Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT
AGREEMENT (the “ Agreement ”) made and entered
into by and between Cellu Tissue Holdings, Inc., a Delaware
corporation (the “ Company ”), and Mr. David J.
Morris (the “ Executive ”), effective as of
August 6, 2007, and which is hereafter referred to as the “
Effective Date .
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, subject
to the terms and conditions hereinafter set forth, the Company
wishes to employ the Executive as its Chief Financial Officer and
the Executive wishes to accept such continued
employment;
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:
1.
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 .”
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 Chief Financial Officer, reporting to the Company’s Chief
Executive Officer. In addition, 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 Chief Executive
Officer.
(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 Chief Executive Officer 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 Two Hundred
Fifty Thousand Dollars ($250,000) per annum, payable in accordance
with the normal payroll practices of the Company for its executives
and subject to increase (but not decrease). The
Company’s Board of Directors (the “Board”) at the
request of the Chief Executive Officer 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 Effective Date, Executive shall be eligible to receive an
annual bonus of 50% of Base Salary (the “ Target Bonus
”), subject to the achievement of an EBITDA target set by the
Company, approved by the Board and subject to the terms and
conditions of any applicable annual incentive program in 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 Company,
and subject to Board approval, 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; (1) the Executive shall be entitled to earn a pro rated
share of bonus compensation for the time period of employment from
the Effective Date until the end of that first fiscal year; and (2)
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
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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 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)
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.
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
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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 general release of
claims , in form and substance satisfactory to the Company
(“Separation Agreement”). Payment under clauses
(iii) and (iv) will be made 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
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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 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;
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(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), (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.
U pon 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 the 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
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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
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 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.
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(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 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 . The Company and
the Executive agree that in the event that any of the severance
payments or severance benefits under Sections 5(d), 5(e), 5(g) or
5(h) of this Agreement might be characterized as parachute payments
under Section 280G of the Internal Revenue Code of 1986, as amended
(“ Section 280G ”), the parties shall timely
take reasonable steps to avoid the tax liability under Section 280G
and Section 4999 of the Internal Revenue Code of 1986, as amended
(the “ Code ”) to the extent permitted by
law. Accordingly, the Executive agrees to cooperate fully in
procuring a shareholder vote (including, but not limited to,
providing any required consents or waivers) to approve the
severance payments or severance benefits under this Agreement
received, to be received by, or payable on behalf of, the Executive
in satisfaction of the shareholder approval requirements described
in Treas. Reg. Section 1.280G-1, Q&A-7, to the extent
applicable. If the shareholder approval requirements
described in Treas. Reg. Section 1.280G-1, Q&A-7 cannot be
satisfied and if the Company determines that any of the severance
payments or severance benefits under
8
this Agreement
received, to be received by, or payable on behalf of, the Executive
would be subject to the excise tax imposed by Section 4999 of the
Code, (the “ Excise Tax ”), then the Company
will, on or prior to the date on which the Excise Tax must be paid
or withheld, make an additional lump sum payment (the “
gross up payment ”) to the Executive. The gross
up payment will be sufficient, after giving effect to federal,
state, and local income taxes (excluding any taxes impo
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