**Exhibit 4.16**

** **

**JSG PACKAGING LIMITED**

**JEFFERSON SMURFIT GROUP LIMITED**

**BEECH HILL**

**CLONSKEAGH**

**DUBLIN 4**

**IRELAND**

 

February 6, 2004

 

PERSONALAND CONFIDENTIAL

 

GaryMcGann

Cherryfield

Stonehouse

Donnybrook

Dublin4

 

DearGary:

 

Inlight of the proposed exchange (the “Exchange”) of ordinary shares andconvertible shares of Jefferson Smurfit Group Limited (“Existing Parent”) forordinary shares and convertible shares of JSG Packaging Limited (“New Parent”),we thought it advisable to confirm and clarify the terms of your employmentupon consummation of the Exchange.

 

# 1.                                       Inthe event that the Exchange in consummated, you will remain employed as thechief executive officer of Existing Parent and its subsidiaries and will havethe title of chief executive officer for New Parent and JSG Holdings plc aswell.  In your capacity as chiefexecutive officer, you shall report to New Parent’s Board of Directors (the“Board”) and discharge all normal responsibilities of a chief executive officerand make recommendations to the Board for capital expenditures, investments anddivestitures in excess of €5,000,000. As long as you remain employed byExisting Parent or one of its subsidiaries, you shall devote substantially allof your business time and attention to New Parent and its subsidiaries and useyour best efforts in furtherance of your responsibilities for New Parent andits subsidiaries; provided that, with the prior consent of the ExistingParent’s Board of Directors (the “Board”), you shall be entitled to serve onthe board of directors of up to two companies or organizations as long as suchservice does not materially interfere with your obligations to New Parent andits subsidiaries and you may act as president of the Irish Business EmployersConfederation.

#  

# 2.                                       Fromand after consummation of the Exchange, your base salary shall be the same asin effect immediately prior to consummation of the Exchange.  Your base salary is subject to increase fromtime to time at the sole discretion of the Board.  All remuneration or payments payable to youpursuant to this paragraph 2 or otherwise shall be subject to such

 

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# tax and otherstatutory deductions as are required to be deducted at source and remitted tothe appropriate revenue authorities.

#  

# 3.                                       Subjectto paragraph 4 below, all senior executive employee benefit plans of ExistingParent and its subsidiaries in place as of the date of this letter, includingthe JSG management incentive plan (the “MIP”), will remain in place afterconsummation of the Exchange on substantially the same terms as present;provided that the MIP will provide that as long as you remain the chiefexecutive officer of Existing Parent and its subsidiaries, your bonus under theMIP for each of 2004, 2005 and 2006 shall be 60% of your base salary for suchyear and you shall be eligible for a bonus of up to 40% of your base salary forsuch year based upon achievement of certain performance targets to bedetermined by the Board or its compensation committee.  You shall continue to be entitled to apension of two thirds final salary at age 62 and, accordingly, appropriateannual employer contributions shall be made to the relevant Plan on yourbehalf.   Moreover, you will be entitledto (a) 30 days’ vacation annually (exclusive of public holidays), (b) use of aleased automobile paid for by a Group Company (which automobile shall be thecurrent model used by you or an equivalent, renewed every four years, togetherwith tax, insurance, operating and maintenance costs), (c) reimbursement ofexpenses, properly vouched in accordance with Group Company policies, (d)business class travel (first class travel, where appropriate), and (e)membership at The K Club and two other golf or similar clubs selected byyou.  In addition, for as long as you arethe chief executive officer, you will provide services at the headquarters forthe Group Companies in Dublin, Ireland, subject to frequent temporary traveloverseas.  Each of these employee benefitplans will ultimately be subject to the supervision and periodic review of theBoard or its compensation committee; provided that your benefit package in theaggregate shall not be decreased.

#  

# 4.                                       Notwithstandingparagraph 3 foregoing, all PSPs, LTIPs, SAYE Schemes, phantom stock plans,option plans and other equity based incentive plans of the Group Companies ineffect as of September 17, 2002 not previously terminated will be terminatedforthwith upon or as soon as possible after the consummation of the Exchange inaccordance with their terms.

#  

# 5.                                       Aslong as you remain employed as chief executive officer of Existing Parent andits subsidiaries and prior to an initial public offering, investment fundscontrolled by or under common control with Madison Dearborn Partners LLC(“MDP”) will cast all of its votes in favor of your appointment and/orre-election to the board of directors of New Parent and Existing Parent.

#  

# 6.                                       Youagree that Existing Parent may terminate your employment at any time with orwithout cause upon 360 days prior notice. If your employment is terminated by Existing Parent other than as aresult of death, total and permanent disability or cause, you will be entitledto receive as severance a payment for the two-year period from the date oftermination (the “Severance Period”) an amount equal to the sum of (a) yourannual salary as of the date of termination, plus (b) the highest annual bonusfor the most recent three years, plus (c) the regular pension contributionsmade by Existing Parent or its

 

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# subsidiaries in respect of your annual salary, plus(d) the cash value of any perks or benefits to which you are entitled as aresult of your employment (other than participation in equity-like incentiveschemes); provided that Existing Parent may, without prior notice,terminate your employment, in which case the Severance Period shall be thethree-year period from the date of termination and severance payment shall becalculated with reference to such payment. Such severance shall be payable to you in a lump sum within 30 days followingthe date of termination of your employment. As a pre-condition to receiving any such severance payments and as amaterial term of this agreement, you agree that you will execute a mutuallyacceptable and complete release in favor of New Parent, Existing Parent andtheir affiliates (including, without limitation, a full and final settlement,discharge and waiver of all rights under law (including but not limited tostatutory, contractual and other common law rights) with respect to youremployment and/or the termination of your employment and/or such payment uponany  termination in which you areentitled to severance).  The rights underthis paragraph shall be in replacement of, rather than in addition to, anyrights that you may have under law (including, without limitation, payment inlieu of notice).

#  

# 7.                                       NewParent understands that you are party to a “two-year” letter, a copy of whichis attached hereto as Exhibit A which provides that if within one year after aRelevant Event (as defined therein), your employment with Existing Parent orits subsidiaries is voluntarily terminated or involuntarily terminated withoutjust cause, you are entitled to receive two years’ Remuneration (as definedtherein).  You agree that you herebyrelease and waive, without any claims or demands, all rights under suchtwo-year letter in connection with the Exchange (including any compulsory shareacquisition under Section 204 of the Irish Companies Act).  As consideration for such release and waiver,in the event that the Exchange is consummated, New Parent will enter into a new“two-year” letter with you in the form attached hereto as Exhibit B. In allcases where payment obligations are triggered pursuant to both paragraphs 6 and7, you shall be entitled to the greater of the amounts payable to you pursuantto paragraphs 6 and 7 hereof, but in no event shall you be entitled to paymentspursuant both paragraphs 6 and 7.

#  

# 8.                                       Whenused herein and when to be used in the new two-year letter, “cause” shall mean(a) the commission of actual or attempted fraud, embezzlement, theft,misappropriation, serious misconduct or gross default by you against or inrespect of a Group Company or your duties for a Group Company, which relates toa material amount or which results in a criminal conviction or settlement withcriminal penalties or future restrictions or in material loss or damage to thatGroup Company or other Group Companies; (b) the refusal or failure by you tocarry out your duties to a Group Company to a material degree, following awritten warning that dismissal may result; (c) conviction of a crime inrelation to the business or assets of a Group Company, which has, in thereasonable opinion of the Board, a material adverse effect upon any GroupCompany or its shareholders, other than (i) a violation of the Road TrafficActs and (ii) a criminal matter in respect of which you have been indemnifiedby a Group Company and are entitled to indemnification, (d) knowing violationof the Foreign Corrupt Practices Act, or (e) material breach of a material,formal agreement in writing (other than this letter agreement) between you andNew Parent or the Group Company by which you are

 

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# employed; providedthat for the avoidance of doubt, the exclusion from this clause (e) of thisletter agreement shall not exclude breach thereof from being deemed the basisfor “cause” termination pursuant the provisions of any of clauses (a) through(d) of this paragraph 8.  For theavoidance of doubt, the termination of your employment by a Group Company shallnot be for Cause if it results wholly or mainly from (v) your death ordisability, (w) your retirement on grounds of age or pursuant to an earlyretirement plan of the Group Company that employs you, (x) your voluntaryresignation (unless you are subject to internal or external proceedings likelyto lead to a termination for Cause at the time of such resignation), (y) yourredundancy, or (z) the Group Company that employs you ceasing for any reason tobe a Group Company.  When used herein,“Group Companies” means New Parent and each of its subsidiaries and AssociatedCompanies and “Group Company” means any such company and “Associated Company”means any company having an Equity Share Capital (as defined in Section 155 ofthe Companies Act, 1963) of which not less than 20% in nominal value isbeneficially owned by any Group Company.

#  

# 9.                                       Youagree that in the event that you (a) voluntarily terminate your employment withthe Group Companies or (b) are terminated without cause, you shall not duringthe Restricted Period:  (i) within theRestricted Area or any part thereof, carry on either directly or indirectly, onyour own behalf or on behalf of any other person, firm, company or entity, anymaterial business of the same or similar kind to that in which any of the GroupCompanies were materially engaged in the year preceding such termination, (ii)induce or attempt to induce any employee of any Group Company to leave theemploy of the Group Companies, or in any way interfere with the relationshipbetween any Group Company and any employee thereof and or (iii) call on,solicit the custom or business of or service any customer, supplier, licensee,licensor or other business relation of any Group Company in order to induce orattempt to induce such person or entity to cease doing or reduce the amount ofbusiness with any Group Company, or in any way interfere with the relationshipbetween any such customer, supplier, licensee or business relation and any GroupCompany (including but not limited to making any negative statements orcommunications about any Group Company, or any employee, director orstockholder thereof).  When used herein,(A) “Restricted Period” means the two-year period from the date of termination;provided that “Restricted Period” shall not include any period for which orwith respect to which you are not receiving or did not receive severancepayments or payments under your “two-year” letter in violation of this letteragreement or such “two-year” letter, and (B) “Restricted Area” means any areaof the world where any Group Company conducted a material portion of itsbusiness in the twelve-month period immediately preceding your terminationdate.  The restrictions contained in thisparagraph 9 shall not restrict you from passively owning not more than 1% ofthe outstanding equity securities of a publicly traded company that competeswith the Group Companies.

#  

# 10.                                 Youagree that all trade secrets, confidential operations, processes or dealings, orany information concerning the organization, business, finances, transactionsand affairs, other than information that becomes publicly available other thanthrough breach of this provision by you, shall be kept confidential both duringthe term of this letter agreement

 

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# and thereafter.  All notes, memoranda, reports and informationcompiled by you during your employment (in whatever form compiled) regardingthe business, affairs and operations of the Group Companies shall be and at alltimes remain the property of the Group Companies.

#  

# 11.                                 Subjectto paragraph 12 below, upon execution of this letter agreement by each partyhereto, this letter agreement shall be binding and enforceable upon each partyhereto.  In the event that the Exchangeis consummated, this letter agreement shall, effective as of the date ofconsummation of the Exchange, amend and supersede that certain letteragreement, dated as of July 4, 2002, by and between Existing Parent and you andany other agreement(s) with any Group Company regarding the subject matterhereof to which you are a party; provided that your employment hereunderby Existing Parent shall be deemed to be continuous with your previousemployment with the Group Companies.

#  

# 12.                                 Notwithstandinganything else to the contrary set forth herein, in the event that the Exchangeis not consummated, this letter agreement shall terminate without obligation orliability to either party hereto.

#  

# 13.                                 NewParent shall procure that the other Group Companies shall satisfy each of itsobligations hereunder from and after the date that this letter agreementbecomes effective in accordance with its terms.

 

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# 14.                                 Thisletter agreement may be executed in multiple counterparts (including byfacsimile), each of which shall constitute one and the same original.  This letter agreement shall be construed inaccordance with the internal laws of the Republic of Ireland.

#  

|                        | JEFFERSON SMURFIT GROUP  LIMITED |
|-----------------------------|----------------------------------|
|                        |                             |
|                        |                             |
|                        | By:                              | /s/ Michael O’Riordan |   |
|                        |                             |   |   |
|                        | Its:                             | Secretary |   |
|                        |                             |
|                        |                             |
|                        | JSG PACKAGING LIMITED            |
|                        |                             |
|                        |                             |
|                        | By:                              | /s/ Michael O’Riordan |   |
|                        |                             |   |   |
|                        | Its:                             | Secretary |   |
|                        |                             |
|                        |                             |
| Acknowledged and  Accepted: |                             |
|                        |                             |
| /s/ Gary McGann             |                             |   |
| Gary McGann                 |                             |
|                             |                                  |  |  |  |

 

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**JSG PACKAGING LIMITED**

**JEFFERSON SMURFIT GROUP LIMITED**

**BEECH HILL**

**CLONSKEAGH**

**DUBLIN 4**

**IRELAND**

 

February 6, 2004

 

GaryMcGann

Cherryfield

Stonehouse

Donnybrook

Dublin 4

 

You were formerly party to a letter agreement withSmurfit International B.V. (the “First Letter”) confirming your right, on theterms set out in the First Letter, to receive a certain amount from theJefferson Smurfit Group plc group of companies (the “Target”) in the event ofthe occurrence of a Relevant Event (as defined therein) and are currently partyto a letter agreement (the “Existing Letter”), dated as of July 4, 2002, withJefferson Smurfit Group Limited (formerly MDCP Acquisitions plc, “JSG” and,together with its subsidiaries, the “Group”) waiving your rights under theFirst Letter in connection with the take-over offer for the Target by JSG.  This letter agreement amends and restates theExisting Letter in its entirety, and on the date that the voluntary exchange ofshares of JSG for shares of JSG Packaging Limited is consummated (the“Exchange”), the Existing Letter will cease to have any effect (and you herebywaive all rights under the Existing Letter as of such date (including as mayresult from the Exchange and any subsequent application of Section 204 of the IrishCompanies Act) and this letter will have effect.  The parties acknowledge that the rights andobligations under the First Letter have already been terminated in full.

 

Theamended and re-stated agreement between us is as follows:

 

# 1.                                       If(a) a Relevant Event (as defined below) shall occur, and (b) within theRelevant Period, your contract of employment is terminated either (i) by you,or (ii) without just cause by JSG or any other Group company which is youremployer (whichever shall first occur), you will be entitled to receive fromJSG or one of its subsidiaries an aggregate amount equal to twice the annualrate of Remuneration (as defined below) payable to you by the Group companythat is your employer at the time of such termination (the “Termination Amount”).  When used herein, “Relevant Period” means thetwelve-month period from the occurrence of a Relevant Event; providedthat if you agree, as a condition to vesting of any equity interests that youhold in JSG Packaging Limited in connection with any Relevant Event, to becomeand remain employed by the Acquirer (as hereinafter defined) or remain employedwith the Group, “Relevant Period” shall mean the twelve-month period followingthe expiry of such period of employment.

 

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# 2.                                       TheTermination Amount is intended to be the maximum amount to be received by youfrom JSG Packaging Limited and its subsidiaries and this letter does not conferon you any additional rights to the extent that you would already be entitledto receive amounts as a result of contractual arrangements entered into withyou or as a result of legal rights in the jurisdiction(s) in which you areemployed or operate.  You will beentitled to receive all such benefits and will only be entitled to receiveamounts under this letter to the extent of any shortfall in the amountsreceived from your employing company or companies as compared to theTermination Amount.

#  

# 3.                                       Forthe purposes of this letter, the following expressions shall have the followingmeanings:

#  

## (a)                                  “RelevantEvent,” the sale of JSG Packaging Limited to a person or entity or group ofpersons or entities acting in concert (other than Excluded Persons) pursuant towhich such person or entity or such group of persons or entities (other thanExcluded Persons) acquire (i) equity securities of JSG Packaging Limitedpossessing the voting power to elect a majority of JSG Packaging Limited’sboard of directors (whether by merger, consolidation or sale or transfer of JSGPackaging Limited’s capital stock) or (ii) all or substantially all of JSGPackaging Limited’s assets determined on a consolidated basis; provided,however, that no Corporate Reorganization shall constitute a RelevantEvent.  When used herein, “ExcludedPersons” means (x) underwriters for any public offering or listing by JSGPackaging Limited or (y) any other entity controlling, controlled by or undercommon control under investment funds affiliated with Madison DearbornPartners, LLC.

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## (b)                                 “CorporateReorganization,” an acquisition of JSG Packaging Limited voting shares by anybody corporate (the “Acquirer”) (i) as a result of an offer made by it toacquire the entire issued voting share capital of JSG Packaging Limited inexchange for shares in the Acquirer (with or without a cash alternative) or acourt scheme, and (ii) which offer (if it had been accepted in full by allholders of voting shares of JSG Packaging Limited at the date of the making ofthe offer) or court scheme (if it had been approved by the court), would haveresulted in the voting shares of the Acquirer immediately after the acquisitionbeing owned by substantially the same persons as those who were the holders ofJSG Packaging Limited voting shares at the date of the making of the offer insubstantially the same percentages as those in which they held such JSGPackaging Limited voting shares.

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## (c)                                  “Remuneration,”the amount of (i) your salary as at the time of such termination, (ii) thehighest amount of the annual bonus (if any) paid or payable to you in respectof the last three completed financial years of the Group prior to suchtermination (but excluding, in each case, any element thereof which was of aspecial or extraordinary nature), (iii) the regular pension contributions madeby your employing Group company or companies in respect of your annual salary(excluding any special or extraordinary contributions), and (iv) the cash valueof

 

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## any perks or benefits towhich you are customarily entitled; no other amounts will be included.

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# 4.                                       Theentitlements under this letter do not relieve you of any legal obligationswhich may exist with regard to mitigation of damages.

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# 5.                                       Theobligations of JSG Packaging Limited set out in this letter are subject toreceipt of any necessary statutory consents required by Irish law to beobtained in relation to making any of payments hereunder.

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# 6.                                       Theprovisions of this letter will be governed by and construed in all respects inaccordance with Irish law.

#  

Pleasesign to confirm your acceptance of the terms and conditions set out herein.

 

 
|                        | **JEFFERSON  SMURFIT GROUP LIMITED** |
|-----------------------------|--------------------------------------|
|                        |                                 |
|                        | By:                                  | /s/ Michael O’Riordan |   |
|                        |                                 |   |   |
|                        | Its:                                 | Secretary |   |
|                        |                                 |
|                        |                                 |
|                        | **JSG  PACKAGING LIMITED**           |
|                        |                                 |
|                        | By:                                  | /s/ Michael O’Riordan |   |
|                        |                                 |   |   |
|                        | Its:                                 | Secretary |   |
|                        |                                 |
|                        |                                 |
| Acknowledged and  Accepted: |                                 |
|                        |                                 |
|                        |                                 |
| /s/ Gary McGann             |                                 |   |
| Gary McGann                 |                                 |
|                             |                                      |  |  |  |

 

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