Document:

Exhibit 4.18

 

JSG
PACKAGING LIMITED

 

- and -

 

FRITS
BEURSKENS

 

 

DIRECTORSHIP
AGREEMENT

 

 

WILLIAM
FRY

Solicitors

Fitzwilton
House

Wilton
Place

Dublin
2

 

001042.0850.MRO

 

 

THIS
AGREEMENT is made on
                       2005

 

BETWEEN:

 

JSG PACKAGING LIMITED

a limited liability company incorporated

in Ireland with registered number 380620

of Beech Hill, Clonskeagh, Dublin 4

(hereinafter called the “Company”)

 

- and -

 

FRITS BEURSKENS

Klimmenderstraat 65

6343 AA Klimmen

The Netherlands

(hereinafter called the “Director”)

 

Hereafter together to be referred to as “the parties”

 

WHEREAS:-

 

A.            The
Company has acquired control of Kappa Holding BV (“Kappa”).

 

B.            The
Director is the former President of Kappa, and has extensive knowledge and
experience of the Kappa group of companies. The Company wishes to secure such
services in its conduct of the business of Kappa for a specified period and the
Director has agreed to provide such services for that period.

 

C.            The Director will be appointed to
provide those services as a Director of certain subsidiaries of the Company. Through
those appointments, those companies will benefit from the Director’s knowledge
and experience.

 

NOW IT IS HEREBY AGREED as follows:-

 

2

 

1.                            Definitions

 

In this
Agreement the following expressions shall, unless the context otherwise
requires, have the following meanings:-

 

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

 

(b)                       “Business”, the business of the production, development and sale of
containerboard (testliner and kraftliner), solid board, corrugated and solid
board packagings, sacks, bag-in-box, graphic and specialty board.

 

(c)                        “Confidential Information”, all information, trade secrets, secret
or confidential operations, processes, information or dealings of any kind
arising from the performance by the Director of the Services hereunder or
relating to the Company or any of its Group Companies or their clients,
customers or suppliers or their organisation, business, finances, transactions
or affairs to which the Director has access during the term of this Agreement.

 

(d)                       “Documents”, all records, reports, documents, papers, electronically
stored information and other materials whatsoever originated by or upon behalf
of the Director pursuant to this Agreement.

 

(e)                        “Group CEO” the Chief Executive Officer for the time being of the
Group.

 

(f)                          “Group”, the Company and all Subsidiaries of the Company including
in particular the Kappa Group and “Group Company” shall mean any one of them.

 

(g)                       “Kappa Group”, Kappa and all of its Subsidiaries and subsidiary
undertakings as at the day preceding the Termination Date and “Kappa Company”
shall mean any one of them.

 

(h)                       “Listed Companies”, the Group Companies set out in Schedule 1 of
this Agreement.

 

3

 

(i)                           “Restricted Area”, the European Economic Area, Albania, Bulgaria,
Serbia and Montenegro, Bosnia and Herzegovina, Croatia, Ukraine, Romania and
Russia and any other geographical area in which the Company operates the
Business during the term of this Agreement and with respect to which the
Director provides the Services.

 

(j)                           “Services”, the services to be provided by the Director to the
Company in accordance with this Agreement, as described in Clause 4.

 

(k)                        “Subsidiary”, any
company, firm or legal entity in which a legal entity
or one or more of its subsidiaries, pursuant to an agreement with other persons
entitled to vote or otherwise, can exercise, solely or jointly, more than one
half of the voting rights at a general meeting or any company, firm or legal entity of which a legal entity or one or more of its subsidiaries is a
member or shareholder and, pursuant to an agreement with other persons entitled
to vote or otherwise, can appoint or dismiss, solely or jointly, more than one
half of the directors or officers or of the supervisory board members, if all
persons entitled to vote were to cast their vote.

 

(l)                           “Termination Date”, the date on which this Agreement terminates.

 

2.                            Construction

 

(a)                        Any reference to any provision of any legislation shall include any
modification re-enactment or extension thereof and shall also include any
subordinate legislation made from time to time under such provisions. Any
reference to any provision of any legislation unless the context clearly
indicates to the contrary shall be a reference to legislation of The
Netherlands.

 

(b)                       Words such as “hereunder”, “hereto”, “hereof”, and “herein” and
other words commencing with “here” shall unless the context clearly indicates
to the contrary refer to the whole of this Agreement and not to any particular
Clause thereof.

 

(c)                        Save as otherwise provided herein any reference to an Appendix shall
be a reference to an Appendix to this Agreement and any reference to a Clause,
paragraph or sub-paragraph shall be a reference to a Clause, 

 

4

 

paragraph or
sub-paragraph (as the case may be) of this Agreement and any reference in a
Clause to a paragraph or sub-paragraph shall be a reference to a paragraph or
sub-paragraph of the Clause or paragraph in which the reference is contained
unless it appears from the context that a reference to some other provision is
intended.

 

(d)                       The masculine gender shall include the feminine and neuter and the
singular number shall include the plural and vice versa and references to
persons shall include bodies corporate, unincorporated associations and
partnerships.

 

(e)                        The Appendices to this Agreement shall integrally form part of this
Agreement.

 

(f)                          The headings and captions to the Clauses in this Agreement are
inserted for convenience of reference only and shall not be considered a part
of or affect the construction or interpretation of this Agreement.

 

3.                            Engagement

 

(a)                        The Company hereby engages the Director to provide the Services in
accordance with the terms and conditions set out herein and in consideration of
the fees payable hereunder and the Director hereby accepts such engagement. The
Director shall not be or become an employee of any Group Company by virtue
either of his engagement under this Agreement or his appointment as a director
of the Listed Companies. The Director hereby waives, to the fullest extent
permitted by the laws of The Netherlands and by the laws of the countries in
which the Listed Companies are incorporated and/or resident, all rights and
entitlements under the laws of such countries related to employment, the
protection and termination thereof.

 

(b)                       The Company shall upon the execution of this Agreement, procure the
appointment of the Director as a director of each of the Listed Companies
(including his appointment to the Supervisory Board of Kappa Packaging
(Deutschland) GmbH) and his maintenance as such throughout the term of this
Agreement.

 

5

 

4.                            Services

 

(a)                        The Director shall exercise due care and skill in his performance of
the Services and shall at all times act in the best interests of the Company.

 

(b)                       The Services to be provided by the Director to the Company, the
Listed Companies and the Group Companies hereunder shall (in the case of the
Listed Companies) be those properly required of a non-executive director and,
in the cases of all of the Group Companies shall be those required from time to
time by the Group CEO and shall comprise the provision of advice and assistance
as requested from time to time of or on behalf of the Group CEO in all aspects
of the business of the Kappa Group and the acquisition of knowledge and
implementation of control by the Company concerning and over the Kappa Group
and its business and in particular:-

 

(i)                          the
provision of advice and assistance in the integration of the Kappa Group into
the Group, especially as to the achievement of synergies and efficiencies, the
identification of suitable employees for promotion and the conduct of
rationalisation activities;

 

(ii)                       assistance in
the maintenance of good employee, customer and supplier relationships;

 

(iii)                    assistance in the
transfer of best practices between Kappa Group companies and companies in the
JSG group of companies;

 

(iv)                   generally rendering
assistance and advice to senior management of the Company;

 

provided that the Group CEO may at any time require
the Director to desist from the provision or conduct of any of the aforesaid
services listed in sub-paragraphs (i) to (iv) either generally or in respect of
specified categories, kinds or parts thereof.

 

6

 

5.                            Provision of Services

 

(a)

 

(i)                          The Director
shall provide the Services for a fixed two-year period from the date hereof,
subject to termination prior to the expiration of such period pursuant to
Clause 12. No compensation will be due upon termination and non-renewal by the
Company of this Agreement either for the termination of the Agreement or for
loss of the Director’s directorships in the Listed Companies.

 

(ii)                       The term of
this Agreement may be extended by express written agreement between the Company
and the Director prior to the Termination Date, but in the absence of such
agreement will expire by operation of law upon the Termination Date without
notice or payment of compensation to the Director or any act of the parties and
shall not be extended by any deemed or implied act or omission of either of
them.

 

(b)                       This Agreement is non-exclusive and the Director shall be free to
engage in other professional and business activities during the term of the
Agreement (including in particular, as Chairman of CEPI for the years 2006 and
2007 and as immediate past President of ICCA up to its 2007 annual conference)
provided however, that the Director shall not during the term of this
Agreement:-

 

(i)                          provide any
information which has direct or indirect relevance to the Company’s or Group’s
businesses to any person other than a Group Company (whether such information
is now in its possession or is acquired during the term hereof); or

 

(ii)                       engage or be
interested either directly or indirectly (whether as consultant, proprietor,
shareholder or otherwise howsoever), in promoting, assisting, advising on or
carrying on any business in the Restricted Area which is competing or
attempting to compete with the business of the Company or the Group; or

 

7

 

(iii)                    solicit or engage
the services of any person who is an employee of any Group Company during the
term hereof either on its own behalf or on behalf of any other person; or

 

(iv)                   do or assist there
to be done anything that causes or may reasonably be expected to terminate or
have an adverse effect on the relationship between the Company (or any Group
Company) and any material customer, supplier, financial services or other
service provider or any regulatory body; or

 

(v)                      accept any
position or engagement in or for any enterprise or body that is a customer, supplier,
competitor, service provider or banker of or to any Group Company; or

 

(vi)                   accept any position
or engage in any activities that are or are reasonably likely to place the
Director in a position of conflict of interest with the Group or which are likely
to embarrass or damage the image of the Group.

 

6.                            Reporting/Records

 

The Director shall report to the Group CEO of the Company in relation
to the Services in such form and with such frequency and within such time
periods as are reasonably specified by the Group CEO. The Director shall keep
detailed records of all acts and things done by it or on its behalf in relation
to the provision of Services and at his request the Group CEO shall be entitled
to have full and free access to same.

 

7.                            Fees

 

(a)                        In consideration for the provision by the Director of the Services,
the Company shall ensure that the Listed Companies shall pay to the Director
the fees specified in Part 1 of Schedule 2 to this Agreement (“Director’s
Fees”).

 

8

 

(b)                       The Director shall be eligible to receive the additional payments
specified in Part 2 of Schedule 2 (the “Bonuses”) subject to the terms and
conditions set out in therein.

 

8.                            Expenses and Car

 

(a)                        The Company shall provide to the Director an expense account
pursuant to which the Company shall reimburse the Director all travelling and
other expenses reasonably incurred by the Director in the proper provision of
the Services (and in the case of all material expenses previously approved by
the Company) provided that on request the Director shall promptly provide the
Company with such vouchers or other evidence of payment of such expenses as the
Company may require.

 

(b)                       The Company shall make available to the Director the car and the services
of a driver, on the terms which applied as between him and Kappa immediately
prior to the termination of his employment with Kappa.

 

(c)                        The Company shall provide the Directors with the following support
services to assist him in providing the Services:-

 

(i)                          suitable
office premises in The Netherlands; and

 

(ii)                       secretarial and
office support services;

 

provided in any event that the aggregate annual cost
of the premises, secretarial and office support described in this Clause 8(c)
shall not exceed €100,000 for each year of the term of this Agreement.

 

(d)                       If and to the extent that any of the benefits due to the Director
hereunder require the withholding of any tax or social security amounts, the
Company may procure the withholding of such amounts by the Listed Companies.

 

9

 

9.                            Relationship between the Director and the Company

 

(a)                        By concluding this agreement, the parties enter into a contract of
assignment as meant in Book 7 Title 7 of the Dutch Civil Code. None of the
parties intend de jure or de facto
to conclude or create an employment relationship between the Company or any of
the Listed Companies and the Director. If wage tax and social security premiums
are withheld by the Company and/or any of the Listed Companies, or if the tax
authorities and/or the social securities board were to regard the relationship
between the Company and/or any of the Listed Companies and the Director as an
employment relationship for tax and social security purposes, this does not in
any way interfere with the intention of the parties to enter into a (civil)
contract of assignment.

 

(b)                       The Director shall indemnify and hold harmless the Company and the
Listed Companies for any possible claims by the tax authorities and/or the
social security board of The Netherlands or of any country in which a Listed
Company is incorporated or resident with regard to wage tax and/or social
security premiums (including penalties and interest) that may become payable by
the Company or any Listed Company (by virtue of this Agreement being considered
as an employment relationship by the tax authorities and/or the social security
board) in respect of any period during which payments have been made to the
Director free of withholdings for tax and/or social security premiums.

 

10.                     Confidentiality

 

(a)                        The Director shall:-

 

(i)                          keep and
maintain as confidential the Confidential Information, the Documents and all
other matters arising from them or coming to its attention in connection with
the provision of the Services or relating to the Company and the Group
Companies and their customers, suppliers, service providers, bankers and their
organisations, business, finances, transactions and affairs to which it may
have access during the term of this Agreement;

 

10

 

(ii)                       not disclose or
permit to be disclosed, at any time for any reason to any person or persons, or
otherwise make use of or permit to be made use of, any information relating to
the Company’s technology, technical processes, testing procedures, products,
business, finances, transactions and affairs and any such information relating
to the Company or any Group Company, and the customers, suppliers, service
providers, bankers of any Group Company which may have already been entrusted
to the Director or to which the Director may hereafter have access in the
performance of or otherwise related to the Services except as permitted
hereunder to enable the Director to perform the Services;

 

(iii)                    not during the
continuance of this Agreement make or permit to be made otherwise than for the
benefit of the Company any notes or memoranda relating to any matter within the
scope of the Services or otherwise within the scope of the business of the
Company or any Group Company or concerning any of the dealings or affairs of
the Company or any Group Company nor shall the Director either during the
continuance of this Agreement or thereafter use or permit to be used any such
notes or memoranda otherwise than for the benefit of the Company, it being the
intention of the parties that all such notes and memoranda made by the Director
shall be the property of the Company and shall be left at its registered
offices on the termination of this Agreement;

 

(iv)                   not disclose or
permit to be disclosed, at any time for any reason to any person or persons,
whether employed by a Group Company or otherwise, other than the Director’s
professional advisers, the terms and conditions of this Agreement save as is
required for the proper execution thereof.

 

(b)                       The obligations in this Clause shall continue to apply after the
expiry or termination of this Agreement without limit, provided however, that
the obligations of confidence referred to in this Clause shall cease to apply
to information or knowledge which may reasonably be said to have come within
the 

 

11

 

public domain
other than by reason of a breach of this Agreement or which the Director is
required by law to disclose.

 

11.                     Post-Termination Restrictions

 

(a)                        The Director acknowledges that he will as a Director of the Listed
Companies and in the course of the performance of the Services under this
Agreement obtain knowledge of trade secrets, know-how, business information and
other confidential information relating to the Business of the Company and the
Group Companies and their customers and agrees that it will be bound by the
following restrictions in order to safeguard such trade secrets, know-how and
information and the goodwill of the Company.

 

(b)                       The Director covenants that he will not without the prior written
consent of the Board during the twelve-month period after the Termination
Date:-

 

(i)                          canvass or
solicit or endeavour to canvass or solicit away from any Group Company the
custom or business of any person, firm or company which is at, or was at any
time during the twelve months prior to, the Termination Date a client or
customer of any Group Company;

 

(ii)                       carry on, set
up, engage or be directly or indirectly interested or concerned in any business
or activity carried on or about to be carried on anywhere in the Restricted
Area by any person, firm or company in competition with the Group in the
Business or any part of it carried on by the Company or any Group Company as at
the Termination Date in respect of which the Director was concerned or involved
to any material extent at any time during the twelve-month period immediately
prior to the Termination Date;

 

(iii)                    entice, solicit or
endeavour to entice or solicit away any person who is employed or engaged by
any Group Company as a director or executive or in any other capacity in which
he obtained confidential information relating to any Group Company;

 

12

 

(iv)                   interfere or seek
to interfere with the supply to the Company or any Group Company of any goods
or services by any supplier who, during the twelve months preceding the
Termination Date, supplied goods or services to any Group Company, nor will he
interfere or seek to interfere with the continuance or the terms of such
supply.

 

(c)                        Each of the restrictions set out in sub-paragraphs (b)(i), (ii),
(iii) and (iv) is an entirely separate, severable and independent restriction
and all such restrictions will (without prejudice to their generality) apply to
any action taken by the Director, whether as agent, representative, principal
or Director or as a director or in any other capacity, or by any company
controlled by the Director or any associate of the Director.

 

(d)                       The Director acknowledges and agrees
that all of the above restrictions are reasonable and necessary
in all the circumstances and are no greater in duration, extent and application
than is necessary for the protection of the goodwill and trade connections of
the Group. In the event
that any of the above restrictions is held to be unreasonable by reason of the
area, duration or type or scope of service covered by such restriction, then
effect will be given to such restriction in such reduced form as may be decided
by any court of competent jurisdiction.

 

(e)                        During the term of this Agreement and after the Termination Date,
the Director will not make any public statements in relation to the Company or
the Group and will not represent himself as being engaged by or connected with
the Company or the Group, except as expressly provided in this Agreement.

 

12.                     Term/Termination

 

(a)                        The Director shall not be entitled to summarily terminate this
Agreement, but shall be entitled to terminate this Agreement if any of the Listed
Companies shall fail to make a payment due to him and shall not remedy its
default within 10 days after receipt of notice from the Director requiring
remedy (but any such termination shall be without prejudice to those parts of
this Agreement that are expressed to continue after termination).

 

13

 

(b)                       The Company shall be entitled to summarily terminate this Agreement
in the event that the Director commits a material breach of this Agreement and
fails to remedy the breach (if capable of remedy) within 10 days of receipt of
notice from the Company giving details of the breach and requiring it to be
remedied. No compensation shall be payable upon such termination.

 

(c)                        Any termination of this Agreement shall be without prejudice to any
claims either party may have accrued under this Agreement prior to the date of
termination.

 

(d)                       Upon the termination of this Agreement for whatever reason, the
Director shall resign, without claim for compensation, as a director of all of
the Listed Companies and shall deliver up to the Company all of the
Confidential Information, Documents and copies thereof in his possession,
power, custody or control at that time and shall do all such acts and things
and shall execute all such deeds and documents as the Company’s legal advisers
may require to transfer and assign to the Company the property in such
Confidential Information and Documents and the Director shall not thereafter
utilise or exploit the Confidential Information or Documents in any way
whatsoever and the Company shall have the right to utilise and exploit the
Confidential Information and the Documents in any way whatsoever without
restriction and in particular, without prejudice to the generality of the
foregoing, without further payment to the Director.

 

13.                     Severance

 

In the event that any condition contained in
this Agreement is held to be void in whole or in part for any reason, such
unenforceability will not affect the enforceability of the remaining conditions
contained in this Agreement and such void conditions will be deemed to be
severable.

 

14.                     Counterparts

 

This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts each of which when executed
and delivered shall 

 

14

 

constitute an original, all such counterparts together constituting but
one and the same instrument.

 

15.                     Assignment

 

The rights and obligations contained in this Agreement shall not be assignable
by either party save with the consent of the other party provided, however,
that the Company may assign its rights or delegate its duties under the
Agreement to any Group Company.

 

16.                     Notices

 

Any notice or other communication whether required or permitted to be
given hereunder shall be given in writing and shall be deemed to have been duly
given if delivered by hand against receipt of the addressee or its duly
authorised agent or if transmitted by telefax or sent by prepaid registered
post addressed to the party to whom such notice is to be given at the address
set out for such party herein (or such other address as such party may from
time to time designate in writing to the other party hereto in accordance with
the provisions of this Clause). Any such notice shall be deemed to have been
duly given if delivered, at the time of delivery, if transmitted by telefax at
the time of transmission and if sent by prepaid registered post as aforesaid,
forty-eight (48) hours after the same shall have been posted.

 

17.                     Governing Law

 

This Agreement shall in all respects (including the formation hereof
and performance hereunder) be governed by the laws of The Netherlands and each
of the parties hereby submits to the exclusive jurisdiction of the courts of
The Netherlands in relation to any dispute or proceedings arising out of or in
connection with this Agreement.

 

15

 

SCHEDULE 1

 

Listed Companies

 

 

	
  Name

  	
   

  	
  Country

  	
   

  	
  Amounts of Director’s Fees

  Payable per annum €

  	
   

  
	
  Kappa
  Packaging Nederland BV

  	
   

  	
  The
  Netherlands

  	
   

  	
  125,000

  	
   

  
	
  Smurfit
  Packaging Corporation Limited

  	
   

  	
  Ireland

  	
   

  	
  75,000

  	
   

  
	
  Kappa
  Packaging (Deutschland) GmbH

  	
   

  	
  Germany

  	
   

  	
  18,750

  	
   

  
	
  Kappa Obaly
  Sturovo, a.s.

  	
   

  	
  Slovakia

  	
   

  	
  68,750

  	
   

  
	
  Kappa
  Packaging Espana, S.L.

  	
   

  	
  Spain

  	
   

  	
  75,000

  	
   

  
	
  Kappa
  Kraftliner AB

  	
   

  	
  Sweden

  	
   

  	
  68,750

  	
   

  
	
  Kappa
  Swisswell AG

  	
   

  	
  Switzerland

  	
   

  	
  37,500

  	
   

  
	
  Kappa
  Packaging UK Limited

  	
   

  	
  UK

  	
   

  	
  31,250

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  500,000

  	
   

  

 

16

 

SCHEDULE 2

 

FEES

 

Part 1 – Director’s Fees

 

The Director will be entitled to be paid the
Director’s Fees by each of the Listed Companies in the amounts set opposite
their names in Schedule 1. The Director’s Fees will be paid quarterly in
advance. Normal salary will be paid up to 31 December 2005 and the first
quarter for payment of Director’s Fees will be Q1 2006. It is acknowledged by
the parties that the Director will perform his duties and provide the Services
in the capacity of director of the Listed Companies and will accordingly
receive his fees in those capacities. The Listed Companies will pay the
Director’s Fees subject to withholding all tax and social security payments and
contributions required in the Listed Companies’ countries of incorporation
and/or residence.

 

Part 2 – Bonuses

 

2.                            Time-Based Bonus

 

The Director shall be eligible for a bonus of
€250,000, for each full year of the term of this Agreement, throughout which he
shall duly perform and observe all of his obligations hereunder. Such fee shall
not accrue throughout each year of the term of this Agreement but shall become
due upon the last day thereof provided the Director has performed and observed
his obligations as aforesaid up to and including such day. Each of the two
time-based incentive fees will be due fourteen days after the end of the year
to which it relates. The time-based Bonus will be paid by the Listed Companies
to the Director in his capacity as director of the Listed Companies in
proportions equal to the proportions in which the aggregate Director’s Fees are
payable by them, subject to withholding all tax and social security payments
and contributions required in the Listed Companies’ countries of incorporation
and/or residence.

 

17

 

3.                            Success Based Bonus

 

The Director will be eligible for the payment of a
single bonus of €500,000, which shall become due on the Termination Date (but
shall not accrue throughout the term of this Agreement) if;

 

(a)                        the Director shall duly perform and observe all of its obligations
under this Agreement throughout its term up to and including the Termination
Date; and

 

(b)                       the Group shall successfully integrate the Kappa Group and achieve
its synergy targets.

 

The synergy targets applicable to this Agreement shall
be the same as those adopted by the Company for application to its Chief Executive.

 

If the Company shall partially achieve its synergy
targets, the Director shall not be entitled to a proportion of the additional
success-based fee provided for herein which shall be due either in full for
achievement in full of the targets, or not at all.

 

If the parties shall fail to agree as to whether the additional
success-based incentive fee is due to the Director, the matter shall be
referred for decision to the Remuneration Committee of the Board, the decision
of which shall be final and binding (and the said Committee shall collectively
act as an expert and not as an arbitrator).

 

The success-based bonus shall be payable, if due,
within fourteen days after the determination that it is due and will be paid by
the Listed Companies to the Director in his capacity as a director of the
Listed Companies in proportions equal to the proportions in which the aggregate
Director’s Fees are payable by them, subject to withholding all tax and social
security payments and contributions required in the Listed Companies’ countries
of incorporation and/or residence.

 

18

 

4.                            Double Taxation

 

If the Director’s country of residence does not accept his claim for
the avoidance of double taxation, if any, in respect of the Director’s Fees,
time-based bonuses or success-based bonuses paid by the Listed Companies
outside the Director’s country of residence, any additional taxation the
Director may be required to pay in his country of residence will be for his
account.

 

19

 

IN
WITNESS whereof this Agreement has been entered into the day and year first
herein written.

 

 

	
  SIGNED
  by

  	
  /s/
  Gary McGann

  	
   

  
	
   

  	
   

  
	
  on
  behalf of JSG PACKAGING LIMITED 

  	
   

  
	
   

  	
   

  
	
  in
  the presence of:-

  
	
   

  
	
   

  	
  /s/
  Michael O’Riordan

  	
   

  
	
   

  
	
   

  
	
  SIGNED
  by FRITS BEURSKENS

  	
   

  
	
   

  	
   

  
	
  in
  the presence of:-

  
	
   

  	
  /s/
  Frits Beurskens

  	
   

  
	
   

  
	
   

  	
  /s/
  Michael O’Riordan

  	
   

  
									

 

20Exhibit
10.1

 

 

 

Symmetry Medical Inc.
2004 Employee Stock Purchase Plan

Report
of Independent Registered Public Accounting Firm and
Financial Statements

December
31, 2005

 

 

Report
of Independent Registered Public Accounting Firm

 

 

Compensation Committee of the Board of Directors

Symmetry Medical Inc.

Warsaw, Indiana

 

 

We have audited
the accompanying statement of financial condition of the Symmetry Medical Inc.
2004 Employee Stock Purchase Plan as of December 31, 2005, and the related
statements of income and changes in plan equity for the year then ended.  These financial statements are the
responsibility of the Plan’s management. 
Our responsibility is to express an opinion on these financial
statements based on our audit.

 

We conducted our
audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States).  Those
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements.  An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation.  We believe that our audit
provides a reasonable basis for our opinion.

 

In our opinion,
the financial statements referred to above present fairly, in all material
respects, the financial position of the Symmetry Medical Inc. 2004 Employee
Stock Purchase Plan as of December 31, 2005, and the results of its
operations for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.

 

 

/s/ BKD, LLP

 

Fort Wayne, Indiana

April 25, 2006

 

Federal Employer Identification Number:  44-0160260

 

 

Symmetry Medical Inc.
2004 Employee Stock Purchase Plan

Statement of Financial
Condition

December 31, 2005

 

 

	
  Assets

  	
   

  	
   

  	
   

  
	
  Cash

  	
   

  	
  $

  	
  5,177

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plan Equity

  	
   

  	
  $

  	
  5,177

  	
   

  

 

See Notes to Financial Statements

 

2

 

 

Symmetry Medical Inc.
2004 Employee Stock Purchase Plan

Statement of Income and
Changes in Plan Equity

Year Ended December 31,
2005

 

 

	
  Additions

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Participant contributions

  	
   

  	
  $

  	
  847,498

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Reductions

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Withdrawals and
  terminations paid in cash

  	
   

  	
  (8,680

  	
  )

  
	
  Purchase and distribution
  of stock (60,793 shares)

  	
   

  	
  (833,641

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (842,321

  	
  )

  
	
   

  	
   

  	
   

  	
   

  
	
  Income and changes in plan
  equity for the year

  	
   

  	
  5,177

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plan equity, beginning of
  year

  	
   

  	
  0

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Plan equity, end of year

  	
   

  	
  $

  	
  5,177

  	
   

  

 

See Notes to Financial Statements

3

 

 

Note 1:                                      Summary
of Significant Accounting Policies

 

Plan
Administration

 

The Compensation Committee (Committee) of the Board of
Directors of Symmetry Medical Inc. (Company) administers the Plan.  The Committee has the authority to interpret
the Plan, to prescribe, amend and rescind rules and regulations relating to the
Plan, and to make all other determinations necessary or advisable for the
administration of the Plan.  The
administration, interpretation or application of the Plan by the Committee will
be final, conclusive and binding upon all persons.  The Company will bear the expenses of administering
the Plan, except that any stamp duties or transfer taxes applicable to
participation in the Plan may be charged to the accounts of the participants.

 

The purpose of the Plan is to provide eligible
employees of the Company the opportunity to purchase the Company’s common stock
through semiannual offerings financed by payroll deductions.  Participants may elect to have up to 10% of
compensation deducted from their pay annually to purchase shares.  Participant contributions for any plan year
may not, in the aggregate, exceed an amount that allows the participant to
purchase Company stock with a collective fair market value of more than $25,000
on the date of the grant to purchase Company stock.

 

Organization

 

The Plan was originally adopted by the Board of
Directors on December 2, 2004.  A total
of 600,000 shares of common stock have been reserved for issuance under the
Plan.  The number of shares reserved for
issuance will be increased each year until 2014 by the lowest of 100,000
shares, 1% of all shares outstanding at the end of the previous year, or a
lower amount determined by the Board of Directors.  The shares of common stock issued under the
Plan may be newly issued shares or shares reacquired in private transactions or
open market purchases.  In 2005, all
shares issued under the Plan were newly issued. 
Shares are issued to participants in their name, and the shares are not
included in Plan assets.

 

The Plan began enrolling participants on March 28,
2005, in an initial enrollment period that ended April 8, 2005.  During the initial enrollment period,
participants were permitted to purchase shares with a lump sum contribution not
to exceed 10% of eligible compensation participants have received or expected
to receive during the six-month period ended June 30, 2005.  Participants enrolled prior to June 30, 2005,
were able to purchase stock at 85% of the lower of the Company’s initial public
offering price of $15 per share or the closing price at June 30, 2005, as
quoted on the New York Stock Exchange. 
Subsequent to June 30, 2005, participants can purchase shares at 95% of
the closing on the last day of each exercise period.

 

The Company issued 50,468 shares at $12.75 per share
and 10,325 shares at $18.42 per share in June and December 2005, respectively,
to participants in the Plan.  As of
December 31, 2005, the Plan had 249 participants.

 

4

 

Note 2:                                      Income
Tax Status

The plan is not and will not be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (Code).  The Plan is intended to qualify as an
employee stock purchase plan under Section 423 of the Code.  Consequently, the difference between the
purchase price and the fair market value of the stock purchase under the plan
is not includable in the participant’s gross income for federal income tax
purposes, unless a disqualifying distribution occurs.

 

5

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