Exhibit 10.16

 

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is effective as of March 1,
2009 by and between Orchids Paper Products Company (“Company”) and Keith R.
Schroeder (“Executive”).

 

WHEREAS, Executive serves as the Company’s Chief Financial Officer pursuant to
an employment agreement, dated as of March 1, 2004 (the “2004 Employment
Agreement”);

 

WHEREAS, the 2004 Employment Agreement expires on March 1, 2009; and

 

WHEREAS, Executive desires to continue to serve as the Chief Financial Officer
of the Company and in exchange for the protection and other consideration set
forth in this Agreement, is willing to give the Company, under certain
circumstances, his covenant not to compete, and the Company desires to so employ
Executive.

 

NOW, THEREFORE, in consideration of the promises and the mutual agreements
contained herein, the Company and Executive hereby agree as follows:

 

ARTICLE I

Definitions

 

1.1                               Definitions.  As used herein, the following
terms shall have the following meanings.

 

(a)                                “Board” means the board of directors of the
Company.

 

(b)                               “Cause” means (i) engaging by Executive in
willful misconduct which is materially injurious to Company; (ii) conviction of
Executive by a court of competent jurisdiction of, or entry of a plea of nolo
contendere with respect to a felony; (iii) engaging by Executive in fraud or
dishonesty in connection with the business of Company; (iv) Executive’s abuse of
or dependency on alcohol or drugs (illicit or otherwise); (v) Executive’s
material breach of this Agreement; or (vi) failure to perform the lawful
directives of the Chief Executive Officer or the Board, including, without
limitation, any failure to regularly report to the office.

 

(c)                                “Change of Control” means (i) a change in the
ownership of the Company, which occurs on the date that any one person or more
than one person acting as a group, acquires ownership of stock of the Company
that, together with stock held by such person or group constitutes more than 50%
of the total fair market value or total voting power of the stock of the
Company; or (ii) a change in the ownership of all or substantially all of the
Company’s assets, which occurs on the date that any one person, or more than one
person acting as a group, acquires (or has acquired during the 12-month period
ending on the date of the most recent acquisition by such person or persons)
assets from the Company that have a total gross fair market value equal to or
more than 80% of the total gross fair market value of all of the assets of the
Company immediately prior to such acquisition or acquisitions.  For this
purpose, gross fair market value means the value of the assets of the Company or
the value of the assets being disposed of determined without regard to any
liabilities associated with such assets.

 

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(d)                               “Code” means the Internal Revenue Code of
1986, as amended.

 

(e)                                “Confidential Information” shall mean all
technical and business information of the Company, or which is learned or
acquired by the Company from others with whom the Company has a business
relationship in which, and as a result of which, similar information is revealed
to the Company, whether patentable or not, which is of a confidential, trade
secret and/or proprietary character and which is either developed by Executive
(alone or with others) or to which Executive shall have had access during his
employment.  Confidential Information shall include (among other things) all
confidential data, designs, plans, notes, memoranda, work sheets, formulas,
processes, and customer and supplier lists.

 

(f)                                  “Good Reason” means (i) a requirement that
the Executive permanently relocate to a place of business more than 50 miles
from the location at which he principally performs services for the Company;
(ii) a material diminution in the Executive’s duties; (iii) a requirement that
Executive regularly report directly to a person other than the Board; or (iv) a
material breach of this Agreement by the Company.

 

ARTICLE II

Employment

 

2.1                               Employment.  Company agrees to employ
Executive and Executive hereby accepts such employment with the Company, upon
the terms and conditions set forth in this Agreement, for the period beginning
on March 1, 2009 (“Start Date”) and ending as provided in Section 2.4 of this
Agreement (“Employment Period”).

 

2.2                               Position and Duties.

 

(a)                                Commencing on the Start Date and continuing
during the Employment Period, Executive shall serve as Chief Financial Officer
of the Company.  As Chief Financial Officer, Executive, subject to the control
of the Board, shall perform such duties as are customary for such position and
such duties as may be assigned to him by Chief Executive Officer.

 

(b)                               Executive shall devote his best efforts and
his full business time and attention to the business and affairs of the
Company.  The Executive shall perform his duties and responsibilities to the
best of his abilities in a diligent, trustworthy, businesslike and efficient
manner.  In the performance of his duties hereunder, Executive shall at all
times report and be subject to the lawful direction of the Chief Executive
Officer and perform his duties hereunder subject to and in accordance with the
resolutions or any other determinations of the Board and the by-laws of the
Company and applicable law.  During the Employment Period, Executive shall not
become an employee of any person or entity other than the Company.

 

2.3                               Base Salary, Bonus and Benefits.

 

(a)                                Subject to the terms of this Agreement, in
consideration of Executive’s agreements contained herein, for the period
beginning on the Start Date, Executive’s base salary shall be $190,025 per annum
(“Base Salary”), which shall be payable in equal

 

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installments during the year in accordance with the Company’s normal payroll
schedule and shall be subject to deductions for customary withholdings,
including, without limitation, federal and state withholding taxes and social
security taxes.  The Board shall evaluate the Base Salary annually and make such
changes to the Base Salary as it deems are appropriate, but in no event shall
the Base Salary be less than $190,025.

 

(b)                               Executive shall be eligible for the
opportunity to earn annual performance bonuses in an amount up to 100% of Base
Salary (with a target bonus equal to 60% of Base Salary), based on the
achievement of such targets as shall be established, in accordance with the
Company’s annual bonus program.  Executive must remain employed by the Company
on the payment date of any such bonus in order to receive any such bonus. 
Subject to the terms of the actual bonus plan, any bonus thereunder is payable
in cash on or after January 1 and no later than April 15 of the calendar year
following the applicable fiscal year with respect to such bonus.  In addition,
during the Employment Period, Executive shall be entitled to participate in all
retirement, disability, pension, savings, life, health, medical, dental,
insurance and other fringe benefits or plans of the Company generally available
to executive employees of the Company.

 

(c)                                During the Employment Period, the Company
upon the submission of proper substantiation by the Executive, shall reimburse
the Executive for all reasonable business expenses actually and necessarily paid
or incurred by him in the course of and pursuant to the business of the Company,
in accordance with Company policies relating to the reimbursement of business
expenses.

 

(d)                               Executive shall be entitled to four weeks of
vacation during the first year of employment and five weeks of vacation during
each year of employment thereafter, consistent with Company policy and to be
taken at times which do not unreasonably interfere with the performance of
Executive’s duties hereunder.  Unused vacation time shall be treated in
accordance with the Company’s policies in effect from time to time.

 

2.4                               Term.

 

(a)                                General Term.  This Agreement shall commence
on the Start Date and terminate on December 31, 2011 (“Initial Term”) unless
extended or sooner terminated as provided herein.  The Initial Term shall
automatically be extended for successive additional one-year periods (each, a
“Renewal Period”), unless either party to this Agreement provides the other
party with notice of termination of this Agreement at least 60 days prior to the
expiration of the Initial Term or any Renewal Period thereafter (“Notice
Period”).

 

(b)                               Termination for Cause or Voluntary
Termination.  If the Executive is terminated by the Company for Cause or if the
Executive terminates his employment for any reason other than as provided in
Section 2.4(d), the Executive shall be entitled only to his Base Salary through
the date of termination, but shall not be entitled to any further Base Salary or
any applicable bonus, benefits or other compensation for that

 

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year or any future year, except as may be provided in an applicable benefit plan
or program, or to any severance compensation of any kind, nature or amount.

 

(c)                                  Termination Without Cause.

 

(i)                                   Before or More Than Twelve Months
Following Change of Control.  If the Executive is terminated by the Company
without Cause before a Change in Control or more than twelve months following a
Change of Control (including any termination which is a direct result of the
Company’s election to terminate the Executive’s employment without Cause at the
end of the Initial Term or any Renewal Period), the Executive shall be entitled
to all previously earned and accrued but unpaid Base Salary up to the date of
such termination and severance pay in an amount equal to one year of Base
Salary.  Such severance payments will be made in equal installments over a
one-year period, payable on the dates on which the Executive’s Base Salary would
have otherwise been paid if Executive’s employment had continued.  All payments
shall be subject to deductions for customary withholdings, including, without
limitation, federal and state withholding taxes and social security taxes.

 

(ii)                                Within Twelve Months After Change of
Control.  Notwithstanding the foregoing, if the Executive is terminated by the
Company without Cause within twelve months after a Change of Control (including,
without limitation, any termination which is a direct result of the Company’s
election to terminate the Executive’s employment without Cause at the end of the
Initial Term or any Renewal Period), the Executive shall be entitled to all
previously earned and accrued but unpaid Base Salary up to the date of such
termination and severance pay in an amount equal to two (2) years of Base
Salary.  Such severance payment will be made in a lump sum on the date that is
90 days after the date of termination of employment.  All payments shall be
subject to deductions for customary withholdings, including, without limitation,
federal and state withholding taxes and social security taxes.

 

(d)                                 Termination by Executive.

 

(i)                                   Good Reason Within Twelve Months After
Change of Control.  If Executive terminates his employment for Good Reason
within twelve (12) months after a Change of Control, Executive shall notify
Company in writing if he believes the termination is for Good Reason.  Executive
shall set forth in reasonable detail why Executive believes Good Reason exists. 
If such termination is for Good Reason, Executive shall be entitled to all
previously earned and accrued but unpaid Base Salary up to the date of such
termination and severance pay in an amount equal to two (2) years of Base
Salary.  Such severance payment will be made in a lump sum on the date that is
90 days after the date of termination of employment.  All payments shall be
subject to deductions for customary withholdings, including, without limitation,
federal and state withholding taxes and social security taxes.

 

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(ii)                                Good Reason Before or More Than Twelve
Months After Change of Control.  In the event that Executive terminates his
employment for Good Reason at any time before a Change of Control or more than
twelve months following a Change of Control, Executive shall be entitled to all
previously earned and accrued but unpaid Base Salary up to the date of such
termination and severance pay in an amount equal to one year of Base Salary. 
Such severance payments will be made in equal installments over a one-year
period, payable on the dates on which the Executive’s Base Salary would have
otherwise been paid if Executive’s employment had continued.  All payments shall
be subject to deductions for customary withholdings, including, without
limitation, federal and state withholding taxes and social security taxes.

 

(iii)                             Other.  In the event that Executive terminates
his employment for any reason at any time other than described in subsections
(d)(i) and (ii) above, Executive shall not be entitled to severance pay and
shall be entitled only to those amounts provided in Section 2.4(b) on a
voluntary termination of employment by Executive.

 

(e)                                Limitation on Certain Additional Payments. 
Anything in this Agreement to the contrary notwithstanding, in the event it is
determined that any payment or distribution by the Company to or for the benefit
of the Executive (“Payments”) would be subject to the excise tax imposed by
Section 4999 of the Code, then the Payments under this Agreement shall be
decreased to the greatest amount that could be paid to the Executive such that
receipt of Payments will not give rise to any such excise tax.  In the event it
is determined that Payments would be subject to the excise tax imposed under
Section 4999 of the Code, such Payments shall be first reduced by those Payments
under this Agreement that are not subject to Section 409A of the Code, and, if
necessary, then out of the Payments that are subject to Section 409A of the
Code, starting with the Payments that are to be paid on the latest future date,
so that there will be no Payments subject to the excise tax imposed by
Section 4999 of the Code.

 

(f)                                  Severance Forfeiture.  Executive agrees
that the Executive shall be entitled to the severance pay as set forth in this
Section 2.4 only if the Executive executes a release of all claims against the
Company in such form as the Company may require and the Executive has not
materially breached as of the date of termination any provisions of this
Agreement and does not materially breach such provisions at any time during the
period for which such payments are to be made.  The Company’s obligation to make
such payments will terminate upon the occurrence of any such material breach
during the severance period.

 

(g)                               No Additional Severance.  Executive hereby
agrees that no severance compensation of any kind, nature or amount shall be
payable to Executive, except as expressly set forth in this Section 2.4, and
Executive hereby irrevocably waives any claim for any other severance
compensation.

 

(h)                               Death or Disability.  The Company’s obligation
under this Agreement terminates on the last day of the month in which the
Executive’s death occurs or on the date as of

 

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which Executive first becomes entitled to receive and actually receives
disability benefits under the Company’s long-term disability plan.  The Company
shall pay to Executive or the Executive’s estate all previously earned and
accrued but unpaid Base Salary up to such date.  Thereafter, the Executive or
his estate shall not be entitled to any further Base Salary, bonus, benefits or
other compensation for that year or any subsequent year, except as may be
provided in an applicable benefit plan or program.

 

2.5                               Confidential Information.

 

(a)                                Executive shall use his best efforts and
diligence both during and after his employment with the Company, regardless of
how, when or why Executive’s employment ends, to protect the confidential, trade
secret and/or proprietary character of all Confidential Information.  Executive
shall not, directly or indirectly, use (for himself or another) or disclose any
Confidential Information, for so long as it shall remain proprietary or
protectible as confidential or trade secret information, except as may be
necessary for the performance of Executive’s duties for the Company.

 

(b)                               Executive shall promptly deliver to the
Company, at the termination of the Employment Period or at any other time at the
Company’s request, without retaining any copies, all documents, information and
other material in Executive’s possession or control containing, reflecting
and/or relating, directly or indirectly, to any Confidential Information.

 

(c)                                Executive’s obligations under this
Section 2.5 shall also extend to the confidential, trade secret and proprietary
information learned or acquired by Executive during his employment from others
with whom the Company has a business relationship.

 

(d)                               Executive’s breach of Section 2.5 of this
Agreement shall relieve Company of its obligations (if any) to pay any further
severance benefits under this Agreement.

 

2.6                               Competitive Activity.

 

(a)                                Executive covenants and agrees that during
the period of his employment hereunder and for a period ending on the earlier of
(i) the second (2nd) anniversary of the date of termination of his employment
with the Company, including without limitation termination by the Company for
Cause or without Cause, and (ii) to the extent severance payments become payable
hereunder and are made in installments, the last day on which Executive is
entitled to receive severance payments hereunder, Executive shall not, in the
United States of America, or in any other country of the world in which the
Company or any of its subsidiaries has done business at any time during the last
two (2) years prior to termination of Executive’s employment with the Company,
engage, directly or indirectly, whether as principal or as agent, officer,
director, employee, consultant, shareholder, or otherwise, alone or in
association with any other person, corporation or other entity, in any Competing
Business.  For purposes of this Agreement, the term “Competing Business” shall
mean any person, corporation or other entity which sells or attempts to sell any
tissue products or

 

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services or any other products or services which are the same as or
substantially similar to (as commonly understood in the relevant industry) the
products and services (a) sold by the Company or any of its subsidiaries at any
time and from time to time during the last two (2) years prior to the
termination of Executive’s employment hereunder or (b) being developed by the
Company or any of its subsidiaries during the period of Executive’s employment
with the Company.

 

(b)                               Executive shall continue to be obligated under
Section 2.5 of this Agreement not to use or to disclose Confidential Information
so long as it shall remain proprietary or protectible as confidential or trade
secret information.

 

(c)                                During the applicable non-compete period,
following termination of Executive’s employment with the Company for any reason,
Executive agrees to advise the Company of his new employer, work location and
job responsibilities within ten (10) days after accepting new employment.

 

(d)                               Executive understands that the intention of
Sections 2.5 and 2.6 of this Agreement is not to prevent the Executive from
earning a livelihood and Executive agrees nothing in this Agreement would
prevent Executive from earning a livelihood utilizing his general skills in any
of the companies which are not directly or indirectly in competition with the
Company.

 

(e)                                Executive agrees that during his employment
with the Company, he shall not, directly or indirectly, solicit the trade of, or
trade with, any customer, prospective customer or supplier of the Company or any
of its subsidiaries for any business propose other than for the benefit of the
Company or such subsidiaries.  Executive further agrees that for two (2) years
following termination of his employment with the Company, including without
limitation termination by the Company for Cause or without Cause, Executive
shall not, directly or indirectly, solicit for any Competing Business the trade
of, or trade with, any customers or suppliers, or prospective customers or
suppliers, of the Company or any of its subsidiaries.

 

(f)                                  Executive agrees that, during his
employment with the Company and for two (2) years following termination of his
employment with the Company, including without limitation termination by the
Company for Cause or without Cause, Executive shall not, directly or indirectly,
solicit, hire or induce, or attempt to solicit, hire or induce, any employee of
the Company or any of its subsidiaries to leave the Company or any of its
subsidiaries for any reason whatsoever or hire any employee of the Company or
any of its subsidiaries.

 

(g)                               Executive’s breach of Section 2.6 of this
Agreement shall relieve Company of its obligations (if any) to pay any further
severance benefits under this Agreement.

 

ARTICLE III

Miscellaneous

 

3.1                               Executive’s Representations.  Executive hereby
represents and warrants to the Company that (i) Executive’s execution, delivery
and performance of this Agreement do not and shall not

 

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conflict with, breach, violate or cause a default under any contract, agreement,
instrument, order, judgment or decree to which Executive is a party or by which
he is bound, and (ii) upon the execution and delivery of this Agreement by the
Company, this Agreement shall be the valid and binding obligation of Executive,
enforceable in accordance with its terms.  Executive hereby acknowledges and
represents that he fully understands the terms and conditions contained herein.

 

3.2                               Survival.  Sections 2.5 and 2.6 and Sections
3.2 through 3.15 shall survive and continue in full force in accordance with
their terms notwithstanding any termination of the Employment Period.

 

3.3                               Notices.  All notices, demands or other
communications to be given or delivered under or by reason of the provisions of
this Agreement will be in writing and will be deemed to have been given when
delivered personally, mailed by certified or registered mail, return receipt
requested and postage prepaid, or sent via a nationally recognized overnight
courier, or sent via facsimile to the recipient.  Such notices, demands and
other communications will be sent to the address indicated below:

 

To the Company:

 

Orchids Paper Products Company
4826 Hunt Street
Pryor, Oklahoma 74361
Attn: Chief Executive Officer

 

with a copy to:

 

Bryan Cave LLP
161 North Clark Street, Suite 4300
Chicago, Illinois 60601
Attn:  Don Figliulo

 

To Executive:

 

Keith R. Schroeder
8656 East 104th Street
Tulsa, Oklahoma 74133

 

or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.

 

3.4                               Severability.  Whenever possible, each
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law.  If any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect under any applicable
law or rule in any jurisdiction, (a) the parties agree that such
provision(s) will be enforced to the maximum extent permissible under the
applicable law, and (b) any invalidity, illegality or unenforceability of a
particular provision will not affect any other provision of this Agreement.

 

3.5                               Successors and Assigns.  Except as otherwise
provided herein, all covenants and agreements contained in this Agreement shall
bind and inure to the benefit of and be enforceable by

 

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the Company, and their respective successors and assigns.  This Agreement is
personal to Executive and except as otherwise specifically provided herein, this
Agreement, including the obligations and benefits hereunder, may not be assigned
to any party by Executive.

 

3.6                               Descriptive Headings.  The descriptive
headings of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.

 

3.7                               Counterparts.  This Agreement may be executed
in one or more identical counterparts, each of which shall be deemed an original
but all of which together shall constitute one and the same instrument.

 

3.8                               Waiver.  Neither any course of dealing nor any
failure or neglect of either party hereto in any instance to exercise any right,
power or privilege hereunder or under law shall constitute a waiver of such
right, power or privilege or of any other right, power or privilege or of the
same right, power or privilege in any other instance.  All waivers by either
party hereto must be contained in a written instrument signed by the party to be
charged therewith, and, in the case of Company, by its duly authorized officer.

 

3.9                               Entire Agreement.  This instrument constitutes
the entire agreement of the parties in this matter and shall supersede any other
agreement between the parties, oral or written, concerning the same subject
matter including, but not limited to, any prior employment and severance
agreements.  Without limiting the foregoing, the 2004 Employment Agreement is
specifically superseded hereby and of no force or effect.

 

3.10                        Amendment.  This Agreement may be amended only by a
writing which makes express reference to this Agreement as the subject of such
amendment and which is signed by Executive and by a duly authorized officer of
the Company.

 

3.11                        Governing Law.  This Agreement shall be signed by
the parties in Tulsa, Oklahoma.  All questions concerning the construction,
validity and interpretation of this Agreement will be governed by and construed
in accordance with the domestic law of the State of Oklahoma, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Oklahoma or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Oklahoma.  Any litigation
relating to or arising out of this Agreement shall be filed and litigated
exclusively in the state or federal courts of Oklahoma.

 

3.12                        Remedies.  Each of the parties to this Agreement
will be entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including reasonable attorneys’ fees) caused by any
breach of any provision of this Agreement and to exercise all other rights
existing in its favor.  The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement, including, without limitation, Sections 2.5 and 2.6 hereof, and that
any party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or deposit) for specific
performance and/or other injunctive relief in order to enforce or prevent any
violations of the provisions of this Agreement.

 

3.13                        Future Employment.  Executive shall disclose the
existence of this Agreement to any new employer or potential new employer which
offers products or services that compete with the Company’s business.  Executive
consents to the Company informing any subsequent employer of

 

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Executive, or any entity which the Company in good faith believes is, or is
likely to be, considering employing Executive, of the existence and terms of
this Agreement.

 

3.14                        Specified Employee Determination.  Notwithstanding
anything herein to the contrary, in the event that the Executive is determined
to be a specified employee in accordance with Section 409A of the Code and the
regulations and other guidance issued thereunder for purposes of any payment on
termination of employment hereunder, payment(s) shall be made or begin, as
applicable on the first payroll date which is more than six months following the
date of separation from service, to the extent required to avoid the adverse tax
consequences under Section 409A of the Code.

 

3.15                        Arbitration.  The parties agree that all disputes
arising under or in connection with this Agreement, and any and all claims by
the Executive relating to his employment with the Company, including any claims
of discrimination arising under Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, the Americans with
Disabilities Act or any similar federal, state or local law will be submitted to
arbitration in Tulsa, Oklahoma to the American Arbitration Association (“AAA”)
under its rules then prevailing for the type of claim in issue.  The parties
each hereby specifically submit to the personal jurisdiction of any federal or
state court located in the State of Oklahoma for any such action and further
agree that service of process may be made within or without the State of
Oklahoma by giving notice in the manner provided herein.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
this 27 day of February, 2009 and effective as of the date first written above.

 

THIS AGREEMENT CONTAINS A BINDING ARBITRATION PROVISION WHICH MAY BE ENFORCED BY
COMPANY.

 

 

COMPANY

 

 

 

 

 

By:

  /s/ Robert A. Snyder

 

Name:  Robert Snyder

 

Title:  President and Chief Executive Officer

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

 

  /s/ Keith R. Schroeder

 

Name:  Keith R. Schroeder

 

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