EXHIBIT 10.14
CHANGE OF CONTROL SEVERANCE POLICY
Introduction
The Board of Directors of Mosinee Paper Corporation recognizes
that, from time to time, the Company may explore potential transactions
that could result in a Change of Control of the Company. This possibility
and the uncertainty it creates may result in the loss or distraction of
employees of the Company and its Subsidiaries to the detriment of the
Company and its shareholders.
The Board considers the avoidance of such loss and distraction to
be essential to protecting and enhancing the best interests of the Company
and its shareholders. The Board also believes that when a Change of
Control is perceived as imminent, or is occurring, the Board should be
able to receive and rely on disinterested service from employees regarding
the best interests of the Company and its shareholders without concern
that employees might be distracted or concerned by the personal
uncertainties and risks created by the perception of an imminent or
occurring Change of Control.
In addition, the Board believes that it is consistent with the
Company's employment practices and policies and in the best interests of
the Company and its shareholders to treat fairly its employees whose
employment terminates in connection with or following a Change of Control.
Accordingly, the Board has determined that appropriate steps
should be taken to assure the Company of the continued employment and
attention and dedication to duty of its employees and to seek to ensure
the availability of their continued service, notwithstanding the
possibility or occurrence of a Change of Control.
Therefore, in order to fulfill the above purposes, the following
plan has been developed and is hereby adopted.
ARTICLE I
ESTABLISHMENT OF PLAN
As of the Effective Date, the Company hereby establishes a
separation compensation plan known as the Mosinee Paper Corporation Change
of Control Severance Policy, as set forth in this document.
-1-
ARTICLE II
DEFINITIONS
As used herein the following words and phrases shall have the
following respective meanings unless the context clearly indicates
otherwise:
(a) ANNUAL BONUS. The highest amount a Participant received as
an annual bonus under the Company's Performance Bonus Plan and/or any
other annual bonus plan, program or policy in any of the three years prior
to a termination of employment entitling the Participant to a Separation
Benefit.
(b) ANNUAL COMPENSATION. The sum of a Participant's Required
Base Salary and Annual Bonus.
(c) BASE SALARY. The amount a Participant is entitled to
receive as wages or salary on an annualized basis, excluding all bonus,
overtime, health additive and incentive compensation, payable by an
Employer as consideration for the Participant's services.
(d) BOARD. The Board of Directors of Mosinee Paper Corporation.
(e) CHANGE OF CONTROL. "Change of Control" shall mean:
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (A) the then
outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company
Voting Securities"); provided, however, that for purposes of this
subsection (i), the following acquisitions shall not constitute a
Change of Control: (I) any acquisition directly from the Company,
(II) any acquisition by the Company, (III) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (IV) any
acquisition pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) of this Section 2(e); or
(ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for
-2-
any reason to constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent
Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal
of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(iii) Consummation by the Company of a reorganization,
merger, share exchange or consolidation or sale or other disposition
of all or substantially all of the assets of the Company or the
acquisition of assets of another entity (a "Business Combination"), in
each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially
all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Business Combination of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be, (B) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly
or indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed with respect to the Company prior to the Business
Combination and (C) at least a majority of the members of the board of
directors of the corporation resulting from such Business Combination
were members of the Incumbent Board at the time of the execution of
the
-3-
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(iv) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
Notwithstanding the foregoing, neither the approval by the shareholders of
the Company, nor the consummation, of the transactions contemplated by
that certain Agreement and Plan of Merger, dated as of August 24, 1997, by
and among Wausau Paper Mills Company, WPM Holdings, Inc. and the Company
on substantially the terms and conditions set forth therein as of August
24, 1997 shall constitute a Change of Control for purposes of this Plan.
(f) CODE. The Internal Revenue Code of 1986, as amended from
time to time.
(g) COMMITTEE. The Compensation Committee of the Board.
(h) COMPANY. Mosinee Paper Corporation and any successor
thereto.
(i) EFFECTIVE DATE. Such date as the Board shall designate in
its resolution approving the Plan.
(j) EMPLOYEE. Any employee of an Employer.
(k) EMPLOYER. The Company or a Subsidiary of the Company which
has adopted the Plan pursuant to Article V hereof.
(l) PARTICIPANT. An Employee who meets the eligibility
requirements of Section 3.1.
(m) PLAN. The Mosinee Paper Corporation Change of Control
Severance Policy.
(n) REQUIRED BASE SALARY. With respect to any Participant, the
higher of (x) the Participant's Base Salary as in effect immediately prior
to the Change of Control and (y) the Participant's highest Base Salary in
effect at any time thereafter.
(o) SEPARATION BENEFIT. The benefit payable in accordance with
Section 4.3 of the Plan.
(p) SUBSIDIARY. Any corporation in which the Company, directly
or indirectly, holds a majority of the voting
-4-
power of such corporation's outstanding shares of capital stock.
(q) WEEKLY COMPENSATION. A Participant's Annual Compensation
divided by 52.
(r) YEAR OF SERVICE. A twelve-month continuous period of
employment, including periods of vacation, lay-off, leave of absence or
disability, with an Employer or any affiliate of an Employer or their
predecessors or successors.
ARTICLE III
ELIGIBILITY
3.1 PARTICIPATION. Each Employee who is not a party to an
employment agreement with the Company which shall be effective in the
event of a Change of Control shall be eligible to be designated by the
Board or the Committee as a Participant in the Plan. An Employee once
designated as a Participant may be excluded from the Plan by action of the
Committee at any time prior to the occurrence of a Change of Control
provided that such exclusion is not in connection with or in anticipation
of a then-pending or proposed Change of Control.
3.2 DURATION OF PARTICIPATION. A Participant shall cease to be
a Participant in the Plan when he ceases to be an Employee of any Employer
or ceases to be a member of the group of Employees designated as eligible
to participate in the Plan, unless, at the time he ceases to be an
Employee or a member of a group of Employees, such Participant is entitled
to payment of a Separation Benefit as provided in the Plan or there has
been an event or occurrence described in Section 4.2(a) which would enable
the Participant to terminate his employment and receive a Separation
Benefit. A Participant entitled to payment of a Separation Benefit or any
other amounts under the Plan shall remain a Participant in the Plan until
the full amount of the Separation Benefit and any other amounts payable
under the Plan have been paid to the Participant.
ARTICLE IV
SEPARATION BENEFITS
4.1 RIGHT TO SEPARATION BENEFIT. A Participant shall be
entitled to receive from his Employer a Separation Benefit in the amount
provided in Section 4.3 if, at any time after a Change of Control has
occurred and on or before the second anniversary thereof, the
Participant's employment by
-5-
an Employer shall terminate for any reason specified in Section 4.2(a),
whether the termination is voluntary or involuntary. Any Separation
Benefits payable hereunder are intended as stipulated damages for the
termination of the Participant's employment, with the understanding that
the actual damages incurred by a Participant in such circumstances will
be difficult or impossible to determine.
4.2 TERMINATION OF EMPLOYMENT.
(a) TERMINATIONS WHICH GIVE RISE TO SEPARATION BENEFITS
UNDER THIS PLAN. (i) Except as set forth in subsection (b) below, any
termination of employment with an Employer by action of the Employer or
any of its affiliates within two years after a Change of Control
(excluding any transfer to another Employer) shall entitle a Participant
to a Separation Benefit in accordance with Section 4.3.
(ii) If within two years after a Change of Control a
Participant's Base Salary is reduced below the Required Base Salary, the
Participant may terminate his employment within 90 days of the occurrence
of such reduction and be entitled to the Separation Benefits in accordance
with Section 4.3.
(iii) If within two years after a Change of Control a
Participant's duties and responsibilities or the program of benefits
offered to a Participant are materially and adversely diminished in
comparison to the duties and responsibilities or the program of benefits
enjoyed by the Participant immediately prior to the Change of Control, he
may terminate his employment within 90 days of the occurrence of such
diminution and be entitled to the Separation Benefits in accordance with
Section 4.3.
(iv) If within two years after a Change of Control a
Participant is required to be based at a location more than 50 miles from
the location where the Participant was based and performed services
immediately prior to the Change of Control, he may terminate his
employment within 90 days of such requirement and be entitled to the
Separation Benefits in accordance with Section 4.3.
(v) If within two years after a Change of Control, an
Employer or any affiliate of an Employer sells or otherwise distributes or
disposes of the subsidiary, branch or other business unit in which the
Participant was employed before such sale, distribution or disposition and
the requirements of subsection (b)(iv) of this Section 4.2 are not met, a
Participant may terminate his employment within 90 days after such sale,
distribution or disposition and
-6-
be entitled to the Separation Benefits in accordance with Section 4.3.
(b) TERMINATIONS WHICH DO NOT GIVE RISE TO SEPARATION
BENEFITS UNDER THIS PLAN. If a Participant's employment is terminated
after a Change of Control for Cause, disability, retirement, or a
qualified sale of business (as those terms are defined below), the
Participant shall not be entitled to Separation Benefits under the Plan,
regardless of the occurrence of a Change of Control.
(i) A termination for disability shall have occurred
where a Participant is terminated because illness or injury has prevented
him from performing his duties (as they existed immediately prior to the
illness or injury) on a full-time basis for 180 consecutive business days.
(ii) A termination by retirement shall have occurred
where a Participant's termination is due to his voluntary normal or early
retirement under a pension plan sponsored by his Employer or its
affiliates, as defined in such plan.
(iii) A termination for Cause shall have occurred where
a Participant is terminated because of:
(A) the willful and continued failure of the Employee
to perform substantially the Employee's duties with the Company
or one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Employee by the Board or an elected officer of the Company which
specifically identifies the manner in which the Board or the
elected officer believes that the Employee has not substantially
performed the Employee's duties, or
(B) the willful engaging by the Employee in illegal
conduct or gross misconduct which is materially and demonstrably
injurious to the Company.
For purposes of this provision, no act or failure to act, on the part of
the Employee, shall be considered "willful" unless it is done, or omitted
to be done, by the Employee in bad faith or without reasonable belief that
the Employee's action or omission was in the best interests of the
Company. Any act, or failure to act, based upon authority given pursuant
to a resolution duly adopted by the Board or based upon the advice of
counsel for the Company shall be conclusively
-7-
presumed to be done, or omitted to be done, by the Employee in good faith
and in the best interests of the Company.
(iv) A termination due to a qualified sale of business
shall have occurred where, within two years after a Change of Control, an
Employer or an affiliate of an Employer has sold, distributed or otherwise
disposed of the subsidiary, branch or other business unit in which the
Participant was employed before such sale, distribution or disposition and
the Participant has been offered employment with the purchaser of such
subsidiary, branch or other business unit or the corporation or other
entity which is the owner thereof on substantially the same terms and
conditions under which he worked for the Employer (including, without
limitation, base salary, duties and responsibilities, program of benefits
and location where based). Such terms and conditions shall also include,
without limitation, a legally binding agreement or plan covering such
Participant, providing that upon a termination of employment with the
subsidiary, branch or business unit (or the corporation or other entity
which is the owner thereof) or any successor of the kind described in
Article VI of this Plan, within two years after the Change of Control of
the Company, the Participant's employer or any successor will pay to each
such former Participant an amount equal to the Separation Benefit and
other benefits that such former Participant would have received under the
Plan had he been a Participant at the time of such termination. For
purposes of this subsection, the new employer plan or agreement must treat
service with any Employer (irrespective of whether the Employer was an
affiliate of the Company or the Employee was a Participant at the time of
such service) and the new employer as continuous service for purposes of
calculating separation benefits.
4.3 SEPARATION BENEFITS.
(a) IN GENERAL. If a Participant's employment terminates
in circumstances entitling him to a Separation Benefit as provided in
Section 4.2(a), the Participant's Employer or the Company shall provide
such Participant with a Separation Benefit as follows:
(i) the Company shall pay such Participant, within ten days after
the date such termination takes effect (the "Date of
Termination"), a cash lump sum equal to the excess of (A) the
Participant's Weekly Compensation (determined immediately before
the Date of Termination) times the "Multiple" (as defined in
Section 4.3(b) below) over (B) the amount of any severance pay or
pay in lieu of notice required to be paid to such Employee under
applicable law ("Statutory Severance"); and
-8-
(ii) the Company shall continue to provide such Participant, for
a number of weeks after the Date of Termination equal to the
Multiple, with life and medical/dental insurance coverage at
least as favorable as the coverage in force on the Date of
Termination, with no increase in the employee contribution rate.
(b) DEFINITION OF "MULTIPLE". The "Multiple" shall mean
the sum of (i) the number of the Participant's completed Years of Service
and (ii) the quotient (rounded down to the nearest whole number) of the
Participant's Required Base Salary, divided by $5,000; provided, however,
that the Multiple shall not be less than 4 nor greater than 52.
4.4 OTHER BENEFITS PAYABLE. The Separation Benefit described in
Section 4.3 above shall be payable in addition to, and not in lieu of, all
other accrued or vested or earned but deferred compensation, rights,
options or other benefits which may be owed to a Participant upon or
following termination, including but not limited to accrued vacation or
sick pay, amounts or benefits payable under any bonus or other
compensation plans, stock option plan, stock ownership plan, stock
purchase plan, life insurance plan, health plan, disability plan or
similar or successor plan, and Statutory Severance.
4.5 CERTAIN REDUCTION OF PAYMENTS BY THE COMPANY.
(a) For purposes of this Section 4.5, (i) a Payment shall
mean any payment or distribution in the nature of compensation to or for
the benefit of a Participant, whether paid or payable pursuant to this
Plan or otherwise; (ii) Separation Payment shall mean a Payment paid or
payable pursuant to this Plan (disregarding this Section); (iii) Net After
Tax Receipt shall mean the Present Value of a Payment net of all taxes
imposed on a Participant with respect thereto under Sections 1 and 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"), and any
corresponding provisions of state and local income tax laws, determined by
applying the highest marginal tax rates that are expected to apply to the
Participant's taxable income for the relevant taxable year; (iv) "Present
Value" shall mean such value determined in accordance with Section
280G(d)(4) of the Code; and (v) "Reduced Amount" shall mean the greatest
aggregate amount of Separation Payments which (a) is less than the sum of
all Separation Payments and (b) results in aggregate Net After Tax
Receipts which are equal to or greater than the Net After Tax Receipts
which would result if the Participant were paid the sum of all Separation
Payments.
-9-
(b) Anything in this Agreement to the contrary
notwithstanding, in the event Ernst & Young LLP or such other certified
public accounting firm designated by the Participant (the "Accounting
Firm") shall determine that receipt of all Payments would subject the
Participant to tax under Section 4999 of the Code, it shall determine
whether some amount of Separation Payments would meet the definition of a
"Reduced Amount." If the Accounting Firm determines that there is a
Reduced Amount, the aggregate Separation Payments shall be reduced to such
Reduced Amount. All fees payable to the Accounting Firm shall be paid
solely by the Company.
(c) If the Accounting Firm determines that aggregate
Separation Payments should be reduced to the Reduced Amount, the Company
shall promptly give the Participant notice to that effect and a copy of
the detailed calculation thereof, and the Participant may then elect, in
his sole discretion, which and how much of the Separation Payments shall
be eliminated or reduced (as long as after such election the present value
of the aggregate Separation Payments equals the Reduced Amount), and shall
advise the Company in writing of his election within ten days of his
receipt of notice. If no such election is made by the Participant within
such ten-day period, the Company may elect which of such Separation
Payments shall be eliminated or reduced (as long as after such election
the present value of the aggregate Separation Payments equals the Reduced
Amount) and shall notify the Participant promptly of such election. All
determinations made by the Accounting Firm under this Section shall be
binding upon the Company and the Participant and shall be made within 60
days of a termination of employment of the Participant. As promptly as
practicable following such determination, the Company shall pay to or
distribute for the benefit of the Participant such Separation Payments as
are then due to the Participant under this Plan and shall promptly pay to
or distribute for the benefit of the Participant in the future such
Separation Payments as become due to the Participant under this Plan.
(d) While it is the intention of the Company to reduce the
amounts payable or distributable to the Participants hereunder only if the
aggregate Net After Tax Receipts to a Participant would thereby be
increased, as a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that amounts will have been paid
or distributed by the Company to or for the benefit of a Participant
pursuant to this Plan which should not have been so paid or distributed
("Overpayment") or that additional amounts which will have not been paid
or distributed by the Company to or for the benefit of a Participant
pursuant to this Plan could have been so paid or distributed
-10-
("Underpayment"), in each case, consistent with the calculation of the
Reduced Amount hereunder. In the event that the Accounting Firm, based
either upon the assertion of a deficiency by the Internal Revenue Service
against the Company or the Participant which the Accounting Firm believes
has a high probability of success determines that an Overpayment has been
made, any such Overpayment paid or distributed by the Company to or for
the benefit of a Participant shall be treated for all purposes as a loan
to the Participant which the Participant shall repay to the Company
together with interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no such loan shall
be deemed to have been made and no amount shall be payable by a
Participant to the Company if and to the extent such deemed loan and
payment would not either reduce the amount on which the Participant is
subject to tax under Section 1 and Section 4999 of the Code or generate a
refund of such taxes. In the event that the Accounting Firm, based upon
controlling precedent or substantial authority, determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Participant together with
interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code.
4.6 PAYMENT OBLIGATIONS ABSOLUTE.
Upon a Change of Control, subject to Section 4.5, the obligations
of the Company and the Employer to pay the Separation Benefits described
in Section 4.3 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company or any
of its Subsidiaries may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action
by way of mitigation of the amounts payable to a Participant under any of
the provisions of this Plan, nor shall the amount of any payment hereunder
be reduced by any compensation earned by a Participant as a result of
employment by another employer.
ARTICLE V
PARTICIPATING EMPLOYERS
As of the Effective Date, this Plan shall be deemed adopted by
each Subsidiary of the Company. Upon such adoption, each Subsidiary shall
become an Employer hereunder and the provisions of the Plan shall be fully
applicable to the Employees of that Subsidiary who are eligible to be
Participants.
-11-
ARTICLE VI
SUCCESSOR TO COMPANY
This Plan shall bind any successor of the Company, its assets or
its businesses (whether direct or indirect, by purchase, merger,
consolidation or otherwise), in the same manner and to the same extent
that the Company would be obligated under this Plan if no succession had
taken place.
In the case of any transaction in which a successor would not by
the foregoing provision or by operation of law be bound by this Plan, the
Company shall require such successor expressly and unconditionally to
assume and agree to perform the Company's obligations under this Plan, in
the same manner and to the same extent that the Company would be required
to perform if no such succession had taken place. The term "Company," as
used in this Plan, shall mean the Company as hereinbefore defined and any
successor or assignee to the business or assets which by reason hereof
becomes bound by this Plan.
ARTICLE VII
DURATION, AMENDMENT AND TERMINATION
7.1 DURATION. If a Change of Control has not occurred and no
proposal with respect to a Change of Control is then pending, this Plan
shall expire on August 24, 1998, unless sooner terminated as provided in
Section 7.2, or unless extended for an additional period or periods by
resolution adopted by the Board.
If a Change of Control occurs, this Plan shall continue in full
force and effect and shall not terminate or expire until after all
Participants who become entitled to any payments hereunder shall have
received such payments in full and all adjustments required to be made
pursuant to Section 4.5 have been made.
7.2 AMENDMENT AND TERMINATION. The Plan may be terminated or
amended in any respect by resolution adopted by a majority of the Board,
unless a Change of Control has previously occurred. However, in
connection with or in anticipation of a then-pending or proposed Change of
Control, this Plan may not be terminated or amended in any manner which
would adversely affect the rights or potential rights of Participants. If
a Change of Control occurs, the Plan shall no longer be subject to
amendment, change, substitution, deletion, revocation or termination in
any respect which adversely affects the rights of Participants.
-12-
7.3 FORM OF AMENDMENT. The form of any amendment or termination
of the Plan shall be a written instrument signed by a duly authorized
officer or officers of the Company, certifying that the amendment or
termination has been approved by the Board. An amendment of the Plan in
accordance with the terms hereof shall automatically effect a
corresponding amendment to all Participants' rights hereunder. A
termination of the Plan shall in accordance with the terms hereof
automatically effect a termination of all Participants' rights and
benefits hereunder.
ARTICLE VIII
MISCELLANEOUS
8.1 INDEMNIFICATION. If a Participant institutes any legal
action in seeking to obtain or enforce, or is required to defend in any
legal action the validity or enforceability of, or entitlement to, any
right or benefit provided by this Plan, the Company or the Employer will
pay for all actual legal fees and expenses incurred (as incurred) by such
Participant, regardless of the outcome of such action.
8.2 EMPLOYMENT STATUS. This Plan does not constitute a contract
of employment or impose on the Participant or the Participant's Employer
any obligation to retain the Participant as an Employee, to change the
status of the Participant's employment, or to change the Company's
policies or those of its Subsidiaries' regarding termination of
employment.
8.3 VALIDITY AND SEVERABILITY. The invalidity or
unenforceability of any provision of the Plan shall not affect the
validity or enforceability of any other provision of the Plan, which shall
remain in full force and effect, and any prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
8.4 GOVERNING LAW. The validity, interpretation, construction
and performance of the Plan shall in all respects be governed by the laws
of Wisconsin, without reference to principles of conflict of law.
-13-