Document:

exv10w2

 

GUARANTEE

     FOR VALUE RECEIVED, the sufficiency of which is hereby acknowledged, and in connection with
that certain funding agreement (the “Funding Agreement”), entered into by and between Principal
Life Insurance Company, an Iowa insurance company (“Principal Life”), and Principal Life Income
Fundings Trust 2007-81, a New York common law trust (the “Trust”), relating to the notes (the
“Notes”) issued by the Trust, Principal Financial Group, Inc., a Delaware corporation and the
indirect parent company of Principal Life (the “Guarantor”), hereby furnishes to the Trust its full
and unconditional guarantee of the Guaranteed Amounts (as hereinafter defined) as follows:

1. Guarantee.

          (a) The Guarantor hereby fully, irrevocably, absolutely and unconditionally guarantees, as a
guarantee of payment and not merely as a guarantee of collection, immediate payment when due to the
Trust any payments required to be made by Principal Life to the Trust under the Funding Agreement
which shall become due and payable regardless of whether such payment is due at maturity, on an
interest payment date or as a result of redemption or otherwise (the “Scheduled Payments”) but
shall be unpaid by Principal Life (the “Guaranteed Amounts”). Notwithstanding anything to the
contrary contained herein, in no event shall the Guaranteed Amounts exceed the Deposit (as defined
in the Funding Agreement) of the Funding Agreement, plus accrued but unpaid interest and any other
amounts due and owing under the Funding Agreement, less any amounts paid by Principal Life to the
Trust.

          (b) In the event that Principal Life fails to make a Scheduled Payment in full when due (the
“Payment Notice Date”), then the Trust or Citibank, N.A., as indenture trustee for the benefit of
the holders of the Notes (the “Indenture Trustee”), pursuant to the indenture (the “Indenture”)
between the Trust and the Indenture Trustee, may present the Guarantor with notice (each, a
“Payment Notice”) of such failure in writing on or after the Payment Notice Date. The Payment
Notice shall identify (1) the Funding Agreement, (2) the Trust, (3) the Payment Notice Date and (4)
the amount of the Scheduled Payments not paid by Principal Life to the Trust as of the Payment
Notice Date. Upon receipt of such Payment Notice, the Guarantor will immediately pay the
Guaranteed Amounts pursuant to Section 7.

          (c) In the event that, after receipt of a Payment Notice from the Trust, the Guarantor fails
to make immediate payment to the Trust or the Indenture Trustee of the Guaranteed Amounts, then
the Trust and the Indenture Trustee may enforce the obligations of the Guarantor under this
Guarantee, including by immediately bringing suit directly against the Guarantor (without first
bringing suit against Principal Life) for the Guaranteed Amounts not paid to the Trust as of the
Payment Notice Date.

          (d) This Guarantee is an unsecured, unsubordinated and contingent obligation of the Guarantor
and ranks equally with all other unsecured and unsubordinated obligations of the Guarantor.

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     2. Termination. This Guarantee is a continuing and irrevocable guarantee of the
Guaranteed Amounts now or hereafter existing and shall terminate and be of no further force and
effect with respect to the Funding Agreement and the Notes upon the full payment of the Scheduled
Payments or upon the earlier extinguishment of the obligations of Principal Life under the Funding
Agreement.

     3. Amendments. Subject to the trust agreement relating to the Trust and the Indenture, no
provision of this Guarantee may be waived, amended, supplemented or modified, except by a written
instrument executed by the Trust and the Guarantor.

     4. Assignment; Governing Law. This Guarantee shall inure to the benefit of the Trust and its
successors, assigns and pledgees. This Guarantee shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to conflict of law principles.

     5. Notices. All notices given pursuant to this Guarantee shall be in writing, and shall
either be delivered, mailed or telecopied to the locations listed below or at such other address or
to the attention of such other persons as such party shall have designated for such purpose in a
written notice complying as to delivery with the terms of this Section 5. Each such notice shall
be effective (i) if given by telecopy, when transmitted to the applicable number so specified in
this Section 5 (such notice shall also be sent by mail, with first class postage prepaid), (ii) if
given by mail, three days after deposit in the mails with first class postage prepaid, or (iii) if
given by any other means, when actually delivered at such address.

If to the Guarantor:

Principal Financial Group, Inc.

711 High Street

Des Moines, Iowa 50392

Attention: General Counsel

Telephone: (515) 247-5111

Facsimile: (515) 248-3011

With a copy to:

Principal Life Insurance Company

711 High Street

Des Moines, Iowa 50392

Attention: Jim Fifield

Telephone: (515) 248-9196

Facsimile: (866) 496-6527

If to the Trust:

Principal Life Income Fundings Trust (followed by the number of the Trust specified in this Guarantee)

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c/o U.S. Bank Trust National Association

100 Wall Street, 16th Floor

New York, New York 10005

Attention: Thomas E. Tabor

Telephone: (212) 361-6184

Facsimile: (212) 809-5459

With a copy to:

Citibank, N.A.

Citibank Agency and Trust

388 Greenwich Street, 14th Floor

New York, New York 10013

Attention: Nancy Forte

Telephone: (212) 816-5685

Facsimile: (212) 816-5527

     6. Representations and Warranties. The Guarantor represents and warrants that: (i) it is duly
organized and in good standing under the laws of the jurisdiction of its organization and has full
capacity and right to make and perform this Guarantee, and all necessary authority has been
obtained; (ii) this Guarantee constitutes a legal, valid and binding obligation of the Guarantor
enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency and similar
laws affecting creditors’ rights and general principles of equity, regardless of whether
enforcement is sought in a proceeding in equity or at law; (iii) the making and performance of this
Guarantee does not and will not violate the provisions of any applicable law, regulation or order,
and does not and will not result in the breach of, or constitute a default under, any material
agreement, instrument or document to which it is a party or by which it or any of its property may
be bound or affected, except to the extent disclosed in the registration statement registering the
issuance of this Guarantee and the Funding Agreement, as amended, supplemented or modified from
time to time (the “Registration Statement”), and to the extent that any such violation, breach or
default does not result in a material adverse effect on the Guarantor; and (iv) all consents,
approvals, licenses and authorizations of, and filings and registrations with, any governmental
authority required under applicable law and regulations for the making and performance of this
Guarantee have been obtained or made and are in full force and effect, except to the extent
disclosed in the Registration Statement and to the extent that the failure to acquire any such
consent, approval, license, authorization, filing or registration does not result in a material
adverse effect on the Guarantor.

     7. Notice of, and Consent to, Security Interest. The Trust hereby notifies the Guarantor that
it has granted to the Indenture Trustee, on behalf of the holders of the Notes, a security interest
in the Collateral (as defined in the Indenture), including, but not limited to, any and all payment
to be made by the Guarantor to the Trust under this Guarantee. The Trust hereby notifies the
Guarantor that it has collaterally assigned to the Indenture Trustee, for the benefit of the
holders of the Notes, this Guarantee. The Guarantor, by executing this Guarantee, hereby (i)
affirms that it has made or simultaneously will make changes to its books and records to reflect
such security interest and collateral assignment, (ii) consents to the security interest

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granted, and collateral assignment made, by the Trust to the Indenture Trustee of this
Guarantee, (iii) agrees to make all payments due under this Guarantee to the Collection Account (as
defined in the Indenture) or any other account designated in writing to the Guarantor by the
Indenture Trustee and (iv) agrees to comply with all orders of the Indenture Trustee with respect
to this Guarantee without any further consent from the Trust.

     8. WAIVER OF JURY TRIAL; FINAL AGREEMENT. TO THE EXTENT ALLOWED BY APPLICABLE LAW, THE
GUARANTOR WAIVES TRIAL BY JURY WITH RESPECT TO ANY ACTION, CLAIM, SUIT OR PROCEEDING ON OR ARISING
OUT OF THIS GUARANTEE. THIS GUARANTEE REPRESENTS THE FINAL AGREEMENT BETWEEN THE GUARANTOR AND THE
TRUST AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS AMONG SUCH PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG SUCH PARTIES.

	 	 	 	 	 	 	 
	 	 	PRINCIPAL FINANCIAL GROUP, INC.
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Elizabeth D. Swanson
	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	Name:
	 	Elizabeth D. Swanson	 	 
	 
	 	 	 	 	 	 
	 

	 	Title:
	 	Counsel	 	 
	 
	 	 	 	 	 	 
	 	 	Date:	 	The Effective Date (as defined in the Funding
	 	 	 	 	Agreement)

Acknowledged and Agreed:

THE PRINCIPAL LIFE INCOME FUNDINGS

TRUST DESIGNATED IN THIS GUARANTEE

	 	 	 	 	 
	By:	 	U.S. Bank Trust National Association,
	 	 	not in its individual capacity, but solely in its
	 	 	capacity as trustee
	 
	 	 	 	 
	By:	 	Bankers Trust Company, N.A.,
	 	 	under Limited Power of Attorney, dated March 2, 2007
	 
	 	 	 	 
	By:

	 	/s/ Craig A Dana
	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	Name:	 	Craig A Dana
	 
	 	 	 	 
	Title:	 	Vice President
	 
	 	 	 	 
	Date:	 	The Effective Date (as defined in the Funding
	 	 	Agreement)

4Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is effective as of August 20, 2007 by and between Orchids Paper Products Company (“Company”) and Robert Snyder (“Executive”). 

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

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

ARTICLE I

Definitions

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

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

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

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

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

	
             
 	
            (e)
 	
            “Confidential Information” shall mean all technical and business information of the Company, or which is learned or acquired by the Company from others with whom 
 

 

 

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

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

ARTICLE II

Employment

	
            2.1
 	
            Employment.  Company agrees to employ Executive and Executive hereby accepts such employment with the Company, upon the terms and conditions set forth in this Agreement, for the period beginning on August 20, 2007 (“Start Date”) and ending as provided in Section 2.4 of this Agreement (“Employment Period”).
 

	
            2.2
 	
            Position and Duties.  
 

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

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

	
            2.3
 	
            Base Salary, Bonus and Benefits.  
 

	
             
 	
            (a)
 	
            Subject to the terms of this Agreement, in consideration of Executive’s agreements contained herein, for the period beginning on the Start Date, Executive’s base salary shall be $250,000 per annum (“Base Salary”), which shall be payable in equal installments during the year in accordance with the Company’s normal payroll schedule and shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and social security taxes.  
 

 

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Commencing on the first September 1 that is approximately one year following the Start Date, and each September 1 thereafter, the Base Salary shall be adjusted annually during the Employment Period to reflect any increase from the previous year in the Bureau of Labor Statistics, Consumer Price Index (all urban wage earners)  for the Midwest Urban metropolitan area, size B/C with a population between 50,000 and 1,500,000 people.  Beginning with the fiscal year ending December 31, 2008, Executive shall be eligible for the opportunity to earn annual performance bonuses in an amount up to 100% of Base Salary (with a target bonus equal to 60% of Base Salary), based on the achievement of such targets as shall be established, in accordance with the Company’s annual bonus program.  Executive must remain employed by the Company on the payment date of any such bonus in order to receive any
such bonus.  Subject to the terms of the actual bonus plan, any bonus thereunder is payable in cash on or after January 1 and no later than April 15 of the calendar year following the applicable fiscal year with respect to such bonus.  In addition, during the Employment Period, Executive shall be entitled to participate in all retirement, disability, pension, savings, life, health, medical, dental, insurance and other fringe benefits or plans of the Company generally available to executive employees of the Company.

	
             
 	
            (b)
 	
            Executive shall receive a bonus for the year ending December 31, 2007 in an amount equal to: $150,000 times (the number of days Executive is employed with the Company during calendar year 2007, divided by 365).  Executive must be employed with the Company on the date such bonus is paid in order to receive such bonus.  The bonus for the year ending December 31, 2007 shall be paid in cash in accordance with the Company’s normal bonus payment schedule on or after January 1 and no later than April 15, 2008, subject to the terms of the bonus plan.
 

	
             
 	
            (c)
 	
            On the Start Date, the Company shall grant Executive a stock option to purchase 225,000 shares of common stock of the Company, subject to all terms and conditions of the Company’s stock option plan and an award agreement evidencing such grant.  The exercise price shall be the fair market value of the underlying stock on the date of grant.  Such option shall be an incentive stock option to the extent allowable by the law, and any portion of such option that does not so qualify as an incentive stock option shall be treated as a nonqualified option.  Such option shall vest at a rate of twenty percent (20%) on the Start Date and an additional twenty percent (20%) on each annual anniversary of the Start Date thereafter, subject to continued employment.  Such options shall fully vest upon a change in control, as defined in the
Company’s stock option plan and the applicable award agreement.
 

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

	
             
 	
            (e)
 	
            The Company shall pay the reasonable closing costs on the sale of Executive’s principal residence in Memphis, Tennessee and on the purchase of Executive’s principal residence in Tulsa, Oklahoma area.  The Company shall pay the actual 
 

 

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moving expenses associated with moving Executive’s (and his immediate family’s) personal effects from Memphis to Tulsa.  In addition, the Company shall pay Executive a one-time incidental moving allowance of $23,500 upon completion of his move to the Tulsa, Oklahoma area.  The Company shall pay to the Executive a gross-up payment in an amount equal to the federal, state and local taxes imposed on the payments contemplated by this subsection (e) relating to moving expense reimbursements and allowances (including federal, state and local taxes imposed on such gross-up payments).  The Executive must be employed with the Company at the time of such payments in order to receive such payments, provided however, that such payments shall be made within 10 days of Executive requesting such reimbursement and allowances.

	
             
 	
            (f)
 	
            The Company shall reimburse Executive monthly for the cost of reasonable temporary living in an apartment in the Tulsa, Oklahoma area for a period not to exceed 12 months.  During the period of temporary living, not to exceed 12 months, the Company shall reimburse Executive monthly for the reasonable cost of traveling to Memphis for the purpose of visiting his family.
 

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

	
            2.4
 	
            Term.
 

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

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

	
             
 	
            (c)
 	
            Termination Without Cause.  
 

	
             
 	
            (i)
 	
            Before or More Than Twelve Months Following Change of Control.  If the Executive is terminated by the Company without Cause before a Change in Control or more than twelve months following a Change of Control 
 

 

4

 

 

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

 

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

	
             
 	
            (d)
 	
            Termination by Executive.  
 

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

	
             
 	
            (ii)
 	
            Good Reason Before or More Than Twelve Months After Change of Control.  In the event that Executive terminates his employment for Good Reason at any time before a Change of Control or more than twelve months following a Change of Control, Executive shall be entitled to all previously earned and accrued but unpaid Base Salary up to the date of such termination and severance pay in an amount equal to one year of Base Salary.  Such severance payments will be made in equal installments over a one-year period, payable on the dates on which the Executive’s Base Salary would have otherwise been paid 
 

 

5

 

 

if Executive’s employment had continued.  All payments shall be subject to deductions for customary withholdings, including, without limitation, federal and state withholding taxes and social security taxes.  

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

	
             
 	
            (e)
 	
            Limitation on Certain Additional Payments.  Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by Company to or for the benefit of Executive (“Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (“Code”), then the Payments due under this Agreement shall be decreased to the greatest amount that could be paid to Executive such that receipt of Payments would not give rise to any such excise tax.
 

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

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

	
             
 	
            (h)
 	
            Death or Disability.  The Company’s obligation under this Agreement terminates on the last day of the month in which the Executive’s death occurs or on the date as of which Executive first becomes entitled to receive and actually receives disability benefits under the Company’s long-term disability plan.  The Company shall pay to Executive or the Executive’s estate all previously earned and accrued but unpaid Base Salary up to such date.  Thereafter, the Executive or his estate shall not be entitled to any further Base Salary, bonus, benefits or other compensation for that year or any subsequent year, except as may be provided in an applicable benefit plan or program.  
 

	
            2.5
 	
            Confidential Information.
 

	
             
 	
            (a)
 	
            Executive shall use his best efforts and diligence both during and after his employment with the Company, regardless of how, when or why Executive’s employment ends, to protect the confidential, trade secret and/or proprietary character of all Confidential Information.  Executive shall not, directly or indirectly, 
 

 

6

 

 

use (for himself or another) or disclose any Confidential Information, for so long as it shall remain proprietary or protectible as confidential or trade secret information, except as may be necessary for the performance of Executive’s duties for the Company.

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

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

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

	
            2.6
 	
            Competitive Activity.
 

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

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

	
             
 	
            (c)
 	
            During the applicable non-compete period, following termination of Executive’s employment with the Company for any reason, Executive agrees to advise the 
 

 

7

 

 

Company of his new employer, work location and job responsibilities within ten (10) days after accepting new employment.

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

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

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

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

ARTICLE III

Miscellaneous

3.1       Executive’s Representations.  Executive hereby represents and warrants to the Company that (i) Executive’s execution, delivery and performance of this Agreement do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which Executive is a party or by which he is bound, (ii) Executive has provided the Company with a redacted version of his letter agreement with his previous employer (Kruger Paper) which sets forth Executive’s ongoing obligations to such prior employer regarding confidentiality (“Confidentiality Clause”) and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of
Executive, enforceable in accordance with its terms.  Executive acknowledges that he is subject to ongoing obligations to his prior employer under the Confidentiality Clause, represents that he is not bound by any other noncompete or confidentiality restrictions and agrees that he shall abide by and shall not violate the Confidentiality Clause.  Executive hereby acknowledges and represents that he fully understands the terms and conditions contained herein.

 

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3.2       Survival.  Sections 2.5 and 2.6 and Sections 3.2 through 3.14 shall survive and continue in full force in accordance with their terms notwithstanding any termination of the Employment Period.

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

To the Company:  

	
             
 	
            Orchids Paper Products Company
4826 Hunt Street
Pryor, OK 74361
Attn: Keith Schroeder
 

 

with a copy to:

 

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

To Executive:  

	
             
 	
            Robert Snyder
3049 Shannon Oaks Cove
Germantown, TN 38138
 

 

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

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

3.5       Successors and Assigns.  Except as otherwise provided herein, all covenants and agreements contained in this Agreement shall bind and inure to the benefit of and be enforceable by the Company, and their respective successors and assigns.  This Agreement is personal to Executive and except as otherwise specifically provided herein, this Agreement, including the obligations and benefits hereunder, may not be assigned to any party by Executive.  

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

 

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

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

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

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

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

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

3.13     Future Employment.  Executive shall disclose the existence of this Agreement to any new employer or potential new employer which offers products or services that compete with the Company’s business.  Executive consents to the Company informing any subsequent employer of Executive, or any entity which the Company in good faith believes is, or is likely to be, considering employing Executive, of the existence and terms of this Agreement.

3.14     Specified Employee Determination.  Notwithstanding anything herein to the contrary, in the event that the Executive is determined to be a specified employee in accordance with Section 409A of the Code and the regulations and other guidance issued thereunder for purposes of any payment on termination of employment hereunder, payment(s) shall be made or begin, as applicable 

 

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on the first payroll date which is more than six months following the date of separation from service, to the extent required to avoid the adverse tax consequences under Section 409A of the Code.

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

 

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement this 20th day of August, 2007 and effective as of the date first written above.

	
             
 	
            COMPANY
 
	
             
 	
             
 	
             
 
	
             
 	
            By:
 	
            /s/ Jay Shuster
 
	
             
 	
             
 	
             
 
	
             
 	
            Name:
 	
            Jay Shuster
 
	
             
 	
             
 	
             
 
	
             
 	
            Title:
 	
            Chairman of the Board
 
	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 
	
             
 	
            EXECUTIVE
 
	
             
 	
             
 	
             
 
	
             
 	
            /s/ Robert Snyder
 
	
             
 	
             
 	
             
 
	
             
 	
            Name:
 	
            Robert Snyder
 

 

 

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