American Pad & Paper Co – ‘10-K’ for 12/31/98 – EX-10.35

As of:  Monday, 3/29/99   ·   For:  12/31/98   ·   Accession #:  1047469-99-11961   ·   File #:  1-11803

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Annual Report   —   Form 10-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 10-K        Annual Report                                         63    401K 
 2: EX-4.22     Instrument Defining the Rights of Security Holders     9     18K 
 3: EX-10.33    Material Contract                                     10     44K 
 4: EX-10.34    Material Contract                                      2     11K 
 5: EX-10.35    Material Contract                                      5     29K 
 6: EX-23.1     Consent of Experts or Counsel                          1      6K 
 7: EX-27.1     Financial Data Schedule (Pre-XBRL)                     2      8K 

EX-10.35   —   Material Contract

EX-10.35
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    AMERICAN PAD & PAPER COMPANY
   17304 PRESTON ROAD, SUITE 700
    DALLAS, TX 75252

    October 13, 1998

Mr. Timothy E. Needham                                                          
5908 Crownover Court                                                            
Plano, TX 75093                                                                 

Dear Tim:                                                                       

 This letter sets forth our agreement (the "Letter Agreement")
relating to your resignation as an officer and employee of American Pad & Paper 
Company and its subsidiaries (the "Company") and your continuing relationship   
with the Company.  Reference is made to that certain Employment Agreement dated 
as of July 2, 1996, as amended on August 7, 1998 (the "Employment Agreement"),  
by and among you and the Company.  The capitalized terms used herein and not    
defined herein have the meanings specified in the Employment Agreement.  Our    
agreement consists of the following:                                            

1.  TERMINATION AND CONSULTING ARRANGEMENT.                 

         (a)  Effective October 31, 1998, your employment with the Company and
its subsidiaries will be terminated and you will resign as an officer of the    
Company and its subsidiaries.  For purposes of the Employment Agreement, your   
termination will be deemed to be a termination by the Company without Cause.    

     (b)  Effective October 31, 1998, in addition to the severance and
other benefits described herein, the Company hereby engages you as an           
independent contractor, and not as an employee, to render consulting services to
the Company as hereinafter provided, and you hereby accept such engagement, for 
a period ending on December 31, 1999 (the "Consulting Period").  You will not   
have any authority to bind or act on behalf of the Company or its subsidiaries. 
During the Consulting Period, you will render such consulting services to the   
Company as are mutually agreed upon by you and the Company at mutually          
convenient times.  These obligations shall not interfere or prohibit any other  
consulting services or employment in which you are engaged.  In addition, you   
will not make any disparaging remarks regarding the Company, and the Company    
will not make any disparaging remarks regarding you.                            

   (c)  The Company will reimburse you for all reasonable expenses
incurred by you in the course of performing your duties under this Letter       
Agreement which are consistent with the Company's standard policies in effect   
from time to time with respect to travel and other business expenses, subject to
the Company's requirements with respect to reporting and documentation of such  
expenses.  In addition, during the Consulting Period, you agree to attend on    
behalf of the Company,                                                          

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Timothy E. Needham                                                              
October 13, 1998                                                                
Page 2                                                                          

and the Company will reimburse you for the reasonable travel, lodging and       
meal expenses incurred by you in attending, the trade association meetings      
for the National Paper Trade Association, the NCCJ Paper Division and the       
Post Office Museum.                                                             

          (d)  You will file all tax returns and reports required to be filed by
you on the basis that you are an independent contractor, rather than an         
employee, as defined in Treasury Regulations Section 31.3121(d)-1(c)(2), and you
will indemnify the Company for the amount of any employment taxes paid by the   
Company as the result of you not paying employment taxes from the payment       
described in paragraph (e) below.  The Company agrees to report all income      
earned from the payments described in paragraph (e) below on a Form 1099 and    
agrees to deliver such form to you within the required statutory time period.   

       (e)    In consideration for the consulting services described above
and your compliance with all of your obligations set forth herein, in Sections  
5, 6 and 7 of the Employment Agreement and in the Release, on July 2, 2000 the  
Company hereby agrees to pay you an amount equal to $240,000 (the "Consulting   
Payment").  In the event that any amounts are still owed by you on July 2, 2000 
under that certain Promissory Note, dated July 2, 1996, as amended on February  
6, 1998 and August 7, 1998 (the "Note"), issued by you to the Company, the      
Company shall have the right to set off the amounts owing under the Note against
the Consulting Payment.  Additionally, to the extent that the Consulting Payment
is owed by the Company to you and the Company does not pay such amount to you,  
the Consulting Payment will be deemed to have been paid and the outstanding     
amounts under the Note will be deemed to be reduced by the amount of the        
Consulting Payment.  In the event that the Company believes that you are not in 
compliance with the obligations described above, the Company will promptly      
notify you of such noncompliance and give you the opportunity to cure such      
noncompliance (to the extent cure is possible).                                 

          2.  SEVERANCE PAYMENT. In lieu of (a) the severance payments of your
Base Salary for 18 months following the end of the Employment Period, (b) your  
Bonus and (c) your car allowance under paragraph 3(b)(iii) of the Employment    
Agreement, the Company hereby agrees, and you hereby accept, two lump sum       
payments as severance, payable as follows: (i) upon the later to occur of (A)   
the effectiveness of this agreement and the Release and (B) October 31, 1998,   
$56,000; and (ii) on January 1, 1999, $570,000.  The Company agrees to withhold 
taxes in specified amounts at your request from the amounts payable under this  
Section 2.                                                                      

    3.  BENEFITS.  For 18 months following the end of the Employment
Period, the Company, at its sole cost and expense, will provide you and your    
family with health, disability and other benefits set forth in paragraph 3(a) of
the Employment Agreement and the fringe benefits described in paragraphs        
3(b)(vi) and 3(b)(vii) of the Employment Agreement.  At the end of the 18 month 
period, you will be entitled to receive continuous insurance coverage in the    
manner and to the extent required under the Consolidated Omnibus Budget         
Reconciliation Act of 1985, as amended.                                         

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Timothy E. Needham                                                              
October 13, 1998                                                                
Page 3                                                                          

In addition, for 18 months following the end of the Employment Period, the      
Company will provide you with the following additional benefits:                

        (i)  the use and access to an executive secretary of the Company, as
deemed reasonably necessary by you; and           

        (ii) the use of a computer, mobile phone (for which the Company will
             pay the monthly service fee and you will be responsible for all
             roaming and long distance charges), the Company's voicemail and
          fax machine (and you will be entitled to retain the hardware
            (other than the voicemail) at no cost following the end of the
18-month period).                                 

       4.  SALE OF THE COMPANY AGREEMENT. The Company and you hereby agree
that the certain Sale of the Company Agreement dated as of August 7, 1998 by and
between you and the Company is hereby terminated and of no further force and    
effect.                                                                         

         5.  OUTPLACEMENT SERVICES.  The Company will provide you, at its sole
cost and expense, with outplacement services for the purposes of obtaining other
employment for a period of 9 months following the end of the Employment Period, 
such service to be selected by you with the approval of the Company (where      
approval will not be unreasonably withheld).                                    

         6.  NON-COMPETE AND OTHER PROVISIONS.  The Company and you agree that
the non-compete and non-solicitation set forth in paragraph 7 of the Employment 
Agreement will run for a period from the date hereof to and including 18 months 
following the end of the Employment Period.  The Company and you agree that the 
confidentiality and intellectual property provisions of paragraphs 5 and 6 of   
the Employment Agreement continue to apply to you during the Consulting Period. 

        7.  D&O INDEMNIFICATION.  The Company hereby agrees and acknowledges
that it will continue to honor its indemnification obligations to you set forth 
in its certificate of incorporation and/or bylaws with respect to any existing  
or future lawsuit against the Company and any other actions pursuant to which   
you would be entitled to indemnification. In addition, you shall have the right 
to retain separate counsel with regard to any such lawsuit or action and the    
Company will indemnify you for the costs and expenses incurred with respect     
thereto, regardless of whether the costs and expenses of such separate          
representation are covered by insurance, to the extent such rights and          
indemnities are provided in the Company's certificate of incorporation and/or   
bylaws.                                                                         

       8.  RELEASE.  Attached hereto as Exhibit I is a release ("Release")
which you agree to execute and deliver to the Company.  It is understood and    
agreed that the effectiveness of the Release is conditioned upon the Company's  
compliance with its obligations under this Letter Agreement, and will otherwise 
be of no force and effect.                                                      

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Timothy E. Needham                                                              
October 13, 1998                                                                
Page 4                                                                          

        9.  PRESS RELEASES.  The parties to this Letter Agreement agree that
they will not issue any public statement regarding your termination of          
employment with the Company or regarding this Letter Agreement without the prior
written consent of the other party hereto, except as required by law.           

          10.  COMPLETE AGREEMENT.  The parties hereto agree that the Employment
Agreement will continue in full force and effect, including but not limited to  
paragraph 18 thereof, except as modified by this Letter Agreement, such         
modifications to include but not be limited to paragraph 2(b).                  

         11.  BINDING EFFECT.  This Letter Agreement is binding on the Company
subject only to your not revoking the Release prior to the expiration of the    
seven day period following your execution of the Release.  Notification of      
revocation by you during the seven day period must be accomplished by hand      
delivered written notice of revocation to the Company at 17304 Preston Road,    
Suite 700, Dallas, TX 75252, Attention: General Counsel, with a copy to the     
Company's counsel, James L. Learner, Kirkland & Ellis, 200 E. Randolph Drive,   
Chicago, IL 60601, before midnight of the seventh day after the execution date  
of the Release.  No attempted revocation after the expiration of such seven day 
period will have any effect on the terms of this Letter Agreement or the        
Release.                                                                        

          12.  STOCK OPTIONS.  The Company hereby agrees that (a) you are deemed
vested with respect to 50,000 shares under the stock options granted to you by  
the Company on April 8, 1998 with  an exercise price of $6.9375 per share and   
with respect to 50,000 shares under the stock options granted to you by the     
Company on August 12, 1998 which has an exercise price of $1.753 per share and  
(b) such vested options are hereby exercisable until June 30, 2000 in accordance
with the terms of such options.  In addition, the Company and you hereby agree  
that all other stock options granted to you by the Company are hereby           
terminated.  The Company represents that it has taken all necessary actions to  
authorize this Letter Agreement and the terms hereof, including the accelerated 
vesting of the stock options.                                                   

        13.  LEGAL FEES.  The Company hereby agrees to reimburse you for the
reasonable legal fees and expenses incurred by you in connection with the       
negotiation and execution of this Letter Agreement.                             

         14.  NOTICES AND CONTACTS.  In the event that you intend to notify or
contact the Company regarding this Letter Agreement, such notices or contacts   
should be directed to the Company's General Counsel at 17304 Preston Road, Suite
700, Dallas, TX 75252.  All notices to you shall be sent to you at 5908         
Crownover Court, Plano, TX 75093, with a copy to Baker & Botts, L.L.P., 2001    
Ross Avenue, Dallas, TX 75201, Attention: Catherine Bowe.                       

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Timothy E. Needham                                                              
October 13, 1998                                                                
Page 5                                                                          

    If you are in agreement with the terms of this Letter Agreement,
please sign in the space provided below.                                        

               Very truly yours,

                          AMERICAN PAD & PAPER COMPANY

By
                                    ----------------------------------

 Its
                                     ---------------------------------

Agreed and accepted                                                             
the __ day of October, 1998:                                                    

-----------------------------                                                   
TIMOTHY E. NEEDHAM                                                              

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘10-K’ Filing		Date		First		Last			Other Filings
		7/2/00		2
		6/30/00		4
		12/31/99		1					10-K,  NTN 10K
Filed on:		3/29/99							DEF 14A
		1/1/99		2
For Period End:		12/31/98							5,  5/A
		10/31/98		1		2
		10/13/98		1		5
		8/12/98		4
		8/7/98		1		3
		4/8/98		4
		2/6/98		2					SC 13G/A
		7/2/96		1		2			424B3
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