Exhibit 10.16
[ARJO WIGGINS APPLETON LOGO]
PERSONAL
February 12, 2001
Mr. Doug Buth
Appleton Papers Inc.
825 East Wisconsin Avenue
Appleton, WI 54912
Dear Doug:
I am writing to confirm the arrangements that we have agreed will apply in
respect of you and the other individuals, (you and they together the "Named
Individuals"), listed on Appendix A to this letter in the event that we complete
(i.e. we effect and receive payment for ("Completion")) the sale, or transfer,
outside the Worms/AWA group of a controlling stake in Appleton Papers Inc ("a
Transaction") to either a third party ("a Third Party Transaction") or to an
ESOP ("an ESOP Transaction"), and provided also that the other terms and
conditions in this letter are agreed to and fulfilled.
The arrangements that will apply are as follows:
1. NO SALARY REVIEW COMPENSATION
There will be no extraordinary salary reviews, or adjustments
to salary, in respect of the Named Individuals until 31 March
2001 or the earlier Completion of a Transaction (any salary
review payable from Completion being a matter for the new
controllers of Appleton Papers). Your normal salary review and
any adjustment agreed to by the Remuneration Committee will be
made effective as of January 1, 2001, and normal salary
reviews (to be discussed with and approved by AWA) for the
other Named Individuals will be made in January 2001 to be
effective April 2001. In recognition of this, provided a
Transaction is completed in 2001, you will be provided with a
pool of US$50,000.00 for you to distribute amongst the Named
Individuals, other than yourself, at your discretion, subject
of course to deduction of applicable taxes and other charges.
2. VALUE RELATED COMPLETION BONUSES
2.1 A project completion bonus pool will be established the size
of which will be directly related to the Value Achieved for a
Transaction.
2.2 Attached to this letter, as Appendix B, is a table showing the
size of the pool according to the particular `Value Achieved'
for a Transaction. You will be entitled to a 40% share of the
pool and will have the discretion to distribute the remaining
60% of the pool among other Appleton Papers' employees who
supported the Transaction.
Mr. Doug Buth
February 12, 2001
Page 2
2.3 These bonuses will only be payable in respect of a Transaction
completed in 2001.
2.4 If the Value Achieved falls between any of the points shown in
the attached table, the size of the bonus pool will be
increased from what it would be for the value point closest
to, but not greater than, the actual Value Achieved by adding
a pro rata proportion of what would have been the increase in
the size of the pool had the next highest value point been
achieved.
2.5 For the purposes of this letter, `Value Achieved' means the
enterprise value (that is the total equity plus total
indebtedness (other than trade payables)) to be put into the
vehicle effectively acquiring the Appleton Papers business as
agreed with the purchaser. This will be calculated on the same
basis and amount upon which our merchant bank (Goldman Sachs
International) would be entitled to be paid a `success fee' in
respect of the Transaction (assuming for this purpose that
their engagement extended to advising on the Transaction
concerned). For example, Value Achieved for the Transaction as
currently described in the letter of intent between AWA and
Paperweight Development Corp. dated February 12, 2001 ("Feb.
12 Letter of Intent"), will be $843,000,000.
3. LOYALTY PAYMENTS
3.1 AWA will, at Completion of a Transaction, provided the
conditions referred to in 3.2 below are complied with, arrange
for the Named Individuals to receive a Loyalty Payment as
detailed in Appendix C to this letter in recognition of their
past service to the AWA Group and in full and final
substitution for and discharge of any employment termination
protection agreements or rights that they may have and any
claims that they may have arising directly or indirectly as a
result of a Transaction or the termination of their employment
(other than (i) claims under new terms of employment applying
after Completion and negotiated with or approved by the new
controllers of Appleton Papers in the context of the
Transaction and (ii) valid claims for payment of already
accrued deferred compensation or qualified or non-qualified
retirement benefits that are already being fully provided for
in Appleton Papers' accounts and that may be triggered by
Completion).
3.2 The Loyalty Payments referred to in 3.1 are only payable if a
Transaction is completed in 2001.
3.3 In addition, if the Transaction is an ESOP Transaction, the
Loyalty Payments will only be payable if the Value Achieved in
that Transaction exceeds $759.403 m (i.e. $755m plus the total
amount of the Loyalty Payments set out in Appendix C)
Mr. Doug Buth
February 12, 2001
Page 3
AND each Named Individual entitled to a Loyalty Payment agrees
that 30% of the Loyalty Payment will be deferred to a
non-qualified deferred compensation plan which will provide
for earnings on the deferred amounts at a rate equivalent to
the increase in value of interests in the ESOP and that the
deferred compensation, with those earnings, will be paid to
participants in the plan, at their election, between 5 and 10
years following the closing of the Transaction. If the Value
Achieved in the said Transaction is more than $755m but less
than $759.403m, the amount of the Loyalty Payments will be
reduced from the amounts shown in Appendix C by the same
proportion by which the excess Value Achieved over $755m is
less than $4.403m, but otherwise the other conditions for
payment shall apply as stated in the foregoing.
4. GENERAL
4.1 The agreement to make or arrange the making of the payments
referred to in 1 to 3 above is also conditional upon the
following:
(a) In the negotiation of revised contracts of employment
with the new owners of API, all the Named Individuals
agree that existing termination protection
arrangements or rights for them no longer apply and
that they will make themselves available to the new
owners of API, if requested, but not unreasonably so,
for periods as detailed in Appendix C.
(b) In addition, both you and Paul Karch have agreed to
make yourselves available to assist AWA in the
management of its Fox River liabilities for the
period of two years from Completion irrespective of
your employment with API or its successor companies.
(c) We receive by 23rd February 2001 from each Named
Individual confirmation in a form reasonably
acceptable to us of their agreement to these
arrangements;
(d) There being, apart from the Named Individuals, no
other employees or officers of Appleton Papers or any
of the other entities to be included in the
Transaction who have or may claim to have rights to
receive payments by virtue of the Transaction and
none of the Named Individuals having or claiming to
have any rights to receive payments or other
compensation by virtue of the Transaction (other than
already accrued deferred compensation or qualified or
non-qualified retirement payments already being fully
provided for in Appleton Papers' accounts) except for
the payments specifically agreed to be made in this
letter.
Mr. Doug Buth
February 12, 2001
Page 4
(e) None of these payments are to be treated as
pensionable compensation for the purpose of any
retirement benefit plan and each Named Individual
shall enter into such agreements, and you will
procure the taking by API of such action, as may be
reasonably requested by us to ensure that this shall
be the case.
4.2 The obligations created under this letter will be recorded as
obligations of API immediately prior to the closing of the
Transaction. AWA will ensure that Payments arising as a
consequence of these arrangements will be made at or within
two business days after Completion of the Transaction by
reference to which they are payable and will be subject to
deduction of income, payroll and other taxes.
4.3 These arrangements supersede and replace any arrangements
regarding bonuses or other rewards payable to you or an),
other Named Individuals in respect of the proposed transaction
or its completion (including Ken Minton's letter to you of
26th July 2000 concerning an Incentive Fund).
We look forward to working with you in the finalisation of this step in
the company's development. Please signify your agreement on behalf of
you and company Appleton Papers and your confirmation that you expect
agreement by the other Named Individuals, by returning, signed, a copy
of this letter.
Yours sincerely, Agreed
/s/ James Morley /s/ Doug Buth
James Morley Doug Buth
- ------------ Date: February 12, 2001
For and on behalf of
- --------------------
Ario Wiggins Appleton p.l.c.
Mr. Doug Buth
February 12, 2001
Page 5
Appendix A
Named Individuals
George Bureau
Doug Buth
Tom Cashman
John Depies
Todd Downey
Rick Fantini
Paul Karch
Richard Lichtfus
Dale Parker
Steve Sakai
John Showalter
John Tucker
Jerry Wallace
Ann Whalen
Mr. Doug Buth
February 12, 2001
Page 6
Appendix B
Value of Bonus Pool
---------------------------------------------------------------
Transaction Value Pool Size
US$ millions S$ millions
---------------------------------------------------------------
1200 10.00
---------------------------------------------------------------
1150 8.66
---------------------------------------------------------------
1100 7.66
---------------------------------------------------------------
1050 6.66
---------------------------------------------------------------
1000 5.66
---------------------------------------------------------------
950 4.66
---------------------------------------------------------------
900 3.83
---------------------------------------------------------------
850 3.00
---------------------------------------------------------------
800 2.33
---------------------------------------------------------------
750 1.66
---------------------------------------------------------------
740 1.55
---------------------------------------------------------------
730 1.20
---------------------------------------------------------------
720 0.80
---------------------------------------------------------------
710 0.50
---------------------------------------------------------------
700 0.00
---------------------------------------------------------------
Note: At a Transaction Value of $843 million, the Pool Size will be
$2.9062 million.
Mr. Doug Buth
February 12, 2001
Page 7
Appendix C
Loyalty Availability
Payment Period to new
US$ '000 owners
Doug Buth 780 24 mths
George Bureau 250 12 mths
Tom Cashman 227 12 mths
John Depies 250 12 mths
Todd Downey 212 12 mths
Rick Fantini 250 12 mths
Paul Karch 306 18 mths
Richard Lichtfus 300 12 mths
Dale Parker 368 18 mths
Steve Sakai 319 18 mths
John Showalter 227 12 mths
John Tucker 250 12 mths
Jerry Wallace 414 18 mths
Ann Whalen 250 12 mths
-------------------
-------------------
TOTAL 4403
===================