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Exhibit 15
SHOREWOOD PACKAGING CORPORATION
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NON-QUALIFIED STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT dated as of October 30, 1998, between
Shorewood Packaging Corporation, a Delaware corporation, with its principal
office at 277 Park Avenue, New York, New York, 10172, (the "Company") and
Jefferson Capital Group, Ltd., a Virginia corporation, with its principal office
at One James Center, Suite 1600, Richmond, Virginia, 23219, (the "Optionee").
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and its stockholders to grant to
the Optionee an option to purchase 50,000 shares of the common stock, par value
$.0l per share (the "Common Stock") of the company in recognition of the
Optionee's services to the Company during the Queens transaction and as an
inducement to perform additional services on behalf of the Company; and
WHEREAS, R. Timothy O'Donnell ("O'Donnell"), the managing
director of Optionee, is also a director of Company; and
WHEREAS, the Board of Directors of the Company has determined
that it is in the best interests of the Company and its stockholders to grant
the Optionee certain rights pursuant to the terms of this Agreement in
recognition of the Optionee's services to the Company and as an inducement to
perform additional services on behalf of the Company.
NOW, THEREFORE, the parties agree as follows:
1. Grant of Option
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1.1 The Company grants to the Optionee, on the terms and
conditions hereinafter set forth, an option (the "Option") to purchase 50,000
shares of Common Stock of the Company (the "Option Shares").
1.2 The Option does not qualify for "ISO" treatment to the
extent permitted by Section 422A of the Internal Revenue Code of 1986, as
amended.
1.3 The Option Shares are not, and are not required to be,
registered under the Securities Act of 1933, as amended, (the "Securities Act")
but may be listed upon any securities exchange upon which the Company's Common
Stock is listed at the time of such issuance and sale.
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2. Price and Payment for Shares
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2.1 The purchase price for the Option Shares shall be
$16.00 per share (the closing price of Company common stock on the date of this
agreement).
2.2 Payment of the purchase price upon exercise of the
Option may be made in cash or check subject to collection.
3. Period of Option and Certain Limitations on Right to
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Exercise and Right to Sell Stock Received Upon Exercise of the Option.
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3.1 The period of the Option will be five years from the
date the option is granted, which date is first written above (the "Period").
The Option will be exercisable, in whole or in part, at any time during the
Period.
3.2 Optionee understands and acknowledges that by virtue
of O'Donnell's status as a director of the Company, the subsequent sale by
Optionee of the shares may be subject to Securities and Exchange Commission Rule
10b-5 and Exchange Act Section 16(b), restricting transactions in Company
securities by certain corporate insiders. Moreover, the purchase and sale of any
securities of the Company by O'Donnell and/or any entity controlled by or under
common control with O'Donnell are subject to the Company's insider trading
policies as promulgated from time to time.
4. Exercise of Option
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4.1 The Option herein granted shall be exercisable, in
whole or in part, from time to time by notice in writing from the Optionee to
the Company which notice shall be signed by a duly authorized officer of the
Optionee. Such notice shall specify the number of Option Shares with respect to
which the Option is then being exercised and shall be accompanied, pursuant to
Section 2 hereof.
4.2 Upon the exercise of the Option in whole or in part,
the Company shall promptly issue stock certificates for the shares of Common
Stock purchased and the Optionee shall be deemed to be the holder of the shares
of Common Stock purchased as of the date of issuance of certificates for such
shares to it. The Company may delay issuing certificates representing Option
Shares for a reasonable period of time pending listing on any stock exchange.
The Optionee will not be nor deemed to be, a holder of any shares subject to the
Option unless and until certificates for such shares are issued to it or them
under the terms of this Agreement.
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4.3 If and when the Option is exercised, the certificates
to be issued evidencing shares of the Company's Common Stock will be restricted
stock and shall bear a legend substantially as follows:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended. No
transfer, sale or other disposition of these shares may be
made except pursuant to Rule 144 under the Securities Act
of 1933, as amended, or unless a registration statement
with respect to these shares has become effective under
said Act, or the Company is furnished with an opinion of
counsel satisfactory in form and substance to the Company
that such registration is not required."
5. Transferability of Options
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The Option shall not be assignable or transferable by the
Optionee to any other individual or entity without the prior written consent of
the Company, which may be withheld in its reasonable discretion.
6. Acceleration of Option Exercise
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Upon the occurrence of any of the following events, the
Option shall be exercisable only within the 30 calendar days next succeeding the
occurrence of the relevant Triggering Event (as defined below), so long as such
exercise occurs within the Period and then only (a) by an authorized officer of
the Optionee on the Optionee's behalf and (b) if and to the extent that the
Optionee was entitled to exercise the Option at the date of the stockholder
approval of the Change of Control:
(a) the event that the stockholders of the Company have
approved an agreement to merge or consolidate with or into another corporation
(and the Company is not the survivor of such merger or consolidation) or an
agreement to sell or otherwise dispose of all or substantially all of the
Company's assets (including a plan of liquidation) ("Change of Control") (the
date of the stockholder approval of the Change of Control shall be the
Triggering Event for purposes of this Subsection (a)).
(b) intentionally omitted.
7. Piggy-Back Registration
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Subject to Sections 8 and 12 hereof, if at any time after
the date of this
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Agreement during the Period, the Company in addition to any of the holders of
the Common Stock other than the Optionee propose to file a registration
statement to register any security of the Company (other than Common Stock
issued with respect to any acquisition or any employee stock option, stock
purchase or similar plan) under the Securities Act for sale to the public in an
underwritten offering upon which may be registered securities similar to the
Option Shares, it will at each such time give written notice to the Optionee of
its intention to do so ("Notice of Intent") and, upon the written request of the
Optionee made within 30 calendar days after the receipt of any such notice
(which request must specify that the Optionee intends to dispose of all of the
Option Shares held by the Optionee on the date the Notice of Intent is received
by the Optionee, and state the intended method of disposition thereof), the
Company will use its best efforts to effect the registration under the
Securities Act of the Option Shares which the Company has been so requested to
register, to the extent requisite to permit the intended disposition; provided,
however, that if the managing underwriter shall certify in writing that
inclusion of all of the Option shares would, in such managing underwriter's
opinion, materially interfere with the proposed distribution of the securities
in respect of which registration was originally to be effected (x) at a price
reasonably related to fair value, and (y) under circumstances which will not
materially and adversely affect the market of the Company's securities (such
writing to state the basis of such opinion and the maximum number of shares
which may be distributed without such interference), then the Company may, upon
written notice to the Optionee, have the right to exclude from such registration
such number of Option Shares which it would otherwise be required to register
hereunder as is necessary to reduce the total amount of securities to be so
registered to the maximum amount which can be so marketed.
8. Registration Expenses
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The costs and expenses (other than underwriting discounts
and commissions) of all registrations and qualifications under the Securities
Act, and of all other actions the Company is required to take or effect pursuant
to this Agreement shall be paid by the Company (including, without limitation,
all registration and filing fees, printing expenses, fees and expenses of
complying with Blue Sky laws, and fees and disbursements of counsel for the
Company and of independent public accountants; provided, however, that fees and
expenses of complying with Blue Sky laws in those states where Option Shares and
no other securities of the Company covered by the registration statement will be
offered for sale, shall be paid by the Optionee).
9. Registration Procedures
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If and whenever the Company is required to effect the
registration of any Option Shares under the Securities Act as provided in this
Agreement, the Company will promptly:
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(i) prepare and file with the Securities and Exchange
Commission ("Commission") a registration statement on such form as the Company
may select with respect to such Option Shares and use its best efforts to cause
such registration statement to become effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all such Option Shares and other securities covered by
such registration statement until such time as all of such Option Shares and
other securities have been disposed of in accordance with the intended methods
of disposition by the seller or sellers thereof set forth in such registration
statement, but in no event for a period of more than nine months after such
registration statement becomes effective;
(iii) furnish to the Optionee such number of copies of such
registration statement and of each such amendment and supplement thereto, such
number of copies of the prospectus included in such registration statement, in
conformity with the requirements of the Securities Act;
(iv) use its best efforts to register or qualify the Option
Shares covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions within the United States of America
(including territories and commonwealths thereof) as the seller shall reasonably
request, except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any jurisdiction
wherein it is not so qualified, to subject itself to taxation in any such
jurisdiction or to consent to general service of process in any jurisdiction;
(v) notify the Optionee when a prospectus relating to the
Option Shares is required to be delivered under the Securities Act within the
period mentioned in subdivision (ii) of this paragraph, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing (and upon receipt of such notice and until a supplemented or amended
prospectus as set forth below is available, the Optionee shall not offer or sell
any securities covered by such registration statement and shall return all
copies of such prospectus to the Company if requested to do so by it); and
(vi) furnish to the Optionee, at the time of the
disposition of any
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Option Shares by him, a signed copy of an opinion of counsel to the effect that:
(a) a registration statement covering such Option Shares has been filed with the
Commission under the Securities Act and has been made effective by order of the
Commission, (b) said registration statement and the prospectus contained therein
comply as to form in all material respects with the requirements of the
Securities Act, (c) no stop order has been issued by the Commission suspending
the effectiveness of such registration statement and (d) the applicable
provisions of the securities or Blue Sky laws of each state in which the Company
shall be required, pursuant to clause (iv) of this paragraph, to register or
qualify such Option Shares, have been complied with, assuming the accuracy and
completeness of the information furnished to such counsel with respect to each
filing relating to such laws; it being understood that such opinion may contain
such qualifications and assumptions as are customary in the rendering of similar
opinions, and that such counsel may rely, as to all factual matters treated
therein, on certificates of the Company.
The Company may require the Optionee to furnish the Company
such information regarding it and the distribution of such Option Shares as the
Company may from time to time request in writing and as shall be required by law
to effect such registration.
10. Termination of Obligations
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The obligations of the Company imposed by Sections 7
through 9 above shall cease and terminate, as to any particular Option Shares,
(a) when such shares shall have been effectively registered under the Securities
Act and disposed of in accordance with the registration statement covering such
securities, or (b) when in the opinion of counsel for the Company such
restrictions are no longer required in order to insure compliance with the
Securities Act or (c) seven years and one day after the date hereof. Whenever
such restrictions shall terminate as to any Option Shares, the Optionee shall be
entitled to receive from the Company without expense a new certificate or
certificates representing such securities not bearing the legend set forth in
Section 4.3 hereto.
11. Availability of Information
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The Company will use its best efforts to comply with the
reporting requirements of Sections 13 and 15(d) of the Securities Exchange Act
of 1933 to the extent it shall be required to do so pursuant to such Sections,
and at all times while so required shall use its best efforts to comply with all
other public information reporting requirements of the Commission (including
reporting requirements which serve as a condition to utilization of Rule 144
promulgated by the Commission under the Securities Act) from time to time in
effect and relating to the availability of an exemption from the Securities Act
for the sale of any Option Shares. The Company will also cooperate with the
Optionee in supplying such information and documentation as may be necessary for
him to complete and file any information reporting forms
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presently or hereafter required by the Commission as a condition to the
availability of an exemption from the Securities Act for the sale of any Option
Shares.
12. Registration Rights Condition
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Notwithstanding any other provision contained herein, the
Company shall not be obligated to comply with any demands for registration of
Option Shares under the Securities Act if, at the time of such demand by the
Optionee:
(i) he is free to sell all of the Option Shares with
respect to which such registration was requested in accordance with Rule 144
promulgated under the Securities Act or any similar rule or regulation
promulgated under the Securities Act; or
(ii) the Company has in effect a registration statement
covering the disposition of the Option Shares.
13. Dilution or Other Adjustments
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In the event of any change in the Common Stock subject to
the Option granted by this Agreement through merger, consolidation,
reorganization, recapitalization, stock split, stock dividend, or the issuance
to stockholders of rights to subscribe to stock of the same class, or in the
event of any change in the capital structure, the Board of Directors of the
Company shall on an equitable basis make such adjustments with respect to (i)
the number of shares of Common Stock of the Company subject to the Option, (ii)
options granted hereunder, or (iii) any provision of this Agreement, in order to
prevent dilution or enlargement of the Option and the rights granted hereunder.
14. Miscellaneous
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14.1 This Agreement shall be governed by the laws of the
State of New York.
14.2 Any and all notices referred to herein shall be
sufficient if furnished in writing and delivered in person or mailed by
certified mail (return receipt requested) to the respective parties at their
addresses set forth above or to such other address as either party may from time
to time designate in writing.
14.3 As used herein, the masculine gender shall include
the feminine gender.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first above mentioned.
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SHOREWOOD PACKAGING CORPORATION
By: /s/ Howard M. Liebman
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Howard M. Liebman
Executive Vice President and
Chief Financial Officer
JEFFERSON CAPITAL GROUP, LTD.
By: /s/ R. Timothy O'Donnell
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R. Timothy O'Donnell
Managing Director
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