Exhibit 10.3
EMPLOYMENT
AGREEMENT
T HIS E MPLOYMENT A GREEMENT is made as of June 17, 2004 (this “
Agreement ”), by and between Bear Creek Corporation, a
Delaware corporation (the “ Company ”), and
William H. Williams (“ Executive ”).
RECITALS
1. Prior to the date hereof,
Executive was employed by the Company’s parent corporation,
Yamanouchi Consumer Inc., a Delaware corporation (“
YCI ”).
2. On the date hereof, Pear
Acquisition Inc., a Delaware corporation that subsequent to the
date hereof will change its name to Bear Creek Holdings Inc.
(“ Holdings ”), purchased all of the outstanding
capital stock of the Company from YCI.
3. The Company and Executive wish to
enter into a formal employment contract that will govern the terms
and conditions applicable to Executive’s employment with the
Company;
Accordingly, the parties agree as
follows:
I. TERMS AND CONDITIONS OF
EMPLOYMENT
1.1 Duties and
Responsibilities .
(a) Commencing on the date hereof (the “ Effective
Date ”) and terminating on the earlier of (i) the fourth
anniversary (each such anniversary, an “ Anniversary
”) of the Effective Date (or any subsequent date to which the
Employment Period is extended as provided below) and (ii) any
earlier date of termination of Executive’s employment
pursuant to Article II (the “ Employment Period
”), Executive will serve as Chief Executive Officer of the
Company and will in such capacity report directly to the board of
directors of the Company (the “ Board ”) or an
executive committee thereof. On June 17, 2008 and on each June 17
thereafter, the Employment Period will be automatically extended
for one additional year, unless either party gives written notice
to the other party by the April 15 immediately prior to such June
17 that it elects not to extend the Employment Period for one
additional year, in which case the Employment Period will expire on
the June 17 following the date of such notice.
(b) Executive will perform and
undertake in good faith and to the best of his ability the
customary duties and responsibilities of a chief executive officer
relative to the Company and as may be assigned to him from time to
time by the Board or a committee thereof.
(c) During the Employment Period,
Executive will devote his full working time and attention during
normal business hours to the business and affairs of the Company
and its Subsidiaries.
(d) As long as Executive serves as
the Chief Executive Officer of the Company, he will be entitled to
serve on the Board.
(e) So long as such activities do
not interfere with Executive’s duties hereunder and except as
provided in Article III, Executive may serve on the boards of
directors of other companies in the future, in each case with the
Board’s prior written consent and provided the Board
determines such board membership would benefit the Company;
continue to serve on the board of directors of Altura International
Inc.; make and manage Executive’s private passive investments
of his choice; and participate in any capacity with any civic,
educational or charitable organization or governmental entity or
trade association. Notwithstanding the foregoing, promptly after
notice from the Board, Executive will resign from any board of
directors (or comparable governing body) of any legal entity that
the Board determines in good faith to be a competitor of the
Company or if the Board determines in good faith that such board
(or comparable governing body) membership impairs or detracts from
Executive’s ability to perform his duties
hereunder.
1.2
Compensation . (a)
During the Employment Period, Executive will be paid a base salary
at the initial annual rate of not less than $567,600 (such salary
at any time being referred to as “ Base Salary
”). Such rate will be subject to review by the Board (or a
committee thereof) not less frequently than annually and may be
increased (but not decreased) annually in the sole discretion of
the Board (or a committee thereof) by such amount, if any, as the
Board (or a committee thereof) determines in its sole discretion.
In making any such determination, the Board (or a committee
thereof) will take into account, among other things,
Executive’s performance; the historical business practices of
the Company; salary adjustments for key executives in other
comparable companies as determined by the Board (or a committee
thereof) or the Company’s compensation consultants; and the
Company’s financial performance, condition and prospects.
Base Salary will be paid in substantially equal installments at
periodic intervals in accordance with the Company’s payroll
practices for salaried employees, but not less frequently than
semi-monthly or bi-weekly as determined by the Company in its sole
discretion.
(b) Executive will participate in
the Company’s Annual Incentive Plan on the terms and
conditions then applicable generally to other executives of the
Company. However, Executive’s target bonus will be 70% of
Base Salary with the actual bonus ranging from 0% to 140% of Base
Salary, depending upon the performance of the Company and
Executive, or such higher percentages as may from time to time be
determined by the Board (or a committee thereof) in its sole
discretion. Within the foregoing parameters and except as provided
below, the Board (or a committee thereof) will determine in its
sole discretion the exact amount of the Annual Incentive Plan bonus
to be paid each year. Notwithstanding the foregoing, for the fiscal
year ending March 26, 2005, Executive will be entitled to receive,
on or before May 13, 2005, a minimum bonus under the Annual
Incentive Plan equal to 70% of the Base Salary in effect on the
date hereof, provided that the amount payable to Executive
under this sentence will be reduced by any amounts withheld by the
Company as provided in Section 3 of the Note (as defined below).
Any bonus to which Executive is entitled as provided above will be
paid in accordance with the Company’s payroll practices for
salaried employees and the Company’s Annual Incentive
Plan.
1.3 Equity
Compensation . (a)
Executive will be entitled to participate in Holdings’ 2004
Stock Option Plan, as amended from time to time (the “
Plan ”), subject to the terms and conditions of the
Plan and any related option agreement contemplated by the Plan. The
Board (or a committee thereof) may, from time to time and upon the
terms and conditions adopted
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thereby, recommend that Executive be granted
stock options under the Plan. Except as provided in Section 1.3(b),
the granting of any such options will be at the sole discretion of
the Board (or a committee thereof) and the Company will have no
obligation to grant any such options.
(b) As of the Effective Date,
Employee will be granted options (“ Options ”)
under the Plan to purchase shares of common stock, par value $.01
per share (“ Common Stock ”), of Holdings,
representing 2.5% of the sum of (i) the aggregate number of shares
of Common Stock outstanding on the Effective Date and (ii) the
number of shares of Common Stock to be reserved for issuance on the
Effective Date under the Company’s stock option plan. The
Options will be granted pursuant to and be governed by an option
agreement and the Plan and will have the following terms in
addition to those contained in such option agreement:
(i) 20% of the Options will vest and
become exercisable on the first Anniversary and the second
Anniversary, and 5.0% of the Options will vest and become
exercisable on the 17 th day of each third calendar month
after the Second Anniversary. Notwithstanding the foregoing, in the
event of Executive’s Involuntary Termination before the
second Anniversary, those Options that would have become vested as
provided above on the second Anniversary, to the extent not already
vested as provided above, will become immediately vested as of the
date of such Involuntary Termination;
(ii) the Options will have an
exercise price of $82.60 per share of Common Stock;
(iii) in the event of any
resignation by Executive or in the event of any termination of
Executive’s employment hereunder, the Options that are vested
on the date of such resignation or termination must be exercised
(if at all) within 30 days after the date of such resignation or
termination; provided , however , that in the event
of Executive’s death or Involuntary Termination, such vested
Options must be exercised (if at all) within 120 days after death
or such Involuntary Termination;
(iv) in the event of a Change in
Control, the Options that have not become vested as provided above
before such Change in Control will become immediately vested as of
the date of such Change in Control. Notwithstanding the foregoing,
the initial public offering of the Company’s capital stock
under the Securities Act of 1933, as amended, will not constitute a
Change in Control, unless such initial public offering results in
Affiliates of Wasserstein & Co., LP or of Highfields Capital
Management LP collectively (A) owning, directly or indirectly, less
than a majority of the total voting power represented by the
Company’s then outstanding Voting Securities and (B) ceasing
to have the power through contract or otherwise to elect or appoint
a majority of the members of the Board;
(v) as a condition to exercising any
Options that are or become vested as provided above (other than as
a result of a Change in Control), Executive will become a party to
and be bound by that certain Stockholders Agreement dated
as
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of June 17, 2004 (the “
Stockholders Agreement ”), among Holdings, U.S. Equity
Partners II, LP, U.S. Equity Partners II (U.S. Parallel), LP, U.S.
Equity Partners (Offshore) II, LP, Highfields Capital I LP,
Highfields Capital II LP and Highfields Capital Ltd.;
(vi) upon termination of
Executive’s employment hereunder for any reason, all of
Executive’s Options which are not then vested (and do not
vest as a result of such termination) will be forfeited and deemed
canceled; and
(vii) the shares of Common Stock
issuable in connection with the exercise of the Option will be
subject to the Company’s Repurchase Right as provided in the
Plan and the option agreement relating to the grant of
Options.
1.4 Participation in Employee
Benefits Plans . (a)
Executive will be eligible to participate in the plans of the
Company generally available to other senior executives relating to
pension, cash or deferred arrangements under Section 401(k) of the
Internal Revenue Code of 1986, as amended (the “ Code
”), life insurance, disability, medical coverage, education
or other retirement or employee benefits that the Company has or
may adopt for the benefit of its employees, as they may be in
effect from time to time. Notwithstanding the foregoing, Executive
will not be entitled to receive benefits under any severance plan,
program or arrangement of the Company, including, but not limited
to, the Bear Creek Corporation Severance Pay Plan since such
severance benefits are provided for in this Agreement.
(b) Executive will accrue paid
vacation benefits during the Employment Period in accordance with
the Company’s paid time off practices for salaried
employees.
(c) For purposes of the
Company’s Excess Pension Plan, Executive will be entitled to
elect a lump sum distribution of his benefit thereunder, calculated
under the formula in such plan as of the Effective Date, anything
in such plan to the contrary notwithstanding.
1.5 Fringe
Benefits . In
addition to the benefit plans referred to above, Executive will be
entitled to participate in any other fringe benefits that are now
or may become applicable to the Company’s executive
employees, including any supplemental life insurance benefit for
executives of the Company. As of the Effective Date, these fringe
benefits include an annual car allowance of $14,400; a
comprehensive annual physical examination; financial consulting,
tax preparation and planning of the type and to the extent provided
generally to the Company’s executive officers; for so long as
Executive continues to reside in the Medford, Oregon area, payment
of dues and assessments for the social club and country club of
which Executive currently is a member in the Medford, Oregon area,
in the amount provided for in the Company’s policy for its
executive officers; and membership dues and assessments for the
Arlington Club in Portland, Oregon; participation by Executive (and
Executive’s spouse, if such event includes spouses) in one
national or international education event per year sponsored by the
World Presidents’ Organization to be reasonably approved by
the Board; and, with the prior consent of the Board, participation
in the Company’s Sabbatical Program.
1.6 Expense
Reimbursement .
Executive will be entitled to receive reimbursement from the
Company for reasonable business expenses incurred by Executive in
the performance of
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his duties hereunder, provided Executive
furnishes the Company with reasonable substantiating documentation
in accordance with the Company’s reimbursement policies in
effect from time to time.
1.7 Certain Loan and
Investment Matters .
In connection with the investment (the “ Investment
”) by Executive in the amount of $300,000 in USEP II
Co-Investment Partners, LLC (the “ Sidecar ”),
as soon as practicable after Executive notifies the Company, the
Company will lend Executive an aggregate of $250,000, against
delivery by Executive to the Company of a promissory note (the
“ Note ”) in the form of Exhibit A .
Executive will use the loan proceeds described above, together with
$50,000 of his personal funds, only to invest in the Sidecar as
described above. Executive and USEP II Co-Investment Partners, LLC
will enter into an agreement (the “ Transfer Agreement
”) dated as of the date of the Investment that will provide,
among other things, that while the Note is outstanding (i) the
Sidecar will have the right (“ Transfer Right ”)
to require Executive to transfer and assign to the Sidecar all of
the membership interests (“ Interests ”) in the
Sidecar that Executive purchased in connection with the Investment;
(ii) upon receipt of notice of exercise of such Transfer Right from
the Sidecar, Executive will transfer and assign to the Sidecar all
of such Interests; (iii) except as otherwise provided in the
Transfer Agreement, Executive will not be entitled to receive any
consideration or other payment from the Sidecar in connection with
the exercise of the Transfer Right; and (iv) the Transfer Right
will become exercisable only upon any (x) termination of
Executive’s employment hereunder by reason of a voluntary
resignation by Executive which does not constitute an Involuntary
Termination or (y) termination of Executive’s employment
hereunder by the Company for Cause. In addition, Executive will be
entitled to direct his individual retirement account to invest
$100,000 in the Sidecar. Such additional investment will also be
subject to the Transfer Agreement.
II. TERMINATION OF
EMPLOYMENT
2.1 Involuntary
Termination . (a) The
Company may terminate Executive’s employment under this
Agreement at any time for any reason, with or without Cause, by
giving prior notice of such termination to Executive. If such
termination notice is given to Executive, the Company may, if it so
desires, immediately relieve Executive of some or all of his
duties.
(b) In the event of an Involuntary
Termination of Executive, Executive will be entitled to
receive:
(i) a severance payment equal to
100% of Executive’s then applicable Base Salary for a period
(the “ Severance Period ”) of (A) two years if
such Involuntary Termination occurs before the second Anniversary,
(B) 18 months if such Involuntary Termination occurs on or after
the second Anniversary but before the third Anniversary or (C) 12
months if such Involuntary Termination occurs on or after the third
Anniversary;
(ii) the applicable Bonus Severance
Amount. “ Bonus Severance Amount ” means an
amount equal to the Target Bonus multiplied by (A) 2.0 if such
Involuntary Termination occurs before the second Anniversary, (B)
1.5 if such Involuntary Termination occurs on or after the second
Anniversary but
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before the third Anniversary or (C)
1.0 if such Involuntary Termination occurs on or after the third
Anniversary. “ Target Bonus ” means the target
bonus payable under Section 1.2(b) for the year in which an
Involuntary Termination occurs, calculated as if Executive had
remained employed by the Company through the end of such
year;
(iii) payment of the dollar value
(determined based upon Base Salary) for any vacation time accrued
during the calendar year in which such Involuntary Termination
occurs but that is unused as of the date of such termination;
and
(iv) to the extent eligible on the
date of termination, and to the extent permissible under the terms
of the applicable plans, continued participation in all welfare
plans, subject to the same employee contribution levels as in
effect from time to time for similarly situated executives, until
the earliest to occur of (i) (A) two years after the date of any
such Involuntary Termination that occurs before the second
Anniversary, (B) 18 months after the date of any such Involuntary
Termination that occurs on or after the second Anniversary but
before the third Anniversary and (C) 12 months after the date of
any such Involuntary Termination that occurs after the third
Anniversary, and (ii) the first date that Executive is covered
under a health benefit program that provides substantially the same
level of benefits without exclusion for pre-existing medical
conditions. To the extent such coverage cannot be provided under
the Company’s welfare benefit plans without jeopardizing the
tax status of such plans, for underwriting reasons or because of
the tax impact on Executive, the Company will reimburse Executive
for the portion of the costs of continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act
(“COBRA”) that exceeds Executive’s group health
plan contribution from time to time, and to the extent that COBRA
coverage is not available, the Company will pay Executive an amount
such that Executive can purchase such benefits separately at no
greater after tax cost (net of Executive’s contributions) to
Executive had Executive been covered under the plans as set forth
above. Any benefit participation described in this subsection will
be offset against the requirements of COBRA.
(c) The payments contemplated by
Section 2.1(b) (i), (ii), (iii) and (iv) will be made in equal
quarterly installments beginning on the first day of the month
immediately following the month in which such Involuntary
Termination occurs and at the beginning of each third calendar
month thereafter. Notwithstanding anything to the contrary in this
Agreement, Executive will not be entitled to receive any payments
under Section 2.1(b) unless Executive executes and delivers to the
Company a release in the form of Exhibit B , with all
periods of revocation thereof having expired.
2.2 Voluntary Resignation by
Executive . (a)
Executive may terminate his employment hereunder at any time by
giving the Company at least 60 days’ prior written notice of
such termination. If such notice is given by the Executive to the
Company, the Company may, if it so desires, immediately relieve
Executive of some or all of his duties. Notwithstanding anything to
the contrary in this Agreement, no action by the Company following
such notice will be deemed to be an Involuntary
Termination.
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(b) Upon the termination of
Executive’s employment by reason of a voluntary resignation
by Executive which does not constitute an Involuntary Termination,
Executive will be entitled to receive only any unpaid Base Salary
accrued for services rendered through the date of termination and
the dollar value (determined based upon Base Salary) for vacation
time accrued during the current calendar year but unused as of the
date of termination.
2.3 Termination by the Company
for Cause . (a) The
Company may terminate Executive’s employment hereunder for
Cause by written notice, to be effective immediately upon
Executive’s receipt of such notice.
(b) Should Executive’s
employment hereunder be terminated by the Company for Cause,
Executive will be entitled to receive only any unpaid Base Salary
accrued for services rendered through the date of termination and
the dollar value (determined based upon Base Salary) for vacation
time accrued during the current calendar year but unused as of the
date of termination.
2.4 Death or
Disability . (a) In
the event Executive’s employment hereunder terminates by
reason of Executive’s death or Disability, the Company will
be required to pay Executive or Executive’s estate (i) any
unpaid Base Salary accrued for services rendered through the date
of Executive’s death or Disability and through the end of the
calendar month next succeeding such date of death or termination
for Disability and (ii) the dollar value (determined based upon the
annual rate of Base Salary in effect for Executive at the time of
his death or Disability) of all vacation time accrued during the
current calendar year but unused as of the date of death or
Disability.
(b) During any period that Executive
fails to perform his duties as a result of a Disability (“
disability period ”), Executive will continue to
receive his full Base Salary at the rate then in effect for such
period until his employment is terminated pursuant to Section
2.4(a), provided that payment so made to Executive during
the disability period will be reduced by the sum of the amounts, if
any, payable to Executive at or prior to the time of any such
payment under the disability benefit plans of the Company or under
the Social Security disability insurance program.
2.5 Termination of
Benefits .
Notwithstanding anything to the contrary in this Agreement, all
payments and benefits under this Article II will immediately
terminate in the event Executive fails to abide by the restrictive
covenants in Article III.
2.6 Cooperation in Claims or
Litigation . For a
period of two years after any termination or resignation of
Executive’s employment hereunder, Executive will meet with
the Company upon request, at dates and times mutually agreeable to
Executive and the Company, to discuss any claim or litigation
involving the Company or its Subsidiaries which involves issues of
which he has knowledge and cooperate in the defense or prosecution
of such matters. Executive will notify the Company immediately if
he is subpoenaed or otherwise served with legal process in any
lawsuit involving the Company or its Subsidiaries and to testify
truthfully and honestly in any such proceeding. Executive will
notify the Company if any attorney who is not representing the
Company contacts or attempts to contact Executive to obtain
information that in any way relates to the Company or its
Subsidiaries, and Executive will not discuss any of
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these matters with any such attorney without
first so notifying the Company and providing the Company with an
opportunity to have its attorney present during any meeting or
conversation with any such attorney. The Company will reimburse
Executive for all reasonable out-of-pocket expenses incurred in
connection with performing the activities provided for in this
Section 2.6, subject to receiving reasonable substantiating
documentation relating to such expenses. No compensation will be
paid to Executive in connection with his obligations under this
Section 2.6. The Company will indemnify Executive for damages and
costs that he incurs in connection with any claim or litigation
involving the Company or its Subsidiaries to the fullest extent
permitted by the Delaware General Corporation Law and the
Company’s certificate of incorporation or bylaws.
2.7 Certain Tax
Matters . (a) If it
is determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to or for the
benefit of Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise
pursuant to or by reason of any other agreement, policy, plan,
program or arrangement, including without limitation any stock
option, restricted stock, performance share, performance unit,
stock appreciation right or similar right, or the lapse or
termination of any restriction on, or the vesting or exercisability
of, any of the foregoing (a “ Payment ”), would
be subject to the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) by reason of being considered
“contingent on a change in ownership or control” of the
Company, within the meaning of Section 280G of the Code (or any
successor provision thereto) or to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax
(such tax or taxes, together with any such interest and penalties,
being hereafter collectively referred to as the “ Excise
Tax ”), but for the application of this sentence, then
the payments and benefits to be paid or provided under this
Agreement will be reduced to the minimum extent necessary (but in
no event to less than zero) so that no portion of any such payment
or benefit, as so reduced, will constitute an “excess
parachute payment” within the meaning of Section 280G of the
Code; provided , however , that the foregoing
reduction will be made only if and to the extent that such
reduction would result in an increase in the aggregate payment and
benefits to be provided, determined on an after-tax basis (taking
into account the excise tax imposed pursuant to Section 4999 of the
Code, or any successor provision thereto, any tax imposed by any
comparable provision of state law, and any applicable federal,
state and local income and employment taxes). The determination of
whether any reduction in such payments or benefits to be provided
under this Agreement or otherwise is required pursuant to the
preceding sentence will be made at the expense of the Company, if
requested by Executive or the Company, by the Company’s
independent accountants. The fact that Executive’s right to
payments or benefits may be reduced by reason of the limitations
contained in this Section 2.7 will not of itself limit or otherwise
affect any other rights of Executive other than pursuant to this
Agreement. In the event that any payment or benefit intended to be
provided under this Agreement or otherwise is req
