada and the United States; or
(c) the United States; or
(d) the States of the United States west of the Mississippi River; or
(e) the State of California.
And for greater certainty and without limiting the provisions of
article 6, subsections 5.4(a) through 5.4(e) are each separate and distinct
covenants, severable one from the other and the most restrictive of subsections
5.4(a) through 5.4(e) shall apply unless such covenant is determined to be
invalid or unenforceable, in which event the next most restrictive shall apply,
and so on.
5.5 PERMITTED INVESTMENTS - Nothing herein shall restrict or prevent the
Executive from owning as a passive investor less than 10% of any class of
securities of a corporation which is a competitor of the Corporation whose
securities are trading in the public market.
5.6 NON-SOLICITATION - The Executive hereby covenants and agrees with the
Corporation that he will not at any time during the Term or Notice Period of
this Agreement, or at any time within
Page 19
one (1) year after the expiry thereof (or within a period of two (2) years after
the expiry thereof if such period is extended pursuant to section 5.9), directly
or indirectly, solicit or attempt to induce, procure, encourage or direct away
from the Corporation any customer, supplier or employee of the Corporation.
5.7 REMEDIAL RIGHTS - Nothing contained in this article 5 shall be deemed to
affect or impair the otherwise lawful rights of the Corporation to enforce its
legal remedies against the Executive either during the period from the date
hereof to the date the Executive ceases to be employed by the Corporation or at
any time thereafter to prevent the Executive from approaching or soliciting any
customer, supplier or employee of the Corporation with a view towards inducing
such customer, supplier or employee to breach a contract between the Corporation
and such customer, supplier or employee and to recover any damages resulting
therefrom. Time shall not toll during any breach of the provisions of article 5.
5.8 RESIGNATION AS OFFICER AND DIRECTOR - The Executive covenants and agrees
that upon any notice of termination being given pursuant to article 2, he shall
tender his resignation from all offices then held by him in the Corporation and
its subsidiaries and affiliates and if requested by the Board, he shall tender
his resignation as a director of the Corporation and its subsidiaries and
affiliates. Such resignations shall provide that they are to be effective as of
the commencement of the Notice Period or as of such other date as may be
mutually agreed to by the Executive and the Corporation. The Executive further
agrees to accept such other suitable corporate senior office or position with
the Corporation or with its subsidiaries and affiliates as may be determined by
the Board and which is acceptable to the Executive acting reasonably.
5.9 EXTENSIONS OF COVENANTS - In addition to the R & N Payments, if any, to be
made to the Executive, the Corporation shall have the right at any time during
the Term or, if applicable, any Notice Period, or within one (1) year after the
expiry thereof, in its sole discretion, and upon notice in writing to the
Executive, to extend the periods of restriction provided for in sections 5.4 and
5.6 from one (1) year to two (2) years, and in respect of such extension the
Corporation shall pay the Executive $500,000 on the first day of the second year
of such period of restriction.
5.10 ACKNOWLEDGMENTS BY EXECUTIVE - The Executive hereby acknowledges and
agrees that: (a) based on the Corporation's Business, business plans and
prospects, the provision and restrictions in this article 5 are reasonable in
the circumstances and, in particular, the duration, area and types of activities
referred to therein are necessary for the protection of legitimate proprietary
interests of the Corporation; (b) the Corporation presently carries on business,
Page 20
directly or indirectly, in the United States, Canada and Mexico; (c) without
prejudice to and in addition to any other recourse or remedy which the
Corporation may have, the Corporation has the right to obtain an injunction
enjoining any violation of any provision of article 5; (d) any violation of any
provision of article 5 will cause the Corporation irreparable harm for which
monetary damages are not an adequate remedy and that an interim interlocutory
and permanent injunction restraining any breach of his obligations hereunder
will be necessary to protect the Corporation from irreparable harm to its
legitimate business interests. In the event of any such breach, the Executive
hereby waives any defences to such an injunction and consents to the immediate
issuance of such an injunction to restrain such breach; and (e) nothing in this
Agreement releases the Executive from any fiduciary or other obligation, duty or
responsibility he may have to the Corporation under any other agreement or
implied at law.
5.11 TERMS - The terms "customer" and "supplier" as used in this article 5
means those persons, who supplied or were supplied by or whose business was
actively sought by the Corporation during the last eighteen (18) months of the
Executive's employment by the Corporation. The term "employee" means a person
employed by the Corporation or otherwise in a management position at the
Corporation within the last eighteen (18) months of the Executive's employment
by the Corporation.
6.0 SEVERABILITY
If any covenant or provision of this Agreement is determined to be invalid,
void or unenforceable in whole or in part, it shall not nor be deemed to affect
or impair the validity of any other covenant or provision hereof and each of
such covenants and provisions is hereby declared to be separate and distinct and
severable from each of the others for the purpose of this Agreement. The
Executive hereby agrees that all covenants and provisions contained in article 5
are reasonable, valid and necessary both as to area and duration for the
protection of the Corporation's proprietary interests and the parties intend
this Agreement to be enforced as written. However, if any provision, or part
thereof is held to be unenforceable because of the duration thereof, the area
covered thereby, or the types of activities restricted thereby, the parties
agree that a Court of competent jurisdiction making such determination shall
have the power to reduce the duration and/or area of such provision or types of
activities restricted to the maximum duration and/or area permitted by
applicable law and/or to delete specific words or phrases and in its reduced
form such provision shall then be enforceable.
Page 21
7.0 NOTICES - Any notice, direction or other instrument required or permitted
to be given or made hereunder shall be in writing and shall be sufficiently
given or made if delivered in person to the address set forth below, or
telecopied or sent by other means of recorded electronic communication and
confirmed by delivery as soon as practicable thereafter. Notices shall be
addressed to the parties as follows:
If to the Executive:
Xx. Xxxxxxxx Xxxxxxxx
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX
00000-0000
Telecopier: (000) 000-0000
If to CCL or the Corporation
000 Xxxxxx Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxx
X0X 0X0
Attention: President
Telecopier: (000) 000-0000
Any notice, direction or other communication so given or made shall be
deemed to have been given or made and to have been received on the day of
delivery, if delivered, or on the day of sending if sent by telecopier or other
means of recorded electronic communication. Either party hereto may change its
address for notice by giving written notice thereof to the other parties hereto.
Delivery of courtesy copies of notice shall not be a condition to the valid
delivery of any notice, direction or other communication.
8.0 GENERAL
8.1 PREVIOUS AGREEMENTS - Any and all previous agreements, written or oral,
between the parties hereto or on their behalf relating to the employment of the
Executive by the Corporation, are hereby terminated and canceled effective the
completion of the Offer in accordance with its terms and each of the parties
hereto hereby releases and forever discharges the other of and from all manner
of actions, causes of action, claims and demands whatsoever under or in respect
of such previous agreements effective the completion of the Offer in accordance
with its terms.
8.2 GOVERNING LAW AND CONSENT TO JURISDICTION - THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
Page 22
DELAWARE WITHOUT GIVING EFFECT TO CHOICE OF LAW PRINCIPLES THEREOF. ANY JUDICIAL
PROCEEDING BROUGHT AGAINST ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, OR
THE TRANSACTION CONTEMPLATED HEREBY, MAY BE BROUGHT IN THE COURTS OF THE STATE
OF DELAWARE AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH OF THE
PARTIES HERETO (I) ACCEPTS, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE
JURISDICTION OF SUCH COURT AND ANY RELATED APPELLATE COURT, AND IRREVOCABLY
AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, SUBJECT, IN EACH CASE, TO ALL RIGHTS TO APPEAL SUCH DECISIONS TO THE
EXTENT AVAILABLE TO THE PARTIES AND (II) IRREVOCABLY WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT
IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH PARTY HERETO
HEREBY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS THAT SERVICE OF PROCESS
UPON SUCH PARTY MAY BE MADE BY DELIVERY AT SUCH PARTY'S ADDRESS SPECIFIED OR
DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF THIS AGREEMENT, AND SERVICE SO
MADE SHALL BE DEEMED COMPLETED ON THE DATE OF DELIVERY. NOTHING HEREIN SHALL
AFFECT THE RIGHT TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW. EACH
PARTY HEREBY WAIVES TRIAL BY JURY IN ANY JUDICIAL PROCEEDINGS INVOLVING,
DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED TO OR
CONNECTED WITH THIS AGREEMENT WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
8.3 ENUREMENT - The provisions hereof, where the context permits, shall enure
to the benefit of and be binding upon the Executive and his heirs, executors,
administrators and legal personal representatives and the Corporation and its
successors and assigns.
8.4 SURVIVAL - For greater certainty, notwithstanding anything to the contrary
contained herein, the provisions of sections 3.5, 5.2, 5.3, 5.4, 5.5, 5.6, 5.7,
5.8, 5.9, 5.10, 5.11, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.10 and 8.11 and
article 6 hereof shall survive any termination of this Agreement or the
Executive's employment hereunder.
8.5 WAIVER - No provision of this Agreement shall be deemed to be waived as a
result of the failure of the Corporation to require the performance of any term
or condition of this Agreement or by other course of conduct. To be effective,
a waiver must be in writing, signed by each of the parties hereto and state
specifically that it is intended to constitute a waiver of a term or breach of
this Agreement. The waiver by the Corporation of any term or breach of this
Agreement shall not prevent a subsequent enforcement of such term or any other
term and shall not be deemed to be a waiver of any subsequent breach.
Page 23
8.6 LEGAL ADVICE - The executive hereby represents and warrants to the
Corporation that he has had sufficient opportunity to seek legal advice with
respect to this Agreement, that he fully understands the nature and effect of
this Agreement and that he is entering into it freely and voluntarily.
8.7 CURRENCY - Unless otherwise stated, all dollar amounts herein are in U.S.
dollars.
8.8 WITHHOLDINGS AND DEDUCTIONS - All salary, remuneration, bonuses, and
payments of any other nature whatsoever payable by the Corporation pursuant to
this Agreement shall be subject to and reduced by any withholdings or deductions
required to be made by law, whether for income tax or otherwise for any reason.
8.9 FURTHER ASSURANCES - Each of the parties hereto hereby covenants and agrees
to execute or cause to be executed all such further and other documents as may
be necessary or desirable to give effect to the purposes and intent of this
Agreement. In particular, and without limiting the generality of the foregoing,
the Executive covenants and agrees to execute all such further and other
covenants as to non-competition, non-solicitation, confidentiality and non-
disclosure consistent into the terms of this Agreement as may be required by the
Corporation from time to time in order to protect, preserve and maintain the
Confidential Information, and goodwill of the corporation, its subsidiaries and
affiliates, in each and every jurisdiction in which the Corporation, its
subsidiaries and affiliates carries on business.
8.10 ATTORNEY'S FEES - In the event that litigation shall be necessary to
enforce, interpret or rescind the provisions of this Agreement, the prevailing
party shall be entitled to recover from the other party, in addition to other
relief all costs and reasonable attorney's fees incurred by the prevailing party
for service before trial, on trial and on any appeal therefrom.
- S1 -
8.11 PERSONS The term "person" as used in this Agreement includes an
individual, a firm, a corporation, a syndicate, a partnership, a trust, an
association, a joint venture, an incorporated organization, a government or a
regulatory authority, agency or commission or other entity.
IN WITNESS WHEREOF the Corporation has executed this Agreement under its
corporate seal and the Executive has hereunto set his hand and seal.
CCL INDUSTRIES INC.
By: /s/ CCL INDUSTRIES INC.
----------------------------------
By: /s/ CCL INDUSTRIES INC. c/s
----------------------------------
SEDA SPECIALTY PACKAGING CORP.
By: /s/ SEDA SPECIALTY PACKAGING CORP.
-----------------------------------
By: /s/ SEDA SPECIALTY PACKAGING CORP. c/s
-----------------------------------
SIGNED, SEALED AND DELIVERED )
in the presence of )
)
)
________________________________ ) /s/ XXXXXXXX XXXXXXXX l/s
------------------------
)
SCHEDULE A
TO EMPLOYMENT AGREEMENT
BASE SALARY $400,000
BONUS UP TO 100% OF BASE
COMPANY CAR AND RELATED EXPENSES FORD EXPEDITION
OTHER AUTO RELATED EXPENSES $20,000
ELIGIBLE FOR 401(K) PLAN PARTICIPATION PARTICIPATES
ELIGIBLE FOR 125 PLAN PARTICIPATION DOES NOT PARTICIPATE
SCHEDULE B
TO EMPLOYMENT AGREEMENT
CAPITAL LEASE: as applied to any person, any lease (however designated) of any
property (whether real, personal or mixed) by such person as lessee which would,
in accordance with GAAP, be required to be classified and accounted for as a
capital lease on the balance sheet of the Corporation or in the notes thereto,
other than, in the case of the Corporation or any of its Subsidiaries, any such
lease under which the Corporation or a Subsidiary is the lessor.
CAPITAL LEASE OBLIGATION: as of any date, with respect to any Capital Lease,
the amount of the obligation of the lessee thereunder which would, in accordance
with GAAP, appear on a balance sheet of such lessee or in the notes thereto in
respect of such Capital Lease.
CONSOLIDATED NET INCOME: of the Corporation for any fiscal year, the net income
(or deficit) of the Corporation for such period (taken as a cumulative whole),
as determined in accordance with GAAP, after deducting, without duplication,
operating expenses, provisions for all taxes and reserves (including reserves
for deferred income taxes) and all other proper deductions, all determined in
accordance with GAAP on a consolidated basis, after eliminating all offsetting
debits and credits between the Corporation and its Subsidiaries and all other
items required to be eliminated in the course of the preparation of consolidated
financial statements of the Corporation and its Subsidiaries in accordance with
GAAP and after deducting portions of income properly attributable to outside
minority interests, if any, in the stock (or its equivalent) and surplus of any
such Subsidiary, provided, however, that there shall in any event be excluded
from Consolidated Net Income the following:
(a) the income (or loss) of any other person accrued prior to the date
it becomes a Subsidiary of the Corporation or is merged into or consolidated
with the Corporation or any Subsidiary of the Corporation;
(b) the income (or loss) of any person in which the Corporation or any
Subsidiary of the Corporation has an ownership interest (other than a Subsidiary
of the Corporation), except to the extent that such income has been actually
received by the Corporation or such Subsidiary in the form of cash dividends or
similar distributions;
(c) the undistributed earnings of any Subsidiary to the extent that
the declaration or payment of dividends or similar distributions by such
Subsidiary is not at the time permitted by the terms of its charter or any
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to such Subsidiary;
(d) any aggregate net income (but not any aggregate net loss) during
such period arising from the sale, exchange or other distribution of capital
assets;
(e) any income resulting from any write-up of any assets;
-2-
(f) any gain or loss arising from the acquisition of any securities,
or the extinguishment of any Debt of the Corporation or any of its Subsidiaries
or the termination of an employee benefit plan; and
(g) the net proceeds of any life insurance policy.
DEBT: as applied to any person, as of any date (without duplication):
(a) all obligations of such person evidenced by bonds, debentures,
notes, drafts or similar instruments and all obligations of such person for
borrowed money (whether or not so evidenced);
(b) all obligations of such person for all or any part of the deferred
purchase price of property or services or for the cost of property constructed
or of improvements thereon, other than trade payables and accrued liability
incurred in respect of property purchased or services provided in the ordinary
course of business or which are being contested in good faith by appropriate
proceedings and are not required to be classified on such person's balance
sheet, in accordance with GAAP, as debt;
(c) all obligations secured by any Lien on or payable out of the
proceeds of production from property owned or held by such person even though
such person has not assumed or become liable for the payment of such obligation;
(d) all Capital Lease Obligations of such person;
(e) all obligations of such person, contingent or otherwise, in
respect of any letter of credit facilities, bankers' acceptance facilities or
other similar credit facilities other than any such obligation which relates to
an underlying obligation which otherwise constitutes Debt of such person
hereunder or a current account payable of such person incurred in the ordinary
course of business;
(f) all Redeemable Preferred Stock issued by such person;
(g) all obligations of such person upon which interest payments are
customarily made; and
(h) all Guarantees by such person of or with respect to obligations of
the character referred to in the foregoing subdivisions (a) through (g) of
another person;
provided, however, that in determining the Debt of any person, (i) all
liabilities for which such person is jointly and severally liable with one or
more other persons (including, without limitation, all liabilities of any
partnership or joint venture of which such person is a general partner or co-
venturer) shall be included at the full amount thereof without regard to any
right such person may have against any such other persons for contribution or
indemnity, and (ii) no effect shall be given to deposits, trust arrangements or
similar arrangements which, in accordance with GAAP, extinguish Debt for which
such person remains legally liable.
-3-
EBITDA: of the Corporation for any fiscal year, the sum of (a) Consolidated Net
Income of the Corporation for such period, plus (b) the sum of the following
amounts for the Corporation and its Subsidiaries to the extent deducted in
determining such Consolidated Net Income for such period: (i) Interest Charges,
(ii) federal, state and local income taxes, (iii) depreciation and (iv)
amortization. The EBITDA targets set out in the agreement to which this Schedule
is attached are based on the capital expenditure budget for the fiscal year
ending December 31, 1997 of $15.1 million. To the extent capital expenditures in
any fiscal year exceed $15.1 million, there will be an appropriate increase in
the targeted EBITDA. In addition, the targeted EBITDA for any fiscal year will
be adjusted in an equitable fashion to take into account the effect on EBITDA of
any acquisition made by the Corporation or any reorganization of the Corporation
with CCL Industries Inc. ("CCL") or any division or subsidiary thereof. EBITDA
shall be calculated after giving effect to any incentive based compensation paid
or payable to any employee of the Corporation including Xxxxx Xxxxxxxx. EBITDA
shall not be reduced by costs and expenses incurred in connection with
acquisitions or dispositions by the Corporation. If there is a dispute between
the Executive and the Corporation with respect to the calculation of EBITDA, the
audit committee of CCL shall, subject only to a right of appeal from the
decision of the audit committee, within ten business days of such decision, to
the Chairman of CCL who shall consider such appeal in good faith and whose
decision shall be final, binding and unappealable, make a determination of all
such disputed matters. The Executive and the Corporation shall have the right to
make representations to the audit committee of CCL in respect of a dispute with
respect to the calculation of EBITDA. The Executive shall have twenty business
days from the date of notice to the Executive of the Corporation's calculation
of EBITDA to dispute such calculation by referring such dispute to the audit
committee, and if the Executive does not dispute such calculation and refer such
dispute to the audit committee within such period, he shall have no right to do
so thereafter.
GAAP: generally accepted accounting principles as set forth in the opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants and in statements by the Financial Accounting Standards Board as at
the date hereof.
GUARANTEE: as applied to any person, any direct or indirect liability,
contingent or otherwise, of such person with respect to any indebtedness, lease,
dividend or other obligation of any other, including, without limitation, any
such obligation directly or indirectly guaranteed, endorsed (otherwise than for
collection or deposit in the ordinary course of business) or discounted or sold
with recourse (including receivables) by such person, or in respect of which
such person is otherwise in any manner directly or indirectly liable, including,
without limitation, any such obligation in effect guaranteed by such person
through any agreement (contingent or otherwise) to (a) purchase, repurchase or
otherwise acquire such obligation or any security therefor, or to provide funds
for the payment or discharge of such obligation (whether in the form of loans,
advances, stock purchases, capital contributions or otherwise), or to (b)
maintain the solvency or any balance sheet or other financial condition of the
obligor of such obligation, or to (c) make payment for any products, materials
or supplies or for any transportation or services regardless of the non-delivery
or non-furnishing thereof, in any such case if the purpose or intent of such
agreement is to provide assurance that such obligation will be paid or
discharged, or that any
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agreements relating thereto will be complied with, or that the holders of such
obligation will be protected against loss in respect thereof. For purposes of
all computations made under this agreement the amount of any Guarantee shall be
equal to the amount of the obligation guaranteed or, if not stated or
determined, the maximum reasonably anticipated liability in respect thereof
(assuming such person is required to perform thereunder) as determined by such
person in good faith.
INTEREST CHARGES: of the Corporation for any fiscal year, the sum (without
duplication) of the following (in each case, eliminating all offsetting debits
and credits between the Corporation and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of consolidated
financial statements of the Corporation and it Subsidiaries in accordance with
GAAP): (a) all interest in respect of Debt of the Corporation and its
Subsidiaries (including imputed interest on Capital Lease Obligations), deducted
in determining Consolidated Net Income of the Corporation for such period, (b)
all dividends in respect of Redeemable Preferred Stock payable during such
period, and (c) all imputed interest associated with the amount of any debt
discount and expense amortized or required to be amortized in the determination
of such Consolidated Net Income for such period.
LIEN: as to any person, any mortgage, lien (statutory or other), pledge,
assignment, hypothecation, charge, security interest or other encumbrance in or
on, or any interest or title of any vendor, lessor, lender or other secured
party to or of such person under any conditional sale, trust receipt or other
title retention agreement or Capital Lease with respect to, any property or
asset of such person, or the signing or filing of a financing statement which
names such person as debtor, or the signing of any security agreement
authorizing any other party as the secured party thereunder to file any
financing statement which names such person as debtor. The term "Lien" shall
not include any encumbrance which is deemed to exist in respect of any property
or asset of any person solely as a result of an agreement entered into by such
person not to subject all or any part of such person's property or assets to a
Lien. For purposes of this agreement, a person shall be deemed to be the owner
of any property which it has placed in trust for the benefit of holders of Debt
of such person which Debt is deemed to be extinguished under GAAP but for which
such person remains legally liable, and such trust shall be deemed to be a Lien.
REDEEMABLE PREFERRED STOCK: any class of preferred stock of the Corporation
which by its terms has any of the following characteristics: (i) it is
redeemable at a fixed or determinable date or dates, whether by operation or a
sinking fund or otherwise, (ii) it is redeemable at the option of the holder, or
(iii) it has conditions for redemption which are not solely within the control
of the Corporation, such as stock which must be redeemed out of future earnings.
SUBSIDIARY: means a subsidiary under GAAP. Unless otherwise specified, any
reference to a Subsidiary is intended as a reference to a Subsidiary of the
Corporation.
VOTING STOCK: as to any corporation, association, partnership, trust, joint
venture or other entity, capital stock (or equivalent ownership interests) the
holders of which are ordinarily, in the
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absence of contingencies, entitled to elect a majority of the corporate
directors (or persons performing similar functions) of such corporation,
association, partnership, trust, joint venture or entity involved.
