AMERICAN PAD & PAPER COMPANY
MANAGEMENT STOCK PURCHASE PLAN
SECTION I
PURPOSE
1.1 Purpose. The purpose of the American Pad & Paper Company Management Stock
Purchase Plan (the "Plan") is to enable and encourage selected management
employees to acquire an ownership interest in the Company through the
purchase of the Company's Common Shares, thereby permitting such
participants to share in the growth in value of the Company.
1.2 Effectiveness of the Plan. The Plan will be effective upon the consummation
of the Initial Public Offering. The Plan will remain in effect until such
time as it is amended or terminated by the Board of Directors of the
Company in accordance with the terms of Section IX hereof.
SECTION II
DEFINITIONS
Unless the context indicates otherwise, the following terms have the meanings
set forth below.
2.1 "Board" means the Board of Directors of American Pad & Paper Company.
2.2 "Committee" means the Compensation Committee of the Board or such other
committee designated by the Board to administer the Plan. The Committee
must be comprised of two or more directors, each of whom is a
"disinterested person" (as such term is defined in Rule 166-3 under the
Exchange Act, as such Rule may be amended from time to time).
2.3 "Common Shares" means the shares of Common Stock, par value $.01 per share,
of the Company, or any other class of capital shares which the Company may
authorize and
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issue from time to time, and as may be made subject to this Plan in the
sole discretion of the Board.
2.4 "Company" means collectively American Pad & Paper Company, any successor
entity in a merger or consolidation, and any Subsidiary, which elects to
participate in the Plan with the approval of the Board.
2.5 "Discount to Market" means a percentage discount to the Fair Market Value
of the Plan Shares for purposes of calculating the Purchase Price
pursuant to Section 5.5 hereof which the Committee may authorize in its
sole discretion from time to time. Unless otherwise determined in writing
by the Committee, the Discount To Market under the Plan shall be 25%.
2.6 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.7 "Fair Market Value" as of a certain date means the fair market value of
the Common Shares as determined by the Committee in its sole discretion.
2.8 "Initial Public Offering" means the initial public offering of the shares
of Common Stock of the Company registered under the Securities Act of
1933.
2.9 "Participant" means the management employees of the Company and its
subsidiaries as designated by the Committee who elect to participate in
the Plan in accordance with the provisions of the Plan.
2.10 "Plan Period" shall have the meaning set forth in Section 5.1.
2.11 "Plan Shares" shall have the meaning set forth in Section 4.1.
2.12 "Purchase Date" shall have the meaning set forth in Section 5.5.
2.13 "Purchase Price" shall have the meaning set forth in Section 5.5.
2.14 "Subsidiary" means any corporation, partnership, association or other
business entity which (i) if a corporation, a majority of the total
voting power of shares of stock entitled to vote in the election of
directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by the Company or (ii) if a
partnership, association or other business entity, a majority of the
partnership or other similar ownership interest is owned or controlled,
directly or indirectly, by the Company.
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SECTION III
ADMINISTRATION OF THE PLAN
3.1 Authority of the Committee. The Plan shall be administered by the
Committee. The Committee is authorized by the Board to administer and
control the operation of the Plan including, but not limited to, the power
to (a) determine eligibility for participation in the Plan, (b) subject to
Section V hereof, prescribe the terms and conditions under which Plan
Shares may be purchased under the Plan, and (c) interpret the Plan and
adopt rules for the administration and application of the Plan.
The Committee, in its sole discretion and on such terms and conditions as
it may provide, may delegate its duties in order to facilitate the purchase
and transfer of Plan Shares and to provide for the day-to-day
administration of the Plan. The Committee shall control the general
administration of the Plan with all powers necessary to enable it to carry
out its duties in that respect.
3.2 Decisions Binding. All determinations and decisions made by the Committee
shall be final, conclusive, and binding on all persons, and shall be given
the maximum deference permitted by law.
SECTION IV
NUMBER OF SHARES UNDER THE PLAN
4.1 Shares Subject to Plan. The Company shall reserve 250,000 Common Shares
(the "Plan Shares") for issuance to and purchase by eligible management
employees under this Plan, subject to adjustment pursuant to Section 4.2
hereof. Plan Shares may be Common Shares now or hereafter authorized yet
unissued or Common Shares already authorized, issued and owned or purchased
by the Company. If and to the extent that any right to purchase Plan Shares
shall not be exercised by any Participant for any reason or if such
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right to purchase shall terminate as provided herein, Plan Shares that have
not been allocated to such Participant under the Plan shall again become
available for allocation to Participants as provided herein.
4.2 Change in Capitalization. In the event of a change in the capitalization of
the Company due to a share split, share dividend, recapitalization, merger,
consolidation, combination, or similar event or as in its sole discretion
may deem appropriate, the aggregate number of Plan Shares and the terms of
any existing offering shall be adjusted by the Board to reflect such
change.
SECTION V
PARTICIPATION AND PLAN OPERATION
5.1 Plan Period. The Plan shall operate on a calendar year basis, with each
Plan Period beginning on the first day of January of each year and ending
on the 31st day of December of such year.
5.2 Eligible Participants. Management employees of the Company and its
Subsidiaries as designated by the Committee prior to the beginning of each
Plan Period shall be eligible to participate in the Plan. In determining
the management employees eligible to participate in the Plan, the Committee
shall consider only those management employees recommended by the Company's
principal executive officer.
5.3 Election to Participate in the Plan. Each year, each Participant may elect
to receive an award of Common Shares under the Plan during the subsequent
calendar year by completing a Stock Subscription Agreement (the
"Subscription Agreement"). The Subscription Agreement shall provide that
the Participant elects to receive Common Shares in lieu of a specified
portion of any annual incentive bonus. Such portion may be expressed as
either (a) a specified percentage of the Participant's actual bonus amount,
up
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to 25% of the Participant's actual bonus amount; (b) the lesser of a
specified percentage or a specified dollar amount of the Participant's
actual bonus amount; or (c) a specified dollar amount, up to 25% of the
Participant's targeted maximum bonus. Any dollar amount specified must be
at least $1,000; any percentage specified must be at least 5% and not more
than 25%. Amounts specified pursuant to methods (a) and (b) are entirely
contingent on the amount of bonus actually awarded. Where the Participant
specifies a fixed dollar amount pursuant to method (c) however, the
Subscription Agreement shall provide that, if the targeted maximum bonus
exceeds the actual bonus amount awarded, the dollar amount specified by the
Participant shall automatically be proportionately reduced. Subscription
Agreements must be received by the Company no later than June 30 of the
fiscal year for which such bonus amount will be determined. A Participant
who is subject to the short-swing profit rules of Section 16 of the
Exchange Act may not revise his or her Subscription Agreement. A
Participant who is not subject to the short-swing profit rules of Section
16 of the Exchange Act may revise his or her Subscription Agreement with
respect to the amount of elected Common Shares no later than September 30
of the fiscal year for which such bonus amount will be determined.
5.4 Award of Common Shares. Once each year, on the date that annual incentive
bonuses are paid or would otherwise be paid, the Company shall award Common
Shares to each Participant as follows: Each Participant shall be issued a
whole number of Common Shares determined by dividing the amount (expressed
in dollars) that is determined under his or her Subscription Agreement by
the Purchase Price of each Common Share awarded on such date. No fractional
Common Share will be issued and the amount equivalent in value to the
fractional Common Share will be paid out to the participant currently in
cash.
5.5 Purchase Price. Unless otherwise specified in writing by the Committee, the
purchase price for each Plan Share to be purchased under the Plan (the
"Purchase Price") shall be equal to the Fair Market Value of the Common
Shares less the Discount To Market as of the date the award of the Common
Shares (the "Purchase Date").
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5.6 Fair Market Value. Unless otherwise specified in writing by the Committee,
the Fair Market Value of the Common Shares on the Purchase Date shall be
equal to the average of the closing sale prices of the Common Shares on the
New York Stock Exchange (or such other securities exchange or quotation
system as is then the principal trading market for such Common Shares) for
the five business days immediately preceding the Purchase Date.
5.7 Termination of Employment. A Participant shall cease to be eligible to
participate in the Plan immediately upon the termination of employment for
any reason with the Company or any of its Subsidiaries.
SECTION VI
RIGHTS NOT TRANSFERABLE
The rights and interests of any Participant in the Plan, including any right to
purchase Plan Shares, shall not be transferable other than by will or the
applicable laws of descent and distribution and any such right to purchase shall
be exercisable only during the lifetime of such Participant, and then only by
such Participant.
SECTION VII
LIMITATIONS ON SHARE OWNERSHIP
Notwithstanding any provision herein to the contrary, no Participant shall have
a right to purchase Plan Shares if such Participant would, immediately after
electing to purchase such shares, own Common Shares possessing 10% or more of
the total combined voting power or value of all classes of capital shares of the
Company or of any of its Subsidiaries. For purposes of the foregoing,
Participants shall be considered to own any Common Shares which they have a
right to purchase under the Plan or any other share option agreement with the
Company or its Subsidiary.
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SECTION VIII
MISCELLANEOUS PROVISIONS
8.1 Continued Employment. Nothing in the Plan shall be construed to give any
employee the right to be retained in the employ of the Company or a
Subsidiary or to affect the right of the Company or any Subsidiary or a
Participant to terminate such employment at any time with or without cause.
8.2 Rights as Stockholder. A Participant shall have no rights as a stockholder
with respect to any Plan Shares which he or she may have a right to
purchase under the Plan until the date such shares are registered in the
name of such Participant or in the name of a Nominee on behalf of such
Participant.
8.3 Rights to Purchase Shares. Each right to purchase Plan Shares under the
Plan shall be subject to the requirement that if at any time the Committee
shall determine that the listing, registration or qualification of such
right to purchase or the Plan Shares subject thereto upon any securities
exchange or under any state or federal law, or the consent or approval of
any governmental regulatory body, is necessary or desirable as a condition
of, or in connection with, such right to purchase or the issue of Plan
Shares pursuant thereto, then, anything in the Plan to the contrary
notwithstanding, no such right to purchase may be exercised in whole or in
part, and no Plan Shares shall be issued, unless such listing,
registration, qualification, consent or approval shall have been effected
or obtained free from any conditions not reasonably acceptable to the
Committee. The Committee is authorized upon the advice of counsel to make
such amendments to the Plan as may be necessary or desirable to facilitate
obtaining an effective registration statement with the Securities and
Exchange Commission under the Securities Act of 1933, as amended, covering
Plan Shares issued pursuant hereto.
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8.4 Withholding Taxes. Each Participant agrees, by entering the Plan, that the
Company shall have the right to deduct any such taxes, in its sole
discretion, from any amount payable to the Participant under the Plan or
from any payment of any kind otherwise due to the Participant. Participants
who wish to avoid the withholding of Common Shares otherwise issuable to
them under the Plan should arrange with the Company to pay the amount of
taxes required to be withheld in advance of the settlement date.
8.5 No Distribution; Compliance with Legal Requirements. The Committee may
require each person acquiring Common Shares under the Plan to represent to
and agree with the Company in writing that such person is acquiring the
shares without a view to distribution thereof. No Common Shares shall be
issued until all applicable securities law and other legal and stock
exchange requirements have been satisfied. The Committee may require the
placing of such stop-orders and restrictive legends on certificates for
Common Shares as it deems appropriate. The Company shall use its best
efforts to cause to be filed under the Securities Act of 1933, as amended,
a registration statement covering the Common Shares issuable under this
Plan.
8.6 Governing Law. The terms of the Plan shall be governed, construed,
administered and regulated in accordance with the laws of the State of
Delaware. In the event any provision of this Plan shall be determined to be
illegal or invalid for any reason, the other provisions shall continue in
full force and effect as if such illegal or invalid provision had never
been included herein.
8.7 Notices; Delivery of Stock Certificates. Any notice required or permitted
to be given by the Company or the Committee pursuant to the Plan shall be
deemed given when personally delivered or deposited in the United Sates
mail, registered or certified, postage prepaid, addressed to the
Participant at the last address shown for the Participant on the records of
the Company. Delivery of stock certificates to persons entitled to receive
them under the Plan shall be deemed effected for all purposes when the
Company or a share
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transfer agent of the Company shall have deposited such certificates in the
United States mail, addressed to such person at his/her last known address
on file with the Company.
SECTION IX
AMENDMENT OR TERMINATION OF THE PLAN
9.1 Amendment. The Board may, at any time and from time to time, amend, modify
or suspend the Plan, but no such amendment, modification or suspension
without the approval of the stockholders shall:
(a) increase the maximum number (determined as provided in the Plan) of
Plan Shares, other than as provided in Section 4.2 hereof; or
(b) permit the issuance of any Plan Shares at a Purchase Price less than
that provided in the Plan as approved by the stockholders.
9.2 Termination. This Plan shall terminate upon the adoption of a resolution of
the Board terminating the Plan.
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