Exhibit 10.1
AGREEMENT
AGREEMENT (this “
Agreement ”) made and entered into by and between
Cellu Tissue Holdings, Inc., a Delaware corporation (the
“ Company ”), and Mr. Russell Taylor (the
“ Executive ”), effective as of the Closing Date
as defined in the Agreement and Plan of Merger, dated May 8,
2006, (the “ Merger Agreement ”) by and among
Cellu Parent Corporation, a Delaware corporation (“ Cellu
Parent ”), Cellu Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of Cellu Parent
Corporation (“ Cellu Acquisition ”), and Cellu
Paper Holdings, Inc., a Delaware corporation (“ Cellu
Paper ”), and which is hereafter referred to as the
“ Effective Date .
WHEREAS, the Company is a wholly
owned subsidiary of Cellu Paper; and Cellu Acquisition is a wholly
owned subsidiary of Cellu Parent;
WHEREAS, the Merger Agreement
contemplates that Cellu Acquisition will merge with and into Cellu
Paper, with Cellu Paper as the surviving entity (the “
Merger ”);
WHEREAS, the operations of the
Company and its Affiliates are a complex matter requiring direction
and leadership in a variety of areas, including financial,
strategic planning, regulatory, community relations and
others;
WHEREAS, the Executive is possessed
of certain experience and expertise that qualify the Executive to
provide the direction and leadership required by the Company and
its Affiliates;
WHEREAS, prior to the closing under
the Merger Agreement, the Executive was employed by the Company as
its President and Chief Executive Officer; and
WHEREAS, subject to the terms and
conditions hereinafter set forth, the Company wishes to continue to
employ the Executive as its President and Chief Executive Officer
and the Executive wishes to accept such continued employment,
effective as of the Closing;
NOW, THEREFORE, in consideration of
the foregoing premises and the mutual promises, terms, provisions
and conditions set forth in this Agreement, the parties hereby
agree:
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Employment . Subject to the terms and conditions set forth
in this Agreement, the Company hereby offers and the Executive
hereby accepts employment.
2.
Term . Subject to earlier termination as hereinafter
provided, the Executive’s employment hereunder shall be for a
term of four (4) years, commencing on the Effective Date, and
shall be automatically extended thereafter for successive terms of
one year each, unless either party provides notice to the other at
least sixty (60) days prior to the expiration of the original or
any extension term that the Agreement is not to be extended. The
term of this Agreement, as from time to time extended or renewed,
is hereafter referred to as “ the term of this
Agreement ” or “ the term hereof
.” Notwithstanding anything in this Agreement to
the contrary, this Agreement shall be null, void and without effect
upon termination of the Merger Agreement prior to consummation of
the Merger.
3.
Capacity and Performance .
(a)
Subject to earlier termination as hereinafter provided, during the
term of this Agreement, the Executive shall serve the Company as
its President and Chief Executive Officer, reporting to the Board
of Directors of the Company (the “Board”). In addition,
and without further compensation, the Executive shall serve as a
member of the Board during the term hereof. In addition, during the
term hereof, and without further compensation, the Executive shall
serve as a director and/or officer of one or more of the
Company’s Affiliates (as defined below) if so elected or
appointed from time to time.
(b)
During the term hereof, the Executive shall be employed by the
Company on a full-time basis and shall perform such duties and
responsibilities on behalf of the Company and its Affiliates
consistent with the Executive’s position with the Company as
may be designated from time to time by the Board or by its
designees. In addition, all senior executives of the Company shall
report to the Executive, unless the Executive chooses an alternate
reporting relationship for any such senior executive.
(c)
During the term of the Executive’s employment, the Executive
shall devote the Executive’s full business time and the
Executive’s best efforts, business judgment, skill and
knowledge exclusively to the advancement of the business and
interests of the Company and its Affiliates and to the discharge of
the Executive’s duties and responsibilities hereunder. The
Executive shall not engage in any other business activity or serve
in any industry, trade, professional, governmental or academic
position during the term of this Agreement, except as may be
expressly approved in advance by the Board in writing.
4.
Compensation and Benefits . As compensation for all services
performed by the Executive under and during the term hereof and
subject to performance of the Executive’s duties and of the
obligations of the Executive to the Company and its Affiliates,
pursuant to this Agreement or otherwise:
(a)
Base Salary . During the term hereof, the Company shall pay
the Executive a base salary at the rate of Four Hundred
Seventy-Five Thousand Dollars ($475,000) per annum, payable in
accordance with the normal payroll practices of the Company for its
executives and subject to increase (but not decrease) from time to
time by the Board, in its discretion. The Board will review the
Executive’s base salary each year. Such base salary, as from
time to time increased, is hereafter referred to as the “
Base Salary ”.
(b)
Annual Bonus Compensation .
(i)
During the term hereof and beginning with the first fiscal year
after the Closing Date, Executive shall be eligible to receive an
annual bonus of 100% of Base Salary (the “ Target
Bonus ”), subject to the achievement of an EBITDA target
set by the Chairman of the Board (after consultation with the
Executive), approved by the Board and subject to the terms and
conditions of any applicable annual incentive program
in
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effect from time to time (the
“ Incentive Plan ”). The amount of any bonus
awarded (whether more than or less than the Target Bonus) shall be
determined by the Board, based upon the achievement of the EBITDA
target, after the completion of the Company’s annual audit
and the Board’s review thereof, and shall further be subject
to the terms of the Incentive Plan as in effect from time to time.
Except as otherwise expressly provided under this Agreement or
under the terms of the Incentive Plan as in effect from time to
time, the Executive shall not be entitled to earn bonus
compensation for any period of service less than a full year,
except as set forth in Sections 5(a), 5(b), 5(d), 5(e),
5(g) and 5(h).
(ii)
Any bonus due hereunder shall be payable not later than two and one
half months following the fiscal year for which the bonus was
earned or as soon as is practicable within the meaning of
Section 409A of the Internal Revenue Code of 1986, as amended,
(“ Section 409A ”).
(c)
Equity Arrangements . On the Effective Date, the Company
will make a grant of restricted stock to the Executive under the
Company’s Stock Option and Restricted Stock Plan (the “
Plan ”). The terms and conditions of such restricted
stock grant shall be subject to the terms of the Plan and the
Restricted Stock Award Agreement in the form attached hereto as
Exhibit A .
(d)
Vacations . During the term hereof, the Executive shall be
entitled to four (4) weeks of vacation per annum, to be taken
at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the
Company.
(e)
Other Benefits . During the term hereof and subject to any
contribution therefor generally required of employees of the
Company, the Executive shall be entitled to participate in any and
all employee benefit plans from time to time in effect for
employees of the Company generally, except to the extent such plans
are in a category of benefit otherwise provided to the Executive.
Such participation shall be subject to (i) the terms of the
applicable plan documents, (ii) generally applicable Company
policies and (iii) the discretion of the Board or any
administrative or other committee provided for in or contemplated
by such plan. The Company may alter, modify, add to or delete its
employee benefit plans at any time as it, in its sole judgment,
determines to be appropriate, without recourse by the
Executive.
(f)
Perquisites . During the term hereof, the Executive shall be
entitled to receive any and all perquisites in effect from time to
time for senior executives of the Company generally, except to the
extent such perquisite is otherwise provided to the Executive. Such
receipt shall be subject to (i) generally applicable Company
policies and (ii) the discretion of the Board. The Company may
alter, modify, add to or delete any such perquisite at any time as
it, in its sole judgment, determines to be appropriate without
recourse by the Executive.
(g)
[Intentionally Omitted] .
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(h)
Term Life Insurance . During the term hereof, and, except as
otherwise provided herein, for a period of one (1) year
thereafter, the Company shall bear the cost of a term life
insurance policy covering Executive in the amount of $1,000,000. It
is understood that Executive shall establish a trust for the
purpose of purchasing such policy, and that the Company’s
contributions shall be made directly to such trust. All benefits of
such term life insurance policy shall inure to the
Executive’s designated beneficiaries. Such term life
insurance policy shall become effective as soon as possible after
Executive has complied with the requirements of the insurance
company underwriting such policy (including but not limited to
submission to and satisfactory results of a physical
evaluation).
(i)
Business Expenses . The Company shall pay or reimburse the
Executive for reasonable, customary and necessary business expenses
incurred or paid by the Executive in the performance of the
Executive’s duties and responsibilities hereunder, subject to
such reasonable substantiation and documentation as may be
specified by the Board or Company policy from time to
time.
(j)
Costs Related to Employment Agreement . The Company will
reimburse the Executive up to Twenty-Five Thousand Dollars
($25,000.00) for fees and expenses incurred in negotiating this
Agreement, subject to receipt of reasonable substantiation and
documentation by the Company.
(5)
Termination of Employment and Severance Benefits . The
Executive’s employment hereunder shall terminate under the
following circumstances:
(a)
Death . In the event of the Executive’s death during
the term hereof, the Executive’s employment hereunder shall
terminate and the Company shall pay or provide to the
Executive’s designated beneficiary or, if no beneficiary has
been designated by the Executive, to the Executive’s
estate: (i) any earned, but unpaid, Base Salary through
the date of termination; (ii) any earned, but unpaid annual
bonus for any fiscal year prior to the fiscal year of the
Executive’s termination; (iii) a pro rata portion (based
on the number of days preceding the Executive’s termination
in the fiscal year of termination) of the Target Bonus; (iv) a
lump sum equal to the lesser of (A) twelve (12) months of Base
Salary or (B) Base Salary for the remainder of the term
hereof; and (v) any unreimbursed business expenses. In
addition, subject to any employee contribution applicable to
employees and their dependents generally, for the twelve (12) month
period following termination, the Company shall continue to
contribute to the premium cost of coverage for the
Executive’s dependents under the Company’s medical and
dental plans provided that a timely COBRA election is made. The
payments referred to in clauses (i), (ii) and (v) above
shall be payable in a lump-sum within thirty (30) days after the
date of termination. The Company’s payments under clauses
(iii) and (iv) above, as well as the continued
contribution toward medical and dental premiums, are expressly
conditioned upon the Executive’s designated beneficiary, or
if no beneficiary has been designated, a representative of the
Executive’s estate executing and delivering to the Company a
timely and effective separation agreement, including a general
release of claims, in form and substance satisfactory to the
Company (“ Separation Agreement ”). Payment
under clauses (iii) and (iv) will be made
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within thirty
(30) days after the Company’s receipt of such release of
claims in form and substance satisfactory to the Company. Other
than as set forth in this clause (a), the Company shall have no
further obligation to the Executive’s beneficiary or the
Executive’s estate.
(b)
Disability .
(i)
The Company may terminate the Executive’s employment
hereunder, upon notice to the Executive, in the event that the
Executive becomes disabled during the Executive’s employment
hereunder through any illness, injury, accident or condition of
either a physical or psychological nature and, as a result, is
unable to perform substantially all of the Executive’s
material duties and responsibilities hereunder for (x) ninety
(90) consecutive calendar days or (y) one hundred and twenty
(120) total days during any period of three hundred and sixty-five
(365) consecutive calendar days. The Board may designate another
employee to act in the Executive’s place during any period of
the Executive’s disability.
(ii)
If any question shall arise as to whether during any period the
Executive is disabled through any illness, injury, accident or
condition of either a physical or psychological nature so as
to be unable to perform substantially all of the Executive’s
duties and responsibilities hereunder, the Executive may, and at
the request of the Company shall, submit to a medical examination
by a physician selected by the Company to whom the Executive or the
Executive’s duly appointed guardian, if any, has no
reasonable objection to determine whether the Executive is so
disabled and such determination shall for the purposes of this
Agreement be conclusive of the issue. If such question shall arise
and the Executive shall fail to submit to such medical examination,
the Company’s determination of the issue shall be binding on
the Executive.
(iii)
Upon the giving of notice of termination of the Executive’s
employment due to disability hereunder, the Company shall have no
further obligation or liability to the Executive, other than for
(i) any earned, but unpaid, Base Salary through the date of
termination; (ii) any earned, but unpaid annual bonus for any
fiscal year prior to the fiscal year of the Executive’s
termination; (iii) a pro rata portion (based on the number of
days preceding the Executive’s termination in the fiscal year
of termination) of the Target Bonus; (iv) a lump sum payment
equal to the lesser of (A) twelve (12) months of Base Salary
or (B) Base Salary for the remainder of the term hereof; and
(v) any unreimbursed business expenses. In addition,
(x) the Company shall continue the benefits contemplated by
Section 4(h) for the period contemplated therein, and
(y) subject to any employee contribution applicable to active
employees and their dependents generally, for the twelve (12) month
period following termination, the Company shall continue to
contribute to the premium cost of coverage for the Executive and
the Executive’s dependents under the Company’s medical
and dental plans provided that a timely COBRA election is made. The
payments referred to in clauses (i), (ii) and (v) above
shall be payable in a lump-sum within thirty (30) days after the
date of termination. The Company’s payments under clauses
(iii) and (iv) above, as well as the
continued
5
contribution toward medical and
dental premiums, are expressly conditioned upon the Executive (or
the Executive’s duly appointed guardian, if any) executing
and delivering to the Company a timely and effective Separation
Agreement. Payment under clauses (iii) and (iv) will be
made within thirty (30) days after the Company’s receipt of
the Separation Agreement. Other than as set forth in this clause
(b), the Company shall have no further obligation to the
Executive.
(c)
By the Company for Cause . The Company may terminate the
Executive’s employment hereunder for Cause at any time upon
notice to the Executive setting forth in reasonable detail the
nature of such Cause. The following, as determined by the Board in
its reasonable judgment, shall constitute Cause for
termination:
(i)
the Executive’s repeated and willful refusal or failure
(other than during periods of illness, disability or vacation) to
perform the Executive’s duties hereunder or under any lawful
directive of the Board (consistent with the terms of this
Agreement;
(ii)
the Executive’s willful misconduct or gross neglect in the
performance of the Executive’s duties hereunder which in
either case is materially injurious to the Company or any of its
Subsidiaries, monetarily or otherwise;
(iii)
the willful material breach of this Agreement by the
Executive;
(iv)
except as provided in clause (v) below, the conviction of the
Executive of any felony or any other crime involving dishonesty or
moral turpitude or the Executive’s pleading guilty to any
felony, other than motor vehicle offenses, or any other crime
involving dishonesty or moral turpitude;
(v)
the commission of fraud, embezzlement, theft or other dishonesty by
the Executive with respect to the Company or any of its
Affiliates;
(vi)
any other conduct that involves a breach of fiduciary obligation on
the part of the Executive or otherwise could reasonably be expected
to have a material adverse effect upon the business, interests or
reputation of the Company or any of its Affiliates; or
(vii)
a previous employer of Executive shall commence against Executive
and/or Cellu Tissue an action, suit, proceeding or demand arising
from an alleged violation of a non-competition or other similar
agreement between Executive and such previous employer.
For purposes of this
Section 5(c), no act, or failure to act, on the
Executive’s part, will be considered “willful”
unless done or omitted to be done by him not in good faith and
without a reasonable belief that the Executive’s action or
omission was in furtherance of the Company’s business. If the
Company desires to terminate the Executive’s employment
pursuant to clause (i),
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(ii), (iii) or
(v) above, it shall first give the Executive written notice of
the facts and circumstances providing Cause and shall allow the
Executive no less than twenty (20) days (x) in the case of a
proposed termination pursuant to clause (i), (ii) or
(iii) above to remedy, cure or rectify the situation giving
rise to Cause and (y) in the case of a proposed termination
pursuant to clause (v) above to explain the circumstances of
the Executive’s actions or to show that the circumstances
underlying the indictment do not constitute the type of felony
described in clause (v). Termination by the Company for Cause
pursuant to clause (iv) above may be effected by written
notice of the Company to the Executive. Upon the giving of notice
of termination of the Executive’s employment hereunder for
Cause, the Company shall have no further obligation to the
Executive, other than for (i) Base Salary earned, but unpaid
at the date of termination, (ii) any earned, but unpaid annual
bonus for any fiscal year prior to the fiscal year of termination
of the Executive’s employment; and (iii) any
unreimbursed business expenses.
(d)
By the Company without Cause . The Company may terminate the
Executive’s employment hereunder without Cause at any time
upon notice to the Executive. In the event of such termination, the
Company shall have no further obligation or liability to the
Executive, other than for (i) any earned, but unpaid, Base
Salary through the date of termination; (ii) any earned, but
unpaid annual bonus for any fiscal year prior to the fiscal year of
the Executive’s termination; (iii) a pro rata portion
(based on the number of days preceding the Executive’s
termination in the fiscal year of termination) of the Target Bonus;
(iv) a lump sum equal to the greater of (x) twenty-four
(24) months of Base Salary or (y) Base Salary for a period
equal to the remainder of the term of this Agreement; (v) a
lump sum equal to the greater of (x) one times the Target
Bonus or (y) payment of the Target Bonus with respect to a
period equal to the remainder of the term of this Agreement; and
(vi) any unreimbursed business expenses. In addition,
(x) the Company shall continue the benefits contemplated by
Section 4(h) for the period contemplated therein, and
(y) subject to any employee contribution applicable to
employees and their dependents generally, for the period following
termination specified in clause (iv) above, or if earlier,
until the date that the Executive becomes eligible for coverage
with a subsequent employer, the Company shall continue to
contribute to the premium cost of coverage for the Executive and
the Executive’s dependents under the Company’s medical
and dental plans provided that a timely COBRA election is made. The
payments referred to in clauses (i), (ii) and (vi) above
shall be payable in a lump-sum within thirty (30) days after the
date of termination. The Company’s payments under clauses
(iii), (iv) and (v) above, as well as the continued
contribution toward medical and dental premiums, are expressly
conditioned upon the Executive executing and delivering to the
Company a timely and effective Separation Agreement. Payment under
clauses (iii), (iv) and (v) will be made within thirty
(30) days after the Company’s receipt of the Separation
Agreement. Other than as set forth in this clause (d), the Company
shall have no further obligation to the Executive.
(e)
By the Executive for Good Reason . The Executive may
terminate the Executive’s employment hereunder for Good
Reason, provided that the Executive shall have given written notice
setting forth in reasonable detail the nature of such Good Reason
to the Company upon the Executive’s becoming aware or at such
time as Executive should have been aware of the occurrence of any
such event or condition, and the Company shall not have
fully
7
corrected the
situation within ten (10) days after such notice of Good
Reason. The following shall constitute “ Good Reason
” for termination by the Executive:
(i)
failure by the Company to pay any compensation when due
hereunder;
(ii)
any significant reduction by the Company’s of the
Executive’s title, duties or responsibilities (except in
connection with termination of the Executive’s employment for
Cause, as a result of Disability, as a result of the
Executive’s death or by the Executive other than for Good
Reason);
(iii)
a reduction by the Company in the Executive’s Base Salary or
any other compensation due hereunder; or
(iv)
any material breach by the Company of any other provision of this
Agreement.
If the Executive
desires to terminate the Executive’s employment with the
Company pursuant to this Section 5(e), the Executive shall
first give written notice of the facts and circumstances providing
Good Reason to the Company, and shall allow the company no less
than twenty (20) days to remedy, cure or rectify the situation
giving rise to Good Reason. The Company’s failure to continue
the Executive’s appointment or election as a director or
officer of any of its Affiliates, a change in reporting
relationships resulting from the direct or indirect control of the
Company (or a successor corporation) by another corporation (in the
absence of an independent change constituting Good Reason as
defined above) and any diminution of the business of the Company or
any of its Affiliates or any sale or transfer of equity, property
or other assets of the Company or any of its Affiliates (in the
absence of an independent change constituting Good Reason as
defined above) shall not constitute Good Reason. In the event of
termination in accordance with this Section 5(e), then the
Executive will be entitled to receive the payments and benefits in
accordance with Section 5(d) hereof provided the
Executive complies with the requirement of executing and delivering
the Separation Agreement. Other than as set forth in this clause
(e), the Company shall have no further obligation to the
Executive.
(f)
By the Executive Without Good Reason . The Executive may
terminate the Executive’s employment hereunder at any time
upon sixty (60) days’ written notice to the Company. In the
event of termination of the Executive pursuant to this
Section 5(f), the Board may elect to waive the period of
notice, or any portion thereof, and, if the Board so elects, the
Company will pay the Executive the Executive’s Base Salary
for the notice period (or for any remaining portion of the period).
The Company shall also pay the Executive (i) any earned, but
unpaid annual bonus for any fiscal year prior to the fiscal year of
the termination of the Executive’s employment, and
(ii) any unreimbursed business expenses.
(g)
Non-Renewal by Company . The Company may elect not to renew
this Agreement in accordance with Section 2 above. In the
event of such non-renewal for a reason
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other than Cause
(as defined in Section 5(c) above), the Company shall
have no further obligation or liability to the Executive other than
for (i) any earned, but unpaid, Base Salary through the date
of termination; (ii) any earned, but unpaid annual bonus for
any fiscal year prior to the fiscal year of the Executive’s
termination; (iii) a pro rata portion (based on the number of
days preceding the Executive’s termination in the fiscal year
of termination) of the Target Bonus; (iv) a lump sum equal to
twenty-four (24) months of Base Salary and (v) any
unreimbursed business expenses. In addition, subject to any
employee contribution applicable to employees and their dependents
generally, for the twenty-four (24) month period following
termination, or if earlier until the date that the Executive
becomes eligible for coverage with a subsequent employer, the
Company shall continue to contribute to the premium cost of
coverage for the Executive and the Executive’s dependents
under the Company’s medical and dental plans provided that a
timely COBRA election is made. The payments referred to in clauses
(i), (ii) and (v) above shall be payable in a lump-sum
within thirty (30) days after the date of termination. The
Company’s payments under clauses (iii) and
(iv) above, as well as the continued contribution toward
medical and dental premiums, are expressly conditioned upon the
Executive executing and delivering to the Company a timely and
effective Separation Agreement. Payment under clauses
(iii) and (iv) will be made within thirty (30) days after
the Company’s receipt of such Separation Agreement. Other
than as set forth in this clause (g), the Company shall have no
further obligation to the Executive or the Executive’s estate
hereunder.
(h)
Change of Control/Gross Up Payment .
(i)
If a Change of Control occurs and, within three (3) months
before and two (2) years following such Change of Control, the
Company terminates the Executive’s employment other than for
Cause or by reason of death or disability, or the Executive
terminates the Executive’s employment for Good Reason, then,
in lieu of any payments to or on behalf of Executive under Sections
5(d), 5(e) or 5(g) hereof, the Company shall have no
further obligation or liability to the Executive, other than for
(i) any earned, but unpaid, Base Salary through the date of
termination; (ii) any earned, but unpaid annual bonus for any
fiscal year prior to the fiscal year of the Executive’s
termination; (iii) a pro rata portion (based on the number of
days preceding the Executive’s termination in the fiscal
year
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