Document:

Exhibit 10.3

 

SMURFIT-STONE CONTAINER CORPORATION

 

EQUITY INCENTIVE PLAN

 

I               INTRODUCTION

 

1.1          Purposes.  The purposes of the Smurfit-Stone
Container Corporation Equity Incentive Plan (this “Plan”) are
(i) to align the interests of the Company’s stockholders and the
recipients of awards under this Plan by increasing the proprietary interest of
such recipients in the Company’s growth and success, (ii) to advance the
interests of the Company by attracting and retaining directors, officers, other
employees and consultants and (iii) to motivate such persons to act in the
long-term best interests of the Company and its stockholders.

 

1.2          Certain Definitions.

 

“Agreement” shall mean the written
agreement evidencing an award hereunder between the Company and the recipient
of such award.

 

“Bankruptcy Court” shall have the meaning set
forth in Section 5.1.

 

“Bankruptcy Proceedings” shall mean the bankruptcy
proceedings in the United States Bankruptcy Court for the District of Delaware
with respect to In re: Smurfit-Stone Container Corp., Case No. 09-10235
(BLS).

 

“Board” shall mean the Board of
Directors of the Company.

 

“Change in Control” shall have the meaning set
forth in Section 5.8(b).

 

“Code” shall mean the Internal
Revenue Code of 1986, as amended.

 

“Committee” shall mean the Committee
designated by the Board, consisting of two or more members of the Board, each
of whom may be (i) a “Non-Employee Director” within the meaning of Rule 16b-3
under the Exchange Act, (ii) an “outside director” within the meaning of
Section 162(m) of the Code and (iii) “independent” within the
meaning of the rules of the principal national stock exchange on which the
Common Stock is then traded.

 

“Common Stock” shall mean the common
stock, par value $0.001 per share, of the Company, and all rights appurtenant
thereto.

 

“Company” shall mean Smurfit-Stone
Container Corporation, a Delaware corporation, or any successor thereto.

 

“Emergence Equity Awards” shall mean
stock option, restricted stock or other equity compensation awards granted in
connection with the Company’s emergence from
bankruptcy following the confirmation of the Plan of Reorganization.

 

 

“Employment Agreement” shall mean the Employment
Agreement or Employment Security Agreement, if any, (as amended, if applicable)
between the Company and the recipient of an award.

 

“Exchange Act” shall mean the Securities
Exchange Act of 1934, as amended.

 

“Fair Market Value” shall mean the closing
transaction price of a share of Common Stock as reported on the principal
national stock exchange on which the Common Stock is traded on the date as of
which such value is being determined or, if there shall be no reported
transactions for such date, on the next preceding date for which transactions
were reported; provided, however, that if the Common Stock is not
listed on a national stock exchange or if Fair Market Value for any date cannot
be so determined, Fair Market Value shall be determined by the Committee by
whatever means or method as the Committee, in the good faith exercise of its discretion,
shall at such time deem appropriate and in compliance with Section 409A of
the Code; provided further that, with respect to the Emergence Equity
Awards, Fair Market Value shall mean the average of the closing transaction
prices of a share of Common Stock as
reported on  the principal national
stock exchange on which the Common Stock is traded  for the 30-day period commencing on the Listing Date.

 

“Free-Standing SAR” shall mean an SAR which is
not granted in tandem with, or by reference to, an option, which entitles the
holder thereof to receive, upon exercise, shares of Common Stock (which may be
Restricted Stock) with an aggregate value equal to the excess of the Fair
Market Value of one share of Common Stock on the date of exercise over the base
price of such SAR, multiplied by the number of such SARs which are exercised.

 

“Incapacity” shall have the meaning set
forth in the Employment Agreement; provided that if a recipient of an
award is not a party to an Employment Agreement that contains such definition,
then “Incapacity” shall mean an individual’s long-term disability as defined
under the long-term disability plan of the Company that covers that individual;
or if the individual is not covered by such a long-term disability plan, an
individual’s disability as defined for purposes of eligibility for a disability
award under the Social Security Act.

 

“Incentive Stock Option” shall mean an
option to purchase shares of Common Stock that meets the requirements of
Section 422 of the Code, or any successor provision, which is intended by
the Committee to constitute an Incentive Stock Option.

 

“Listing Date” shall mean the date on which
the Common Stock first becomes listed on a national stock exchange after the
Company’s emergence from bankruptcy following the confirmation of the Plan of
Reorganization.

 

“Non-Employee Director” shall mean any
director of the Company who is not an officer or employee of the Company or any
Subsidiary.

 

“Nonqualified Stock Option” shall mean an
option to purchase shares of Common Stock which is not an Incentive Stock
Option.

 

“Performance Measures” shall mean the criteria and
objectives, established by the Committee and set forth in the Agreement, which
shall be satisfied or met (i) as a condition to 

 

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the
grant or exercisability of all or a portion of an option or SAR or
(ii) during the applicable Restriction Period or Performance Period as a
condition to the vesting of the holder’s interest, in the case of a Restricted
Stock Award, of the shares of Common Stock subject to such award, or, in the
case of a Restricted Stock Unit Award, to the holder’s receipt of the shares of
Common Stock subject to such award or of payment with respect to such
award.  To the extent necessary for an
award to be qualified performance-based compensation under Section 162(m) of
the Code and the regulations thereunder, such criteria and objectives shall
include one or more of the following corporate-wide or subsidiary, division,
operating unit or individual measures, stated in either absolute terms or
relative terms, such as rates of growth or improvement: the attainment by a
share of Common Stock of a specified Fair Market Value for a specified period
of time, earnings per share, return to stockholders (including dividends),
return on assets, return on equity, earnings of the Company before or after
taxes and/or interest, revenues, market share, cash flow or cost reduction
goals, interest expense after taxes, return on investment, return on investment
capital, economic value created, operating margin, net income before or after
taxes, pretax earnings before interest, depreciation and/or amortization,
pretax operating earnings after interest expense and before incentives, and/or
extraordinary or special items, operating earnings, net cash provided by
operations, and strategic business criteria, consisting of one or more
objectives based on meeting specified market penetration, geographic business
expansion goals, cost targets, customer satisfaction, reductions in errors and
omissions, reductions in lost business, management of employment practices and
employee benefits, supervision of litigation and information technology,
quality and quality audit scores, productivity, efficiency, and goals relating
to acquisitions or divestitures, or any combination of the foregoing.

 

“Performance Option” shall mean an Incentive
Stock Option or Nonqualified Stock Option, the grant of which or the
exercisability of all or a portion of which is contingent upon the attainment
of specified Performance Measures within a specified Performance Period.

 

“Performance Period” shall mean any period
designated by the Committee and set forth in the Agreement during which
(i) the Performance Measures applicable to an award shall be measured and
(ii) the conditions to vesting applicable to an award shall remain in
effect.

 

“Performance Unit” shall mean a right to
receive, contingent upon the attainment of specified Performance Measures
within a specified Performance Period, a specified cash amount or, in lieu
thereof, shares of Common Stock having a Fair Market Value equal to such cash
amount.

 

“Performance Unit Award” shall mean an
award of Performance Units under this Plan.

 

“Plan of Reorganization” shall mean the Plan of Reorganization approved and confirmed pursuant to
the Bankruptcy Proceedings.

 

“Restricted Stock” shall mean shares of Common
Stock which are subject to a Restriction Period and which may, in addition
thereto, be subject to the attainment of specified Performance Measures within
a specified Performance Period.

 

“Restricted Stock Award” shall mean an
award of Restricted Stock under this Plan.

 

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“Restricted Stock Unit” shall mean a right to
receive one share of Common Stock or, in lieu thereof, the Fair Market Value of
such share of Common Stock in cash, which shall be contingent upon the
expiration of a specified Restriction Period and which may, in addition
thereto, be contingent upon the attainment of specified Performance Measures
within a specified Performance Period.

 

“Restricted Stock Unit Award” shall mean an
award of Restricted Stock Units under this Plan.

 

“Restriction Period” shall mean any period
designated by the Committee and set forth in the Agreement during which
(i) the Common Stock subject to a Restricted Stock Award may not be sold,
transferred, assigned, pledged, hypothecated or otherwise encumbered or
disposed of, except as provided in this Plan or the Agreement relating to such
award, or (ii) the conditions to vesting applicable to a Restricted Stock
Unit Award shall remain in effect.

 

“Retirement” shall have the meaning set
forth in the Employment Agreement; provided that if an Agreement does
not specify such definition, then “Retirement” shall mean an employee’s
retirement from the Company after the attainment of age 55 and the completion
of at least five years of service with the Company.

 

“SAR” shall mean a stock
appreciation right which may be a Free-Standing SAR or a Tandem SAR.

 

“Stock Award” shall mean a Restricted
Stock Award or a Restricted Stock Unit Award.

 

“Subsidiary” shall mean any corporation,
limited liability company, partnership, joint venture or similar entity in
which the Company owns, directly or indirectly, an equity interest possessing
more than 50% of the combined voting power of the total outstanding equity
interests of such entity.

 

“Tandem SAR” shall mean an SAR which is
granted in tandem with, or by reference to, an option (including a Nonqualified
Stock Option granted prior to the date of grant of the SAR), which entitles the
holder thereof to receive, upon exercise of such SAR and surrender for
cancellation of all or a portion of such option, shares of Common Stock (which
may be Restricted Stock) with an aggregate value equal to the excess of the
Fair Market Value of one share of Common Stock on the date of exercise over the
base price of such SAR, multiplied by the number of shares of Common Stock
subject to such option, or portion thereof, which is surrendered.

 

“Tax Date” shall have the meaning set
forth in Section 5.5.

 

“Ten Percent Holder” shall have the meaning set
forth in Section 2.1(a).

 

1.3          Administration.  This Plan shall be administered by
the Committee. Any one or a combination of the following awards may be made
under this Plan to eligible persons: (i) options to purchase shares of
Common Stock in the form of Incentive Stock Options or Nonqualified Stock
Options (which may include Performance Options), (ii) SARs in the form of
Tandem SARs or Free-Standing SARs, (iii) Stock Awards in the form of
Restricted Stock or 

 

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Restricted Stock Units and
(iv) Performance Units. The Committee shall, subject to the terms of this
Plan, select eligible persons for participation in this Plan and determine the
form, amount and timing of each award to such persons and, if applicable, the
number of shares of Common Stock, the number of SARs, the number of Restricted
Stock Units and the number of Performance Units subject to such an award, the
exercise price or base price associated with the award, the time and conditions
of exercise or settlement of the award and all other terms and conditions of
the award, including, without limitation, the form of the Agreement evidencing
the award.  The Committee may, in its
sole discretion and for any reason at any time, subject to the requirements of
Section 162(m) of the Code and regulations thereunder in the case of
an award intended to be qualified performance-based compensation, take action
such that (i) any or all outstanding options and SARs shall become
exercisable in part or in full, (ii) all or a portion of the Restriction
Period applicable to any outstanding Restricted Stock or Restricted Stock Units
shall lapse, (iii) all or a portion of the Performance Period applicable
to any outstanding Restricted Stock, Restricted Stock Units or Performance
Units shall lapse and (iv) the Performance Measures (if any) applicable to
any outstanding award shall be deemed to be satisfied at the target or any other
level.  The Committee shall, subject to
the terms of this Plan, interpret this Plan and the application thereof,
establish rules and regulations it deems necessary or desirable for the
administration of this Plan and may impose, incidental to the grant of an
award, conditions with respect to the award, such as limiting competitive
employment or other activities, which shall be set forth in the applicable
Agreement.  All such interpretations,
rules, regulations and conditions shall be conclusive and binding on all
parties.

 

The
Committee may delegate some or all of its power and authority hereunder to the
Board or, subject to applicable law, to the Chief Executive Officer or other
executive officer of the Company as the Committee deems appropriate; provided,
however, that (i) the Committee may not delegate its power and
authority to the Board or the Chief Executive Officer or other executive
officer of the Company with regard to the grant of an award to any person who
is a “covered employee” within the meaning of Section 162(m) of the
Code or who, in the Committee’s judgment, is likely to be a covered employee at
any time during the period an award hereunder to such employee would be
outstanding and (ii) the Committee may not delegate its power and authority
to the Chief Executive Officer or other executive officer of the Company with
regard to the selection for participation in this Plan of an officer, director
or other person subject to Section 16 of the Exchange Act or decisions
concerning the timing, pricing or amount of an award to such an officer,
director or other person.

 

No
member of the Board or Committee, and neither the Chief Executive Officer nor
any other executive officer to whom the Committee delegates any of its power
and authority hereunder, shall be liable for any act, omission, interpretation,
construction or determination made in connection with this Plan in good faith,
and the members of the Board and the Committee and the Chief Executive Officer
or other executive officer shall be entitled to indemnification and
reimbursement by the Company in respect of any claim, loss, damage or expense
(including attorneys’ fees) arising therefrom to the full extent permitted by
law (except as otherwise may be provided in the Company’s Certificate of Incorporation
and/or By-laws) and under any directors’ and officers’ liability insurance that
may be in effect from time to time.

 

A
majority of the Committee shall constitute a quorum. The acts of the Committee
shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which 

 

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a
quorum is present or (ii) acts approved in writing by all of the members
of the Committee without a meeting.

 

1.4          Eligibility.  Participants in this Plan shall
consist of such officers, other employees, consultants and nonemployee
directors, and persons expected to become officers, other employees,
consultants and nonemployee directors, of the Company and its Subsidiaries as
the Committee in its sole discretion may select from time to time or as
specified in the Plan of Reorganization. 
The Committee’s selection of a person to participate in this Plan at any
time shall not require the Committee to select such person to participate in
this Plan at any other time.  For
purposes of this Plan, references to employment by the Company shall also mean
employment by a Subsidiary.

 

1.5          Shares Available.  Subject to adjustment as provided
in Section 5.7 and to all other limits set forth in this Section 1.5,
8,695,652 shares of Common Stock shall be available for all awards under this
Plan, reduced by the sum of the aggregate number of shares of Common Stock
which become subject to outstanding options, outstanding Free-Standing SARs and
outstanding Stock Awards and delivered upon the settlement of Performance
Units.  To the extent that shares of
Common Stock subject to an outstanding option, SAR or stock award granted under
the Plan are not issued or delivered by reason of (i) the expiration,
termination, cancellation or forfeiture of such award (excluding shares subject
to an option cancelled upon settlement in shares of a related tandem SAR or
shares subject to a tandem SAR cancelled upon exercise of a related option) or
(ii) the settlement of such award in cash, then such shares of Common
Stock shall again be available under this Plan.

 

Shares
of Common Stock to be delivered under this Plan shall be made available from
authorized and unissued shares of Common Stock, or authorized and issued shares
of Common Stock reacquired and held as treasury shares or otherwise or a
combination thereof.

 

To
the extent necessary for an award to be qualified performance-based
compensation under Section 162(m) of the Code and the regulations
thereunder (i) the maximum number of shares of Common Stock with respect
to which options or SARs or a combination thereof may be granted during any
fiscal year of the Company to any person shall be 2% of the total outstanding shares of Common Stock determined as of the
effective date of the Plan, subject to adjustment as provided in
Section 5.7; (ii) the maximum number of shares of Common Stock with
respect to which Stock Awards subject to Performance Measures may be granted
during any fiscal year of the Company to any person shall be 2% of the total outstanding shares of Common
Stock determined as of the effective date of the Plan, subject to
adjustment as provided in Section 5.7, and (iii) the maximum amount
that may be payable with respect to Performance Units granted during any fiscal
year of the Company to any person shall be the cash equivalent of (x) 2% of the total outstanding shares of
Common Stock determined as of the effective date of the Plan multiplied by (y) the
Fair Market Value of a share of Common Stock determined as of the effective
date of the Plan, subject to adjustment as provided in Section 5.7.

 

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II             STOCK OPTIONS AND STOCK
APPRECIATION RIGHTS

 

2.1          Stock Options.  The Committee may, in its
discretion, or shall, pursuant to the Plan of Reorganization, grant options to
purchase shares of Common Stock to such eligible persons as may be selected by
the Committee or as specified in the Plan of Reorganization. Each option, or
portion thereof, that is not an Incentive Stock Option, shall be a Nonqualified
Stock Option.  To the extent that the
aggregate Fair Market Value (determined as of the date of grant) of shares of
Common Stock with respect to which options designated as Incentive Stock Options
are exercisable for the first time by a participant during any calendar year
(under this Plan or any other plan of the Company, or any parent or Subsidiary)
exceeds the amount (currently $100,000) established by the Code, such options
shall constitute Nonqualified Stock Options.

 

Options
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable or as approved in the Plan of
Reorganization, and set forth in the applicable Agreement:

 

(a)           Number of Shares and Purchase
Price.  The number of shares of
Common Stock subject to an option and the purchase price per share of Common
Stock purchasable upon exercise of the option shall be determined by the
Committee and set forth in the Agreement; provided, however, that
the purchase price per share of Common Stock purchasable upon exercise of a
Nonqualified Stock Option or an Incentive Stock Option shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date of grant
of such option; provided further, that if an Incentive Stock Option
shall be granted to any person who, at the time such option is granted, owns
capital stock possessing more than 10 percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
Subsidiary) (a “Ten Percent Holder”), the purchase price per share of
Common Stock shall not be less than the price (currently 110% of Fair Market
Value) required by the Code in order to constitute an Incentive Stock Option.

 

(b)           Option Period and Exercisability.  The period during which an option may be
exercised shall be determined by the Committee and set forth in the Agreement; provided,
however, that no Incentive Stock Option or Nonqualified Stock Option
shall be exercised later than ten years after its date of grant; provided
further, that if an Incentive Stock Option shall be granted to a Ten
Percent Holder, such option shall not be exercised later than five years after
its date of grant.  The Committee may, in
its discretion, determine that an option is to be granted as a Performance
Option and may establish and include in the Agreement an applicable Performance
Period and Performance Measures which shall be satisfied or met as a condition
to the grant of such option or to the exercisability of all or a portion of
such option. The Committee shall determine whether an option shall become
exercisable in cumulative or non-cumulative installments and in part or in full
at any time. An exercisable option, or portion thereof, may be exercised only
with respect to whole shares of Common Stock.

 

(c)           Method of Exercise.  An option may be exercised (i) by giving
written notice to the Company specifying the number of whole shares of Common
Stock to be purchased and accompanying such notice with payment therefor in
full (or arrangement made for such payment to the Company’s satisfaction)
either (A) in cash, (B) by delivery (either actual delivery or by 

 

7

 

attestation
procedures established by the Company) of shares of Common Stock having a Fair
Market Value, determined as of the date of exercise, equal to the aggregate
purchase price payable by reason of such exercise, (C) authorizing the
Company to withhold whole shares of Common Stock which would otherwise be
delivered having an aggregate Fair Market Value, determined as of the date of
exercise, equal to the amount necessary to satisfy such obligation, (D) 
in cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (E) a combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement
relating to the option, (ii) if applicable, by surrendering to the Company
any Tandem SARs which are cancelled by reason of the exercise of the option and
(iii) by executing such documents as the Company may reasonably
request.  Any fraction of a share of
Common Stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the
optionee.  No shares of Common Stock
shall be issued and no certificate representing Common Stock shall be delivered
until the full purchase price therefor and any withholding taxes thereon, as described
in Section 5.5, have been paid (or arrangement made for such payment to
the Company’s satisfaction).

 

2.2          Stock Appreciation Rights.  The Committee may, in its
discretion, or shall, pursuant to the Plan of Reorganization, grant SARs to
such eligible persons as may be selected by the Committee or as specified in
the Plan of Reorganization.  The
Agreement relating to an SAR shall specify whether the SAR is a Tandem SAR or a
Free-Standing SAR.

 

SARs
shall be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of this Plan,
as the Committee shall deem advisable or as approved in the Plan of
Reorganization, and set forth in the applicable Agreement:

 

(a)           Number of SARs and Base Price.  The number of SARs subject to an award shall
be determined by the Committee and set forth in the Agreement.  Any Tandem SAR related to an Incentive Stock
Option shall be granted at the same time that such Incentive Stock Option is
granted.  The base price of a Tandem SAR
shall be the purchase price per share of Common Stock of the related
option.  The base price of a
Free-Standing SAR shall be determined by the Committee and set forth in the
Agreement; provided, however, that such base price shall not be
less than 100% of the Fair Market Value of a share of Common Stock on the date
of grant of such SAR.

 

(b)           Exercise Period and Exercisability.  The period for the exercise of an SAR shall
be determined by the Committee and set forth in the Agreement; provided,
however, that no Tandem SAR shall be exercised later than the
expiration, cancellation, forfeiture or other termination of the related option
and no Free-Standing SAR shall be exercised later than ten years after its date
of grant.  The Committee may, in its
discretion, establish and include in the Agreement applicable Performance
Measures which shall be satisfied or met as a condition to the grant of an SAR
or to the exercisability of all or a portion of an SAR.  The Committee shall determine whether an SAR
may be exercised in cumulative or non-cumulative installments and in part or in
full at any time.  An exercisable SAR, or
portion thereof, may be exercised, in the case of a Tandem SAR, only with respect
to whole shares of Common Stock and, in the case of a Free-Standing SAR, only
with respect to a whole number of SARs. 
If an SAR is exercised for 

 

8

 

shares
of Restricted Stock, a certificate or certificates representing such Restricted
Stock shall be issued in accordance with Section 3.2(c), or such shares
shall be transferred to the holder in book entry form with restrictions on the
Shares duly noted, and the holder of such Restricted Stock shall have such
rights of a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the exercise of an SAR, the holder of such SAR
shall have no rights as a stockholder of the Company with respect to the shares
of Common Stock subject to such SAR.

 

(c)           Method of Exercise.  A Tandem SAR may be exercised (i) by
giving written notice to the Company specifying the number of whole SARs which
are being exercised, (ii) by surrendering to the Company any options which
are cancelled by reason of the exercise of the Tandem SAR and (iii) by
executing such documents as the Company may reasonably request.  A Free-Standing SAR may be exercised
(A) by giving written notice to the Company specifying the whole number of
SARs which are being exercised and (B) by executing such documents as the
Company may reasonably request.

 

2.3          Termination of Employment or
Service.  All of the terms relating to the exercise,
cancellation or other disposition of an option or SAR upon a termination of
employment or service with the Company of the holder of such option or SAR, as
the case may be, whether by reason of Incapacity, Retirement, death or any
other reason, shall be determined by the Committee and set forth in the
Agreement, Employment Agreement and/or any other agreement between the Company
and the recipient of an award.

 

2.4          No Repricing.  Notwithstanding anything in this
Plan to the contrary and subject to Section 5.7, without the approval of
the stockholders of the Company, the Committee will not amend or replace any
previously granted option or SAR in a transaction that constitutes a “repricing,”
as such term is used in the listing rules of the applicable stock exchange
on which shares of Common Stock are listed.

 

III            STOCK AWARDS

 

3.1          Stock Awards.  The Committee may, in its
discretion, or shall, pursuant to the Plan of Reorganization, grant Stock
Awards to such eligible persons as may be selected by the Committee or as
specified in the Plan of Reorganization. 
The Agreement relating to a Stock Award shall specify whether the Stock
Award is a Restricted Stock Award or a Restricted Stock Unit Award.

 

3.2          Terms of Restricted Stock Awards.  Restricted Stock Awards shall be
subject to the following terms and conditions and shall contain such additional
terms and conditions, not inconsistent with the terms of this Plan, as the
Committee shall deem advisable or as approved in the Plan of Reorganization,
and set forth in the applicable Agreement.

 

(a)           Number of Shares and Other Terms.  The number of shares of Common Stock subject
to a Restricted Stock Award and the Restriction Period, Performance Period (if
any) and Performance Measures (if any) applicable to a Restricted Stock Award
shall be determined by the Committee and set forth in the Agreement.

 

9

 

(b)           Vesting and Forfeiture.  The Agreement relating to a Restricted Stock
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of the
shares of Common Stock subject to such award (i) if the holder of such
award remains continuously in the employment of the Company during the
specified Restriction Period and (ii) if specified Performance Measures
(if any) are satisfied or met during a specified Performance Period, and for
the forfeiture of the shares of Common Stock subject to such award (x) if
the holder of such award does not remain continuously in the employment of the
Company during the specified Restriction Period or (y) if specified
Performance Measures (if any) are not satisfied or met during a specified
Performance Period.  The Committee may,
in its sole discretion, grant shares of Common Stock pursuant to the Plan that
are not subject to any vesting or performance conditions.

 

(c)           Stock Issuance.  During the Restriction Period, the shares of
Restricted Stock shall be held by a custodian in book entry form with
restrictions on such shares duly noted or, alternatively, a certificate or
certificates representing a Restricted Stock Award shall be registered in the
holder’s name and may bear a legend, in addition to any legend which may be
required pursuant to Section 5.6, indicating that the ownership of the
shares of Common Stock represented by such certificate is subject to the
restrictions, terms and conditions of this Plan and the Agreement relating to
the Restricted Stock Award.  All such
certificates shall be deposited with the Company, together with stock powers or
other instruments of assignment (including a power of attorney), each endorsed
in blank with a guarantee of signature if deemed necessary or appropriate,
which would permit transfer to the Company of all or a portion of the shares of
Common Stock subject to the Restricted Stock Award in the event such award is
forfeited in whole or in part.  Upon
termination of any applicable Restriction Period (and the satisfaction or
attainment of applicable Performance Measures), subject to the Company’s right
to require payment of any taxes in accordance with Section 5.5, the
restrictions shall be removed from the requisite number of any shares of Common
Stock that are held in book entry form, and all certificates evidencing
ownership of the requisite number of shares of Common Stock shall be delivered
to the holder of such award.

 

(d)           Rights with Respect to Restricted
Stock Awards.  Unless otherwise set
forth in the Agreement relating to a Restricted Stock Award, and subject to the
terms and conditions of a Restricted Stock Award, the holder of such award
shall have all rights as a stockholder of the Company, including, but not limited
to, voting rights, the right to receive dividends and the right to participate
in any capital adjustment applicable to all holders of Common Stock; provided,
however, that a distribution with respect to shares of Common Stock,
other than a regular cash dividend,  shall be
deposited with the Company and shall be subject to the same restrictions as the
shares of Common Stock with respect to which such distribution was made.

 

3.3          Terms of Restricted Stock Unit
Awards.  Restricted Stock Unit Awards shall be subject
to the following terms and conditions and shall contain such additional terms
and conditions, not inconsistent with the terms of this Plan, as the Committee
shall deem advisable or as approved in the Plan of Reorganization, and set
forth in the applicable Agreement.

 

(a)           Number of Shares and Other Terms.  The number of shares of Common Stock subject
to a Restricted Stock Unit Award and the Restriction Period, Performance Period
(if any)

 

10

 

and
Performance Measures (if any) applicable to a Restricted Stock Unit Award shall
be determined by the Committee and set forth in the Agreement.

 

(b)           Vesting and Forfeiture.  The Agreement relating to a Restricted Stock
Unit Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
Restricted Stock Unit Award (i) if the holder of such award remains
continuously in the employment of the Company during the specified Restriction
Period and (ii) if specified Performance Measures (if any) are satisfied
or met during a specified Performance Period, and for the forfeiture of the
shares of Common Stock subject to such award (x) if the holder of such
award does not remain continuously in the employment of the Company during the
specified Restriction Period or (y) if specified Performance Measures (if
any) are not satisfied or met during a specified Performance Period.  The Committee may, in its sole discretion,
grant units representing the right to receive shares of Common Stock that are
not subject to any vesting or performance conditions.

 

(c)           Settlement of Vested Restricted
Stock Unit Awards.  The Agreement
relating to a Restricted Stock Unit Award shall specify (i) whether such
award may be settled in shares of Common Stock or cash or a combination thereof
and (ii) whether the holder thereof shall be entitled to receive, on a
current or deferred basis, dividend equivalents, and, if determined by the
Committee, interest on, or the deemed reinvestment of, any deferred dividend
equivalents, with respect to the number of shares of Common Stock subject to
such award.  Prior to the settlement of a
Restricted Stock Unit Award, the holder of such award shall have no rights as a
stockholder of the Company with respect to the shares of Common Stock subject
to such award.

 

3.4          Termination of Employment or
Service.  All of the terms relating to the satisfaction
of Performance Measures and the termination of the Restriction Period or Performance
Period relating to a Stock Award, or any forfeiture and cancellation of such
award upon a termination of employment or service with the Company of the
holder of such award, whether by reason of Incapacity, Retirement, death or any
other reason, shall be determined by the Committee and set forth in the
Agreement, Employment Agreement and/or any other agreement between the Company
and the recipient of an award.

 

IV            PERFORMANCE UNIT AWARDS

 

4.1          Performance Unit Awards.  The Committee may, in its discretion,
or shall, pursuant to the Plan of Reorganization, grant Performance Unit Awards
to such eligible persons as may be selected by the Committee or as specified in
the Plan of Reorganization.

 

4.2          Terms of Performance Unit Awards.  Performance
Unit Awards shall be subject to the following terms and conditions and shall
contain such additional terms and conditions, not inconsistent with the terms
of this Plan, as the Committee shall deem advisable or as approved in the Plan
of Reorganization and set forth in the applicable Agreement.

 

(a)           Number of Performance Units and
Performance Measures.  The number of
Performance Units subject to a Performance Unit Award and the Performance
Measures and Performance Period applicable to a Performance Unit Award shall be
determined by the Committee and set forth in the Agreement.

 

11

 

(b)           Vesting and Forfeiture.  The Agreement relating to a Performance Unit
Award shall provide, in the manner determined by the Committee, in its
discretion, and subject to the provisions of this Plan, for the vesting of such
Performance Unit Award if the specified Performance Measures are satisfied or
met during the specified Performance Period and for the forfeiture of such
award if the specified Performance Measures are not satisfied or met during the
specified Performance Period.

 

(c)           Settlement of Vested Performance
Unit Awards.  The Agreement relating
to a Performance Unit Award shall specify whether such award may be settled in
shares of Common Stock (including shares of Restricted Stock) or cash or a
combination thereof.  If a Performance
Unit Award is settled in shares of Restricted Stock, such shares of Restricted
Stock shall be issued to the holder in book entry form or a certificate or
certificates representing such Restricted Stock shall be issued in accordance
with Section 3.2(c) and the holder of such Restricted Stock shall
have such rights as a stockholder of the Company as determined pursuant to
Section 3.2(d). Prior to the settlement of a Performance Unit Award in
shares of Common Stock, including Restricted Stock, the holder of such award
shall have no rights as a stockholder of the Company.

 

4.3          Termination of Employment or
Service.  All of the terms relating to the satisfaction
of Performance Measures and the termination of the Performance Period relating
to a Performance Unit Award, or any forfeiture and cancellation of such award
upon a termination of employment or service with the Company of the holder of
such award, whether by reason of Incapacity, Retirement, death or any other
reason, shall be determined by the Committee and set forth in the Agreement,
Employment Agreement and/or any other agreement between the Company and the
recipient of an award.

 

V             GENERAL

 

5.1          Effective Date and Term of Plan.  This Plan shall be submitted to
the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy
Court”) for approval in connection with the Plan of Reorganization and, if
approved, shall become effective as of the effective date of the Plan of
Reorganization.  This Plan shall
terminate as of the first annual meeting of the Company’s stockholders to occur
on or after the tenth anniversary of its effective date, unless terminated
earlier by the Board. Termination of this Plan shall not affect the terms or
conditions of any award granted prior to termination.

 

Awards
hereunder may be made at any time prior to the termination of this Plan,
provided that no award may be made later than ten years after the effective date
of this Plan. In the event that this Plan is not approved by the Bankruptcy
Court, this Plan and any awards hereunder shall be void and of no force or
effect.

 

5.2          Amendments.  The Board may amend this Plan as
it shall deem advisable, subject to any requirement of stockholder approval
required by applicable law, rule or regulation, including Section 162(m) of
the Code and any rule of the principal national stock exchange on which
the Common Stock is then traded; provided, however, that no
amendment may impair the rights of a holder of an outstanding award without the
consent of such holder.

 

12

 

5.3          Agreement.  Each award under this Plan shall
be evidenced by an Agreement setting forth the terms and conditions applicable
to such award. No award shall be valid until approved by the Company or, with
respect to the Emergence Equity Awards, the Bankruptcy Court.  Such award shall be effective as of the
effective date set forth in the Agreement.

 

5.4          Non-Transferability.  No award shall be transferable
other than by will, the laws of descent and distribution or pursuant to
beneficiary designation procedures approved by the Company or, to the extent
expressly permitted in the Agreement relating to such award, to the holder’s
family members, a trust or entity established by the holder for estate planning
purposes or a charitable organization designated by the holder.  Except to the extent permitted by the
foregoing sentence or the Agreement relating to an award, each award may be
exercised or settled during the holder’s lifetime only by the holder or the
holder’s legal representative or similar person.  Except as permitted by the second preceding
sentence, no award may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process.  Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any award, such
award and all rights thereunder shall immediately become null and void.

 

5.5          Tax Withholding.  The Company shall have the right
to require, prior to the issuance or delivery of any shares of Common Stock or
the payment of any cash pursuant to an award made hereunder, payment by the
holder of such award of any federal, state, local or other taxes which may be
required to be withheld or paid in connection with such award.  An Agreement may provide that (i) the
Company shall withhold whole shares of Common Stock which would otherwise be
delivered to a holder, having an aggregate Fair Market Value determined as of
the date the obligation to withhold or pay taxes arises in connection with an
award (the “Tax Date”), or withhold an amount of cash which would otherwise be
payable to a holder, in the amount necessary to satisfy any such obligation or
(ii) the holder may satisfy any such obligation by any of the following
means: (A) a cash payment to the Company, (B) delivery (either actual
delivery or by attestation procedures established by the Company) to the
Company of previously owned whole shares of Common Stock having an aggregate
Fair Market Value, determined as of the Tax Date, equal to the amount necessary
to satisfy any such obligation, (C) authorizing the Company to withhold
whole shares of Common Stock which would otherwise be delivered having an
aggregate Fair Market Value, determined as of the Tax Date, or withhold an
amount of cash which would otherwise be payable to a holder, equal to the
amount necessary to satisfy any such obligation, (D) in the case of the
exercise of an option and except as may be prohibited by applicable law, a cash
payment by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (E) any combination of (A),
(B) and (C), in each case to the extent set forth in the Agreement
relating to the award. Shares of Common Stock to be delivered or withheld may
not have an aggregate Fair Market Value in excess of the amount determined by
applying the minimum statutory withholding rate.  Any fraction of a share of Common Stock which
would be required to satisfy such an obligation shall be disregarded and the
remaining amount due shall be paid in cash by the holder.

 

5.6          Restrictions on Shares.  Each award made hereunder shall
be subject to the requirement that if at any time the Company determines that
the listing, registration or 

 

13

 

qualification of the
shares of Common Stock subject to such award upon any securities exchange or
under any law, or the consent or approval of any governmental body, or the
taking of any other action is necessary or desirable as a condition of, or in
connection with, the delivery of shares thereunder, such shares shall not be
delivered unless such listing, registration, qualification, consent, approval
or other action shall have been effected or obtained, free of any conditions
not acceptable to the Company.  The Company
may require that certificates evidencing shares of Common Stock delivered
pursuant to any award made hereunder bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.

 

5.7          Adjustment.  In the event of any stock split,
stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization or event, or any distribution to holders of Common Stock
other than a regular cash dividend, the number and class of securities
available under this Plan, the number and class of securities subject to each
outstanding option and the purchase price per security, the terms of each
outstanding SAR, the terms of each outstanding Restricted Stock Award and
Restricted Stock Unit Award, including the number and class of securities
subject thereto, the terms of each outstanding Performance Unit, the maximum
number of securities with respect to which options or SARs may be granted
during any fiscal year of the Company to any one grantee and the maximum number
of shares of Common Stock that may be awarded during any fiscal year of the
Company to any one grantee pursuant to a Stock Award that is subject to
Performance Measures shall be equitably adjusted by the Committee, such
adjustments to be made in the case of outstanding options and SARs in
accordance with Section 409A of the Code. 
The decision of the Committee regarding any such adjustment shall be
final, binding and conclusive. If any such adjustment would result in a
fractional security being (a) available under this Plan, such fractional
security shall be disregarded, or (b) subject to an award under this Plan,
the Company shall pay the holder of such award, in connection with the first
vesting, exercise or settlement of such award, in whole or in part, occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the
excess, if any, of (A) the Fair Market Value on the vesting, exercise or
settlement date over (B) the exercise or base price, if any, of such
award.

 

5.8          Change in Control.

 

(a)           Notwithstanding any provision in this
Plan or any Agreement, in the event of a Change in Control, (i) all
outstanding options and SARs shall immediately become exercisable in full,
(ii) the Restriction Period applicable to any outstanding Restricted Stock
Award or Restricted Stock Unit Award shall lapse, (iii) the Performance
Period applicable to any outstanding award shall lapse, (iv) the
Performance Measures applicable to any outstanding award shall be deemed to be
satisfied at the maximum level and (v) the Board (as constituted prior to
such Change in Control) may, in its discretion:

 

(1)           require that shares
of stock of the corporation resulting from such Change in Control, or a parent
corporation thereof, be substituted for some or all of the shares of Common
Stock subject to an outstanding award, with an appropriate and equitable 

 

14

 

adjustment
to such award as shall be determined by the Board in accordance with
Section 5.7; and/or

 

(2)           require outstanding
awards, in whole or in part, to be surrendered to the Company by the holder,
and to be immediately cancelled by the Company, and to provide for the holder
to receive (A) a cash payment in an amount equal to (i) in the case
of an option or an SAR, the number of shares of Common Stock then subject to
the portion of such option or SAR surrendered multiplied by the excess, if any,
of the Fair Market Value of a share of Common Stock as of the date of the
Change in Control, over the purchase price or base price per share of Common
Stock subject to such option or SAR, (ii) in the case of a Stock Award,
the number of shares of Common Stock then subject to the portion of such award
surrendered multiplied by the Fair Market Value of a share of Common Stock as
of the date of the Change in Control, and (iii) in the case of a
Performance Unit Award, the number of Performance Units then subject to the
portion of such award surrendered; (B) shares of capital stock of the
corporation resulting from such Change in Control, or a parent corporation
thereof, having a fair market value not less than the amount determined under
clause (A) above; or (C) a combination of the payment of cash
pursuant to clause (A) above and the issuance of shares pursuant to clause
(B) above.

 

(b)           For purposes of this Plan, a “Change
in Control” shall have the meaning set forth in the Employment Agreement;
provided that if the holder of any award is not party to an Employment
Agreement that contains such definition, then “Change in Control” shall mean
the occurrence of any one or more of the following events following the
effective date of the Plan of Reorganization:

 

(1)           The “beneficial
ownership” of securities representing more than 40% of the combined voting
power of the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the “Company Voting Securities”) is
accumulated, held or acquired by a Person (as defined in Section 3(a)(9) of
the Exchange Act, as modified, and used in Sections 13(d) and 14(d) thereof)
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, any corporation owned, directly or
indirectly, by the Company’s stockholders in substantially the same proportions
as their ownership of stock of the Company; provided, however,
that any acquisition from the Company or any acquisition pursuant to a
transaction that complies with clauses (i), (ii) and (iii) of
subparagraph (3) of this definition will not be a Change in Control under
this subparagraph (1), and provided further that immediately prior to such
accumulation, holding or acquisition, such person was not a direct or indirect
beneficial owner of 40% or more of the Company Voting Securities; or

 

(2)           Individuals who, as
of the day next following the effective date of the Plan of Reorganization,
constitute the Board of Directors (the “Incumbent Board”) cease for any reason
to constitute at least a majority of the Board; provided, however,
that an individual becoming a director subsequent to that date whose election,
or nomination for election by the Company’s stockholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board will be considered as though such 

 

15

 

individual
were a member of the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result of an actual
or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents by
or on behalf of a Person other than the Board; or

 

(3)           Consummation by the
Company of a reorganization, merger or consolidation, or sale or other
disposition of all or substantially all of the assets of the Company or the
acquisition of assets or stock of another entity (a “Business Combination”), in
each case, unless immediately following such Business Combination: (i) more
than 60% of the combined voting power of then outstanding voting securities
entitled to vote generally in the election of directors of (A) the
corporation resulting from such Business Combination (the “Surviving
Corporation”), or (B) if applicable, a corporation that as a result of
such transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries (the “Parent
Corporation”), is represented, directly or indirectly, by Company Voting
Securities outstanding immediately prior to such Business Combination (or, if
applicable, is represented by shares into which such Company Voting Securities
were converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportions as their
ownership, immediately prior to such Business Combination, of the Company
Voting Securities; (ii) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 40% or more of the
combined voting power of the then outstanding voting securities eligible to
elect directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) except to the extent that such
ownership of the Company existed prior to the Business Combination; and (iii) at
least a majority of the members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
were members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination;

 

(4)           Approval by the
Company’s stockholders of a complete liquidation or dissolution of the Company;

 

(5)           The consummation of
a reorganization under the U.S. Bankruptcy Code; or

 

(6)           The consummation of
a complete liquidation or dissolution of the Company under the U.S. Bankruptcy
Code.

 

However,
in no event will a Change in Control be deemed to have occurred, with respect
to a Participant’s award, if the Participant is part of a purchasing group that
consummates the Change in Control transaction. 
A Participant will be deemed “part of a purchasing group” for purposes
of the preceding sentence if the Participant is an equity participant in the
purchasing company or group (except: (i) passive ownership of less than 2%
of the stock of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group that is otherwise not 

 

16

 

significant,
as determined prior to the Change in Control by a majority of the non-employee
continuing directors).  For the avoidance
of doubt, a Change in Control shall not include transactions pursuant to the
Plan of Reorganization (as defined herein).

 

5.9          Deferrals.  The
Committee may determine that the delivery of shares of Common Stock or the
payment of cash, or a combination thereof, upon the exercise or settlement of
all or a portion of any award (other than awards of Incentive Stock Options,
Nonqualified Stock Options and SARs) made hereunder shall be deferred, or the
Committee may, in its sole discretion, approve deferral elections made by
holders of awards.  Deferrals shall be
for such periods and upon such terms as the Committee may determine in its sole
discretion and as set forth in the Agreement, subject to the requirements of
Section 409A of the Code.

 

5.10        No Right of Participation, Employment
or Service.  Unless otherwise set forth in an employment
agreement, no person shall have any right to participate in this Plan.  Neither this Plan nor any award made
hereunder shall confer upon any person any right to continued employment by or
service with the Company, any Subsidiary or any affiliate of the Company or
affect in any manner the right of the Company, any Subsidiary or any affiliate
of the Company to terminate the employment of any person at any time without
liability hereunder.

 

5.11        Rights as Stockholder.  No person shall have any right as
a stockholder of the Company with respect to any shares of Common Stock or
other equity security of the Company which is subject to an award hereunder
unless and until such person becomes a stockholder of record with respect to
such shares of Common Stock or equity security.

 

5.12        Designation of Beneficiary.  A holder of an award may file
with the Committee a written designation of one or more persons as such holder’s
beneficiary or beneficiaries (both primary and contingent) in the event of the
holder’s death or incapacity.  To the
extent an outstanding option or SAR granted hereunder is exercisable, such
beneficiary or beneficiaries shall be entitled to exercise such option or SAR
pursuant to procedures prescribed by the Committee.

 

Each
beneficiary designation shall become effective only when filed in writing with
the Committee during the holder’s lifetime on a form prescribed by the
Committee.  The spouse of a married
holder domiciled in a community property jurisdiction shall join in any
designation of a beneficiary other than such spouse.  The filing with the Committee of a new
beneficiary designation shall cancel all previously filed beneficiary
designations.

 

If
a holder fails to designate a beneficiary, or if all designated beneficiaries
of a holder predecease the holder, then each outstanding option and SAR
hereunder held by such holder, to the extent exercisable, may be exercised by
such holder’s executor, administrator, legal representative or similar person.

 

5.13        Governing Law.  This Plan, each award hereunder
and the related Agreement, and all determinations made and actions taken
pursuant thereto, to the extent not otherwise governed by the Code or the laws
of the United States, shall be governed by the laws of the State of Delaware
and construed in accordance therewith without giving effect to principles of
conflicts of laws.

 

17

 

5.14        Foreign Employees.  Without amending this Plan, the
Committee may grant awards to eligible persons who are foreign nationals on
such terms and conditions different from those specified in this Plan as may in
the judgment of the Committee be necessary or desirable to foster and promote
achievement of the purposes of this Plan and, in furtherance of such purposes
the Committee may make such modifications, amendments, procedures, subplans and
the like as may be necessary or advisable to comply with provisions of laws in
other countries or jurisdictions in which the Company or its Subsidiaries
operates or has employees.

 

18Exhibit
10.4

 

SMURFIT-STONE CONTAINER CORPORATION

2010 MANAGEMENT INCENTIVE PLAN

 

ARTICLE I

PURPOSE OF THE PLAN

 

The Smurfit-Stone Container Corporation 2010 Management Incentive Plan
(the “Plan”) is hereby established by the Compensation Committee of Smurfit-Stone
Container Corporation, effective as of the confirmation date of a plan of
reorganization in the Bankruptcy Proceedings, or such earlier date as may be
established by the Committee.  The Plan
is designed to drive the Company’s financial performance to meet or exceed the
Company’s short-term financial and operational goals by providing Employees
with annual performance-based incentive payments for the attainment of those
short-term goals.  Payments under the
Plan are intended to be exempt from section 409A of the Internal Revenue Code
of 1986, as amended, as “short-term deferrals” within the meaning of Treasury
Regulation section 1.409A-1(b)(4).  The
Plan shall not create any contractual right of any individual to any Award
prior to the payment of such award, unless otherwise expressly set forth
herein.

 

ARTICLE II

DEFINITIONS

 

For purposes of this Plan, the following terms, when capitalized, shall
have the meanings set forth below:

 

Section 2.1.           “Award” means
the annual cash incentive bonus awarded to an Employee under the Plan with
respect to the Performance Periods in the Plan Year, which bonus is subject to
the Company Achievement of the applicable Performance Targets and/or any other
objective or (except in the case of an officer of the Company under Section 16
of the Securities Exchange Act of 1934) subjective criteria established by the
Committee.

 

Section 2.2.           “Bankruptcy
Proceedings” shall mean the bankruptcy proceedings in the United States
Bankruptcy Court for the District of Delaware with respect to In re:
Smurfit-Stone Container Corporation, et al., Case No. 09-10235 (BLS).

 

Section 2.3.           “Base Pay”
means the Employee’s base salary in effect on the last day of the Plan
Year.  Base Pay does not include any
bonuses, incentive pay or other supplemental pay or benefits, in each case, as
determined by the Committee.

 

Section 2.4.           “Cause” shall
mean: (a) the refusal or continued failure by the Employee to perform
substantially all his or her duties with the Company (other than any failure
resulting from incapacity due to physical or mental illness) after the Company
provides the Employee a demand for substantial performance identifying in
reasonable detail the manner in which the Employee has not substantially
performed his or her duties; (b) a plea of guilty or nolo contendere by
the Employee, or conviction of the Employee, for a felony; or (c) the
determination by the Committee in its sole discretion that the Employee has
engaged in: (1) illegal conduct or gross misconduct in connection with the
Employee’s job duties or the business of the Company; (2) a material
breach of any written policy of the Company; (3) fraud or

 

 

material
dishonesty in connection with the business of the Company; or (4) any
violation of a statutory or common law duty of loyalty to the Company.

 

Section 2.5.           “Change in
Control” means the occurrence of any one or more of the following:

 

(a)           The “beneficial ownership” of
securities representing more than 20% of the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Company Voting Securities”) is accumulated, held or
acquired by a Person (as defined in Section 3(a)(9) of the Exchange
Act, as modified, and used in Sections 13(d) and 14(d) thereof) other
than the Company, any trustee or other fiduciary holding securities under an
employee benefit plan of the Company, any corporation owned, directly or
indirectly, by the Company’s stockholders in substantially the same proportions
as their ownership of stock of the Company; provided, however, that any
acquisition from the Company or any acquisition pursuant to a transaction that
complies with clauses (i), (ii) and (iii) of subparagraph (c) of
this definition will not be a Change in Control under this subparagraph (a),
and provided further that immediately prior to such accumulation, holding or
acquisition, such Person was not a direct or indirect beneficial owner of 20%
or more of the Company Voting Securities; or

 

(b)           Individuals who, as of the first day
following the confirmation of the Company’s plan of reorganization in the
Bankruptcy Proceedings, constitute the Board of Directors (the “Incumbent Board”)
cease for any reason to constitute at least a majority of the Board of
Directors (the “Board”); provided, however, that an individual becoming a
director subsequent to that date whose election, or nomination for election by
the Company’s stockholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board will be considered as though
such individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board; or

 

(c)           Consummation by the Company of a
reorganization, merger or consolidation, or sale or other disposition of all or
substantially all of the assets of the Company or the acquisition of assets or
stock of another entity (a “Business Combination”), in each case, unless
immediately following such Business Combination: (i) more than 60% of the
combined voting power of then outstanding voting securities entitled to vote
generally in the election of directors of (A) the corporation resulting
from such Business Combination (the “Surviving Corporation”), or (B) if
applicable, a corporation that as a result of such transaction owns the Company
or all or substantially all of the Company’s assets either directly or through
one or more subsidiaries (the “Parent Corporation”), is represented, directly
or indirectly, by Company Voting Securities outstanding immediately prior to
such Business Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportions as their ownership, immediately prior to
such Business Combination, of the Company Voting Securities; (ii) no
Person (excluding any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) 

 

2

 

beneficially
owns, directly or indirectly, 20% or more of the combined voting power of the
then outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
except to the extent that such ownership of the Company existed prior to the
Business Combination; and (iii) at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) were members of the Incumbent Board at
the time of the execution of the initial agreement, or of the action of the
Board, providing for such Business Combination;

 

(d)           Approval by the Company’s stockholders
of a complete liquidation or dissolution of the Company;

 

(e)           The consummation of a reorganization
under the U.S. Bankruptcy Code (other than pursuant to the Bankruptcy
Proceedings); or

 

(f)            The consummation of a complete
liquidation or dissolution of the Company under the U.S. Bankruptcy Code.

 

However,
in no event will a Change in Control be deemed to have occurred, with respect
to an Employee’s Award, if the Employee is part of a purchasing group that
consummates the Change in Control transaction. 
An Employee will be deemed “part of a purchasing group” for purposes of
the preceding sentence if the Employee is an equity participant in the
purchasing company or group (except: (i) passive ownership of less than 2%
of the stock of the purchasing company; or (ii) ownership of equity
participation in the purchasing company or group that is otherwise not
significant, as determined prior to the Change in Control by a majority of the
continuing non-employee members of the Board).

 

Section 2.6.           “Committee”
means the Compensation Committee of the Company, or any successor thereto or
delegate thereof with the authority to act on behalf of the Committee with
respect to this Plan.

 

Section 2.7.           “Company” means
the Smurfit-Stone Container Corporation and includes any successor thereto,
including pursuant to a plan of reorganization under the U.S. Bankruptcy Code.

 

Section 2.8.           “Company
Achievement” means the percentage of the Performance Target achieved by the
Company in a Performance Period, as determined by the Committee.

 

Section 2.9.           “Confirmation
Date” means the confirmation date of a plan of reorganization in the Bankruptcy
Proceedings.

 

Section 2.10.        “Disability”
shall mean an individual’s long-term disability as defined under the long-term
disability plan of the Company that covers that individual; or if the
individual is not covered by such a long-term disability plan, an individual’s
disability as defined for purposes of eligibility for a disability award under
the Social Security Act.

 

Section 2.11.        “Emergence Date”
means the date on which the Company’s plan of reorganization confirmed in the
Bankruptcy Proceedings becomes effective.

 

Section 2.12.        “Employee”
means an individual who is (a) a regular part-time or full-time employee
of the Company or one of its subsidiaries or affiliates, other than an
individual

 

3

 

classified
by his or her employer as a contractor or intern, and (b) designated by
the Committee as eligible to participate in the Plan.

 

Section 2.13.        “Incentive Statement” means a letter or other writing (including
in electronic format) provided by the Company to an Employee that sets forth
the Award that an Employee may earn under the Plan (or otherwise describes an
Employee’s eligibility to participate in the Plan), that also may describe the
performance metrics and any other objective or (except in the case of an
officer of the Company under Section 16 of the Securities Exchange Act of
1934) subjective performance criteria applicable to an Employee, in each case
as established by the Committee.

 

Section 2.14.        “Payment Date”
means the date on which an Award is paid to an Employee.

 

Section 2.15.        “Performance
Period” means (i) January 1 through June 30, 2010, or (ii) July 1
through December 31, 2010, as the case may be.

 

Section 2.16.        “Performance
Target” means the Company’s financial and/or operational goals for the
Performance Period of January 1 through June 30, 2010, or July 1
through December 31, 2010, as the case may be, as established by the
Committee.

 

Section 2.17.        “Plan Year”  means the one year period commencing on January 1,
2010 and ending on December 31, 2010.

 

Section 2.18.        “Retirement”
shall mean an employee’s retirement from the Company after the attainment of
age 55 and the completion of at least five years of service with the Company.

 

Section 2.19.        “Target
Incentive” means the percentage of an Employee’s Base Pay, as determined by the
Committee based on the Employee’s position and as reflected in the Employee’s
Incentive Statement (or otherwise
approved by the Committee prior to the Confirmation Date), that, subject
to the provisions of Sections 3.1 and 3.2 below, he or she will receive as an
Award for the Plan Year if Company Achievement of each of the Performance
Targets (and of any other objective or (except in the case of an officer of the
Company under Section 16 of the Securities Exchange Act of 1934)
subjective performance criteria established by the Committee) is equal to
100%.  In the case of an Employee who is
designated by the Committee as eligible to participate in the Plan prior to the
Effective Date of this Plan, the Committee (or the Company’s Chief Executive
Officer and/or President with respect to each such Employee other than an
officer of the Company under Section 16 of the Securities Exchange Act of
1934) has established and approved (a) a Target Incentive that shall be
applicable with respect to the portion of the Plan Year from January 1,
2010 until the later of the Emergence Date or June 30, 2010 and (b) a
separate Target Incentive (which may be lower) that shall be applicable with
respect to the remainder of the Plan Year that begins on the later of the
Emergence Date or June 30, 2010 until December 31, 2010.

 

4

 

ARTICLE III

AWARD ELIGIBILITY

 

Section 3.1.           Eligibility.

 

(a)   Subject to Section 3.2, an individual shall be eligible to
receive the portion of an Award that relates to a Performance Period during the
Plan Year if he or she:

 

(1)                    was employed on or before September 30,
2010;

 

(2)                    was designated as an
eligible Employee for the Performance Period; and

 

(3)                    is an Employee on the last
day of the Plan Year,

 

in all cases as determined by the Committee.  The portion of an Award that relates to a
Performance Period may be prorated, at the sole discretion of the Committee, to
the extent the individual has not performed services as an active Employee for
the entirety of such Performance Period.

 

(b)   In the event an Employee (i) transfers out of or otherwise
assumes another position that is ineligible to participate in the Plan or (ii) transfers
into or otherwise assumes another position that is (or remains, as the case may
be) eligible to participate in the Plan, the Committee retains the sole
discretion to determine what adjustments, if any, will be made to the Employee’s
Target Incentive.

 

(c)   The Committee retains the discretion to reduce or eliminate an
Award for any Employee who is not employed on the date on which payment of an
Award is made or whose performance does not consistently meet
expectations.  The Committee also retains
the discretion to increase the Target Incentive of any Employee (other than an
officer of the Company under Section 16 of the Securities Exchange Act of
1934) at any time during the Plan Year.

 

Section 3.2.           Ineligibility /
Termination of Employment.

 

(a)   Notwithstanding anything herein to the contrary (but subject to Section 3.2(c)),
except as otherwise determined by the Committee, if, prior to the date on which
the payment of an Award is made, the employment of an Employee is terminated
(whether not such termination occurs before or after the end of the Performance
Period to which a portion of the Award relates), by reason of death, Disability
or Retirement or without Cause, such Employee shall be eligible to receive part
of the portion of an Award which relates to such Performance Period that shall
be prorated on the basis of the calendar days in the Performance Period during
which such Employee was employed by the Company and based on the Company’s
actual performance during such Performance Period; provided, however, that such
Employee was employed by the Company (or became employed in a position eligible
to participate in the Plan) for at least three full calendar months during the
Plan Year.

 

(b)   Notwithstanding anything herein to the contrary (but subject to Section 3.2(c)),
except as otherwise determined by the Committee, if, prior to the date on which
the payment of an Award is made, the employment of an Employee is terminated by
the Employee for any reason other than Retirement or is terminated by the
Company for Cause, such Employee shall not be eligible to receive any unpaid
amounts under the Plan (even if such termination occurs

 

5

 

subsequent to the last day of a Performance Period
and/or Plan Year).

 

(c)   Notwithstanding anything herein to the contrary, in the case of an
Employee with an employment agreement or similar agreement with the Company
which addresses the Employee’s entitlement to an annual bonus which has not
been paid as of the date of the Employee’s termination of employment with the
Company, the amount, if any, of an Award which is payable to such Employee
following the Employee’s termination of employment with the Company shall be
determined by the terms of such agreement.

 

ARTICLE IV

CALCULATION OF AWARD

 

Section 4.1.           Performance
Targets.  The Committee shall establish
Performance Targets for each Performance Period.  Each Performance Target shall include a
threshold level of performance below which no portion of an Award shall be
payable, levels of performance at which specified percentages of the target
Award shall be payable, and a maximum level of performance above which no
additional Award shall be payable.  The
Performance Target for a Performance Period, as well as the threshold and
maximum levels of performance, may be changed by the Committee in the event of
changed or unanticipated circumstances, as determined by the Committee in its
discretion.

 

Section 4.2.           Semi-annual
Performance Periods.  Awards
under the Plan will include a portion which relates to each of the two
semi-annual Performance Periods in the Plan Year.  The Company will establish two Performance
Targets, one for each Performance Period in the Plan Year.  Subject to the provisions of Sections 3.1 and
3.2 above, an Employee is eligible to receive after the end of the Plan Year
the portion of an Award which relates to each Performance Period during the
Plan Year subject to the Company Achievement of the Performance Targets and any
other applicable objective or (except in the case of an officer of the Company
under Section 16 of the Securities Exchange Act of 1934) subjective
performance criteria established by the Committee.

 

Section 4.3.           Awards.

 

(a)   The Company shall provide an Incentive Statement to each Employee
as soon as practicable after this Plan becomes effective.  The Incentive Statement shall explain the
Award that the Employee is eligible to earn for the Plan Year (or shall
otherwise describe such Employee’s eligibility to participate in the Plan) and
shall describe the Performance Targets applicable to the Performance Periods in
the Plan Year as well as any other objective or (except in the case of an
officer of the Company under Section 16 of the Securities Exchange Act of
1934) subjective performance criteria applicable to the individual Employee, as
established by the Committee.  Subject to
the provisions of Sections 3.1 and 3.2 above, payment of the portion of an
Award which relates to a Performance Period shall be made only if and to the
extent that a pre-determined threshold percentage of the Performance Target
with respect to such Performance Period is attained, and all other objective or
(except in the case of an officer of the Company under Section 16 of the
Securities Exchange Act of 1934) subjective performance criteria applicable to
the Employee have been met.  Unless
otherwise provided in an Employee’s

 

6

 

Incentive Statement, the actual amount of the Award
payable to an Employee under the Plan shall be determined as a percentage of
the Employee’s Target Incentive in accordance with Section 2.19, which
percentage shall vary depending upon the extent to which the Performance
Targets for the Performance Periods during the Plan Year have been attained and
all other objectives or (except in the case of an officer of the Company under Section 16
of the Securities Exchange Act of 1934) subjective performance criteria
applicable have been met.  The Award that
an Employee is eligible to earn for the Plan Year may be changed by the
Committee in the event of changed or unanticipated circumstances, as determined
by the Committee in its discretion, provided that such change is not
inconsistent with the terms of this Plan or the applicable Employee’s Incentive
Statement.

 

(b)   The following will apply with respect to the calculation of the
actual amount of the total Award that an Employee will receive for the Plan
Year:  (i) 50% of the Employee’s
applicable Target Incentive shall be paid for 85% achievement of the applicable
Performance Target for the applicable Performance Period; (ii) 100% of the
Employee’s applicable Target Incentive shall be paid for 100% achievement of
the applicable Performance Target for the applicable Performance Period
performance; and (iii) 175% of the Employee’s applicable Target Incentive
shall be paid for 140% achievement of the applicable Performance Target for the
applicable Performance, provided that (A) this subsection (iii) shall
not apply to Employees who were designated as “Tier III” participants under the
Company’s 2009 Management Incentive Plan with respect to the portion of the
Plan Year that precedes the Emergence Date (but shall apply on the Emergence
Date and for the remainder of the Plan Year) and (B) with respect to the
calculation of such portion of the Award for each Employee that relates to the
period of time beginning on the Emergence Date through December 31, 2010,
the foregoing 175% shall be increased to 200%.

 

Section 4.4.           Emergence from
Bankruptcy / Liquidation.  In
the event that during the Plan Year the United States Bankruptcy Court for the
District of Delaware presiding over the Bankruptcy Proceedings, confirms a plan
of reorganization for the Company the reorganized Company shall assume the Plan
in connection with the confirmation and effectiveness of such a plan of
reorganization.  In the event that during
the Plan Year the Company consummates a liquidation pursuant to Section 2.5(d) or
(f), then each Employee shall receive the portion of an Award which relates to
any completed Performance Period and a part of the portion of an Award which
relates to the Performance Period in which the liquidation is consummated,
which part shall be determined by (a) prorating on the basis of the
calendar days during which such Employee shall have been employed by the
Company during such Performance Period and (b) based on the Company’s
actual performance through the date of liquidation measured as a percentage of
the Company’s financial/operational targets prorated on the basis of the
calendar days elapsed during such Performance Period.

 

ARTICLE V

PAYMENT OF AWARDS

 

Section 5.1.           Time of Payment.  Payment of Awards shall be made within a
reasonable period after the end of the Plan Year, but in no event later than March 15,
2011.

 

7

 

Section 5.2.           Form of
Payment.  Awards shall be paid in the
form of a lump sum cash payment.

 

ARTICLE VI

ADMINISTRATION

 

Section 6.1.           The Plan shall
be administered by the Committee, which shall have full power and authority to
interpret, construe and administer the Plan in accordance with the provisions
set forth herein, including without limitation the authority to:
(i) select the Employees to whom Awards may from time to time be granted
hereunder; (ii) determine the terms and conditions of each Award,
consistent with the terms of the Plan; and (iii) determine the Award
formula for every Employee in each Performance Period consistent with the terms
of the Plan, subject to the Company Achievement and the Company’s satisfaction
of any and all other objective or (except in the case of an officer of the
Company under Section 16 of the Securities Exchange Act of 1934)
subjective performance criteria established by the Committee.  In this connection, the Committee may
delegate to any corporation, committee or individual(s), regardless of whether
any such individuals are employees of the Company, the duty to act for the
Committee hereunder.

 

Section 6.2.           Decisions of
the Committee shall be final, conclusive and binding on all persons or
entities, including the Company and any Employee.  A majority of the members of the Committee
may determine its actions.

 

Section 6.3.           No officer or
employee of the Company shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his or her own willful misconduct or lack of good faith.

 

Section 6.4.           The expenses of
administering the Plan shall be paid by the Company and shall not be charged
against the Plan.

 

ARTICLE VII

MISCELLANEOUS

 

Section 7.1.           Successors.  All obligations of the Company under the Plan
will be binding on any successor to the Company, whether the existence of the successor
results from a Change in Control or otherwise. 
In the event that the Company’s successor, including the reorganized
Company following the assumption of the Plan in connection with the
confirmation of a plan of reorganization (other than in the Bankruptcy
Proceedings), terminates the Plan prior to December 31, 2010, then each
Employee who is actively employed on the date of such termination of the Plan
shall receive the portion of an Award which relates to any completed
Performance Period and a part of the portion of an Award which relates to the
Performance Period in which the Plan is terminated, which part shall be
determined by (a) prorated on the basis of the calendar days during which
such Employee shall have been employed by the Company during such Performance
Period and (b) based on the Company’s actual performance through the date
of Plan termination measured as a percentage of the Company’s

 

8

 

financial/operational
targets prorated on the basis of the calendar days elapsed during such
Performance Period.

 

Section 7.2.           Nontransferability.  No Award payable hereunder, nor any right to
receive any future Award hereunder, may be assigned, alienated, sold,
transferred, anticipated, pledged, encumbered, or subjected to any charge or
legal process, and if any such attempt is made, or a person eligible for any
Award hereunder becomes bankrupt, the Award under the Plan which would
otherwise be payable with respect to such person may be terminated by the
Committee which, in its sole discretion, may cause the same to be held or
applied for the benefit of one or more of the dependents of such person or make
any other disposition of such Award that it deems appropriate.

 

Section 7.3.           Beneficiary
Designation.  Each
Employee may, from time to time, name any beneficiary or beneficiaries (who may
be named contingently or successively) to whom any Award under the Plan is to
be paid in case the Employee should die before receiving any or all of his or
her Award.  Each beneficiary designation
will revoke all prior designations by the same Employee with respect to this
Plan, must be in a form prescribed by the Committee, and must be made during
the Employee’s lifetime.  If the Employee’s
designated beneficiary predeceases the Employee or no beneficiary has been
designated, any Award remaining unpaid at the Employee’s death may, in the sole
discretion of the Committee, (a) be paid to the Employee’s estate or to
one or more of the dependents of the Employee or (b) be disposed of in any
other manner that the Committee deems appropriate.

 

Section 7.4.           Claim to Awards
and Employment Rights. 
Nothing in this Plan shall require the Company to segregate or set aside
any funds or other property for purposes of paying all or any portion of an
Award hereunder.  No person shall have
any right, title or interest in or to any Award hereunder (or any portion of
such award, including but not limited to any Surplus Award) prior to the actual
payment thereof, nor to any property of the Company.  Eligibility for an Award in one year or
Performance Period does not entitle an individual to be eligible for an Award
in any other year or Performance Period. 
Neither the adoption of the Plan nor the continued operation thereof
shall confer upon any Employee any right to continue in the employ of the
Company or shall in any way affect the right and power of the Company to
dismiss or otherwise terminate the employment of any Employee at any time for
any reason, with or without cause.

 

Section 7.5.           Income Tax
Withholding/Rights of Offset.  The Company shall have the right to deduct
and withhold from all Awards all federal, state and local taxes as may be
required by law.  In addition to the
foregoing, the Company shall have the right to set off against the amount of
any Award which would otherwise be payable hereunder, the amount of any debt,
judgment, claim, expense or other obligation owed at such time by the Employee
to the Company, as permitted by law.

 

Section 7.6.           Effective Date
of Plan.  The Plan shall be effective as
of the confirmation date of a plan of reorganization in the Bankruptcy
Proceedings, or such earlier date as may be established by the Committee.

 

Section 7.7.           Termination of
Plan.  The Plan may be terminated at
any time and for any reason by the Committee.

 

9

 

Section 7.8.           Severability.  If any provision of the Plan is held illegal
or invalid for any reason, the illegality or invalidity will not affect the
remaining parts of the Plan, and the Plan will be construed and enforced as if
the illegal or invalid provision had not been included.

 

Section 7.9.           Governing Law.  All questions pertaining to the construction,
validity and effect of the Plan shall be determined in accordance with the laws
of the State of Delaware.

 

10

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