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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 required to be reduced pursuant to this Section 2.7,
Executive will be entitled to designate the payments and/or
benefits to be so reduced in order to give effect to this Section
2.7. The Company will provide Executive with all information
reasonably requested by Executive to permit Executive to make such
designation. In the event that Executive fails to make such
designation within 10 business days of the effective date of
Executive’s termination of employment or other event
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