EXHIBIT 10.7
Conformed Copy
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
the 4th day of November 1997, by and among U.S. Timberlands Services Company,
L.L.C., a Delaware limited liability company (the "Company"), U.S. Timberlands
Company, L.P., a Delaware limited partnership ("UST"), New Services (as defined
below), a Delaware limited liability company, and Xxxx X. Xxxxx ("Executive").
Recitals:
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A. The Company desires to employ Executive as its Chairman, and Executive
desires to accept such employment, on the terms and conditions set forth in this
Agreement.
B. A new limited partnership, UST, has been formed and a new limited
liability company to be re-named "U.S. Timberlands Service Company, L.L.C."
("New Services"), has been formed to serve as the general partner of UST and as
the managing member of certain affiliated limited liability companies (together
with any subsidiary entities, the "UST Group") and upon the initial public
offering of the units representing limited partner interests in UST (the "IPO"),
New Services will assume the obligations of the Company hereunder as more fully
described in Section 12.2.
C. To induce Executive to accept such employment, UST desires to guarantee
the performance by the Company of its obligations hereunder.
Agreements:
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NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:
Section 1. Employment
The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.
Section 2. Term
Subject to the provisions of Section 6, Executive's employment by the
Company under this Agreement shall be for a term (the "Term") commencing on the
date hereof and expiring on December 31, 2002.
Section 3. Executive's Duties
3.1 Duties. Executive shall hold the position of the Company's Chairman.
Subject to the control of the board of directors or other governing body of the
Company (the "Board"), and any limitations set forth in the operating agreement
of the Company (the "Company Agreement") and in the agreements of limited
partnership of the partnerships and the operating agreements of the limited
liability companies within the UST Group, Executive shall, in general, oversee
the Chief Executive Officer of the Company in the supervision and control of all
the day-to-day business and affairs of the Company and the UST Group.
3.2 Performance of Duties. Executive shall perform Executive's duties and
responsibilities during the Company's normal business hours and at all other
times reasonably necessary to comply with the terms and conditions of this
Agreement. Executive shall devote the time and attention required to the
performance of Executive's duties and responsibilities for and on behalf of the
Company on the terms set forth in this Section 3.2. In addition, Executive may
from time to time serve as a consultant to and/or as a member of the board of
directors of other entities, provided that the Board in good faith determines
that such activities do not unreasonably interfere with the business of the
Company and the UST Group and the performance of Executive's duties hereunder.
The parties acknowledge that Executive currently serves as a board member or
advisory member of various civic and charitable organizations and may continue
to participate in these activities, subject to the limitations set forth in the
first two sentences of this Section 3.2; provided, however, that such continued
participation shall in no event be deemed a violation of the limitations of the
first two sentences of this Section 3.2 unless and until Executive shall have
been notified in writing thereof and afforded a reasonable opportunity to cure
the violation.
3.3 Principal Place of Employment. Executive's principal place of
employment shall be at the location of the Company's executive offices in New
York City or at any other location which the Company establishes as its
executive offices. The Company shall provide Executive, at his principal place
of employment, with a private office, secretarial services and such other
facilities and support services as are appropriate to the position of Chairman
and necessary or appropriate in the performance of Executive's assigned duties.
Section 4. Compensation and Other Benefits
Executive shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Executive
hereunder:
4.1 Salary and Bonuses. During the Term, the Company shall pay Executive
an annual base salary of $300,000, payable in equal installments during the year
in accordance with the Company's customary practices for senior executives
("Base Salary"). The amount of Executive's Base Salary may be increased from
time to time by the Board, and, once increased, such higher
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amount shall become the Base Salary for all purposes of this Agreement and may
not thereafter be reduced. The Company shall also pay to Executive, to the
extent earned, an annual cash bonus, not to exceed 100% of Base Salary, which
shall be based on the performance of Executive and the UST Group's business as
determined annually by the Compensation Committee of the Board in its
discretion. The Company shall have the right to deduct and withhold from
Executive's compensation all taxes and charges that are currently or that
hereafter may be required by law to be so deducted and withheld.
The Company shall establish a program whereby Executive may, at his option,
defer receipt of any or all of the Base Salary and bonuses otherwise payable to
him under this Agreement. Any amounts so deferred shall be placed in a "rabbi"
trust, with a bank or other financial institution reasonably satisfactory to
Executive, as trustee, providing the maximum security to Executive without
causing the constructive receipt of income for federal income tax purposes and
distributed, together with interest or other earnings thereon, according to a
payment schedule to be designated by Executive.
4.2 Long Term Incentive Plan. Executive shall be entitled to participate
in the Long Term Incentive Plan ("LTIP") adopted by the Company on the terms and
conditions set forth therein. Concurrently with the IPO, Executive will be
granted Unit Options (as defined in the LTIP) pursuant to the LTIP in an amount
equal to 12.5% of the number of Unit Options initially available to be granted
under the LTIP and substantially in the form of the grant agreement attached
hereto as Attachment A.
4.3 Participation in Benefit Plans. During the Term, Executive shall be
eligible to participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established that are generally applicable to
other senior executives of the Company, including, without limitation, all life,
group insurance, and medical and dental care plans and all disability,
retirement, 401(k) and other employee benefit plans of the Company, as long as
any such plan or arrangement remains generally applicable to other senior
executives of the Company. Executive shall also be entitled to the same
vacation benefits as are generally available to senior executives of the
Company, provided in any case that Executive shall have a minimum of four weeks'
vacation per year.
4.4 Reimbursement of Expenses. The Company shall reimburse Executive for
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder in accordance with the policy of the Company for reimbursement
of expenses as adopted by the Board from time to time and generally applicable
to all senior executives of the Company. Executive shall furnish the Company
with the supporting documentation required under the Company's policy in
connection with the reimbursement of such expenses.
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Section 5. Membership on the Board
Executive shall be entitled to membership on the Board in accordance with
the terms of the Company Agreement as in effect on the date the Company
Agreement is first executed.
Section 6. Termination
6.1 Termination by the Company Without Cause. The Company may terminate
Executive's employment other than for Cause or Executive becoming Disabled (as
such terms are defined below) at any time during the Term if the Board
determines, in its sole discretion, that the continued employment of Executive
is not in the continued interests of the Company. In the event the Company
terminates Executive's employment pursuant to this Section 6.1, then Executive
shall be paid on termination (i) any unpaid Base Salary earned hereunder prior
to the termination date, (ii) all unused vacation time accrued by Executive as
of the termination date in accordance with the Company's vacation policy for
senior executives, (iii) all unpaid amounts of compensation in which Executive
is vested as of the termination date under any and all incentive compensation
plans or programs of the Company, (iv) any expenses in respect of which
Executive has requested, and is entitled to, reimbursement in accordance with
Section 4.4, (v) a prorated bonus for the year of such termination calculated
based on the bonus being equal to 100% of Base Salary, and (vi) an amount equal
to the amount of Base Salary that Executive would receive if Executive's
employment had continued without change through the remainder of the Term or for
12 months, whichever is less, (items (i) through (iv) above being the "Earned
Amounts").
6.2 Termination by the Company for Cause. The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of (i) any
conviction of Executive for a felony, (ii) any material breach by Executive of a
material written agreement between Executive and the Company or the UST Group,
including this Agreement, (iii) any breach caused by Executive of the Company
Agreement, the limited partnership agreement or operating agreement of any
member of the UST Group, or the charter or bylaws of any corporation within the
UST Group, provided that Executive had prior written notice of such agreement or
other document and any amendment thereto (including a copy of the full text
thereof) and provided further that such breach has a material adverse effect on
the Company, (iv) any willful conduct by Executive materially injurious to the
Company or the UST Group or their respective businesses, (v) any willful failure
by Executive to comply with any material policies, procedures, or directives of
the Board, provided that, Executive shall first be given notice from the Board
of such failure and such failure shall not have been cured within three days
after such notice or, if such failure is not capable of being cured within three
days, Executive shall not have commenced and be diligently pursuing in good
faith efforts to cure such default, or (vi) any fraud, misappropriation of
funds, embezzlement, or other similar acts of misconduct by Executive with
respect to the Company or the UST Group. In the event the Company terminates
Executive's employment pursuant to this Section 6.2 for Cause, then Executive
shall be paid on termination the Earned Amounts. For purposes of this
Agreement, no act or failure to act on Executive's part shall be deemed
"willful" unless done, or omitted to be done, in bad faith or without the
reasonable belief that the act or failure to act was in the best
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interests of the Company or the UST Group. Any act or failure to act on the
basis of authority given by resolution duly adopted by the Board or on the basis
of advice given by legal counsel for the Company shall be conclusively presumed
to have been done, or omitted to be done, in good faith and in the best
interests of the Company or the UST Group. No termination of Executive's
employment shall be for Cause unless such termination shall have been authorized
in advance by a resolution adopted by the Board and delivered to Executive,
following a meeting of the Board at which Executive (together with his counsel)
shall have been afforded a reasonable opportunity to refute the purported
grounds for termination for Cause.
6.3 Termination Upon Death or Disability of Executive. This Agreement
shall terminate upon the death of Executive, or upon Executive becoming Disabled
(as defined below). In the event of a termination of this Agreement pursuant to
this Section 6.3, Executive (or Executive's estate, if applicable) shall be paid
on termination the Earned Amounts. For purposes of this Agreement, "Disabled"
shall mean that Executive shall have qualified for and be receiving benefits
under the Company's long-term disability insurance plan or, if there is no such
plan, that Executive shall have qualified for and be receiving disability
benefits under the federal Social Security Act.
6.4 Voluntary Resignation for Good Reason. Executive may resign
Executive's employment with the Company at any time and, if such resignation is
for "Good Reason", Executive shall be entitled to the same payments and benefits
that Executive would receive under Section 6.1 if Executive's employment were
being terminated by the Company other than for Cause or Executive becoming
Disabled. "Good Reason" shall mean any one or more of the following: (i)
failure of UST to complete its IPO on or before March 31, 1998; (ii) failure of
the Company to appoint or re-appoint Executive to the office of Chairman; (iii)
failure of the Company's members to elect or re-elect Executive to the Board;
(iv) failure of the Company, by act, omission, amendment to the instruments
governing its organization and operation or otherwise, to vest in Executive the
position, duties and responsibilities contemplated by this Agreement; (v)
failure by the Company to pay when due any portion of the compensation payable
to Executive hereunder; (vi) any material breach by the Company of any material
provision of this Agreement; or (vii) on or following a Change of Control (as
such term is defined in the Company's LTIP, as the same may be amended from time
to time) either Executive is assigned any duties or responsibilities materially
inconsistent with, or diminished from, Executive's duties and responsibilities
with the Company and the UST Group immediately prior to the Change of Control,
or, Executive's status, duties, responsibilities, titles or offices with the
Company and the UST Group are materially diminished from those in effect
immediately prior to the Change of Control, as determined in the good faith
opinion of Executive; provided, however, Good Reason shall exist with respect to
a matter described in (ii) through (vii) above that is capable of being
corrected by the Company only if such matter is not corrected by the Company
within a reasonable period following its receipt of written notice of such
matter from Executive, and in no event shall a termination by Executive
occurring more than 60 days following any such written notice or the event
described in (i) above be for Good Reason.
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Section 7. Covenant Not to Compete; Confidentiality
7.1 Noncompetition. Unless granted written permission by the Board and
subject to any further restrictions contained in the agreements of limited
partnership and operating agreements within the UST Group, while employed by the
Company or a member of the Board and for a period of 12 months after the
termination of such employment or membership on the Board, Executive covenants
that Executive shall not (i) own (as a proprietor, partner, or stockholder of
greater than one percent of outstanding equity securities, interests or
otherwise) an interest in, or (ii) participate (as an officer, director, or in
any other capacity) in the management, operation, or control of, or (iii)
perform services as or act in the capacity of any employee, independent
contractor, consultant, or agent of any enterprise which engages in one or more
of the following activities in a state in which the Company or the UST Group is
then conducting business and in which the Company or the UST Group commenced
conducting business prior to the commencement of such activities therein by
Executive:
(a) acquisition, exchange, operation or sale of timber-producing real
property or rights to harvest timber, a principal purpose of which is
producing logs or other forest products;
(b) harvesting of timber other than harvesting which is incidental to
the ownership or operation of real property not owned or operated for a
principal purpose of producing logs or other forest products;
(c) sale, exchange or purchase of logs other than sales, exchanges or
purchases which are incidental to the ownership or operation of real
property not owned or operated for a principal purpose of producing logs or
other forest products;
(d) acquisition or sale of any facilities used to convert logs into
lumber, plywood or other wood products;
(e) conversion of logs into lumber, plywood or other wood products;
(f) marketing and sale of lumber, plywood or other wood products;
(g) import or export of logs, lumber, plywood or other wood products
to or from the United States;
(h) manufacture, marketing or sale of manufactured, engineered, or
substitute wood products to the extent such products compete with products
produced by the Company or any member of the UST Group; or
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(i) any and all other activities relating to the United States forest
products industry to the extent such activities compete with activities of
the Company or any member of the UST Group.
The noncompetition restrictions set forth in this Section 7.1 shall not apply in
the event of a termination of this Agreement pursuant to Section 6.1 or 6.4,
nor, in the event of Executive's termination due to Executive becoming Disabled
in accordance with Section 6.3, shall they apply following Executive ceasing to
be Disabled unless the Company offers to re-employ Executive on terms and
conditions at least as favorable as those set forth in this Agreement.
7.2 Confidentiality. Executive acknowledges that in the course of
Executive's employment by the Company, including as a member of the Board
following employment, if applicable, Executive will be furnished and have access
to certain information concerning the business, financial condition, operations,
assets and liabilities of the Company and the UST Group that is confidential or
proprietary in nature. All such information (irrespective of the form of
communication) is hereinafter collectively referred to as the "Information."
Until the later to occur of (i) the date of termination of Executive's
employment hereunder or (ii) the date of Executive's resignation or removal from
the Board, and for a period of 18 months thereafter, Executive agrees to keep
the Information confidential and agrees that Executive will use the Information
solely for the purpose of performing Executive's duties hereunder or as a member
of the Board or as otherwise authorized by the Company. This Agreement shall be
inoperative as to such portions of the Information which (a) are or become
generally available to the public other than as a result of a disclosure by
Executive in violation of this Agreement, (b) become available to Executive on a
non-confidential basis from a source other than the Company or the UST Group
that is not bound by an obligation of confidentiality to such entity or
entities, or (c) are required to be disclosed by an order or decree of a court
or other tribunal of competent jurisdiction, provided the Company is given
prompt notice of, and the opportunity to contest disclosure under, such order or
decree. Upon termination of this Agreement, Executive will return the
Information furnished by the Company or the UST Group and any documents that
contain, reflect, or are based upon, in whole or in part, the Information.
7.3 Equitable Relief. Executive acknowledges and agrees that it would be
difficult to measure damage to the Company or the UST Group from any breach by
Executive of Section 7.1 or 7.2 and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Executive agrees that if Executive
shall breach Section 7.1 or 7.2, the Company shall be entitled, in addition to
all other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any actual damage sustained by the Company or the UST Group.
Executive further agrees to waive any requirement for the securing or posting of
any bond in connection with such remedies.
7.4 Executive's Acknowledgment. Executive hereby expressly acknowledges
and agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 7 will not prevent Executive from obtaining gainful employment in
Executive's field of expertise or cause Executive
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undue hardship, and (ii) in view and consideration of the substantial benefits
Executive will receive from the Company pursuant to this Agreement and the
Company Agreement, the restrictions and obligations imposed on Executive under
this Section 7 are reasonable and necessary to protect the legitimate business
interests of the Company and its members and the UST Group.
Section 8. Indemnification
(a) During the Term and for a period of six years thereafter, the Company
shall cause Executive to be covered by and named as an insured under any policy
or contract of insurance obtained by it to insure its directors and officers
against personal liability for acts or omissions in connection with service as
an officer or director of the Company or service in other capacities at the
request of the Company. The coverage provided to Executive pursuant to this
Section 8 shall be of a scope and on terms and conditions at least as favorable
as the coverage (if any) provided to any other officer or director of the
Company.
(b) To the maximum extent permitted under applicable law, during the Term
and for a period of six years thereafter, the Company shall indemnify Executive
against and hold Executive harmless from any costs, liabilities, losses and
exposures to the fullest extent and on the most favorable terms and conditions
that similar indemnification is offered to any director or officer of the
Company.
Section 9. Representations and Warranties
9.1 By Executive. Executive represents and warrants to the Company that
(i) Executive is under no contractual or other restriction or obligation which
would prevent the performance of Executive's duties hereunder or interfere with
the rights of the Company hereunder and (ii) this Agreement has been duly
executed and delivered by Executive, is the legal, valid and binding obligation
of Executive, and is enforceable against Executive in accordance with its terms,
except that no representation or warranty is made with respect to the provisions
of Section 7.
9.2 By the Company. The Company represents and warrants to Executive that
(i) it has all requisite limited liability company power and authority to
execute, deliver and perform this Agreement, (ii) all necessary proceedings of
the Company have been duly taken to authorize the execution, delivery and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.
Section 10. Life Insurance
If requested by the Company, Executive shall submit to such physical
examinations by a physician and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company to
obtain life insurance on the life of Executive for the benefit of the Company,
but in no event shall Executive's failure to qualify for such coverage, as a
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result of the outcome of the medical examination or otherwise, be grounds for a
termination of Executive's employment.
Section 11. Notices
Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:
To the Company: U.S. Timberlands Services Company, L.L.C.
000 Xxxxxxx Xxxxxx - Xxxxx 00-X
Xxx Xxxx, Xxx Xxxx 00000
Attn: Chairman, Compensation Committee of the Board
Facsimile No: (000) 000-0000
To Executive: Xxxx X. Xxxxx
0000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Section 12. General Provisions
12.1 Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available at
law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.
12.2 Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. The parties understand and hereby acknowledge that upon the
consummation of the IPO and related transactions, the obligations of the Company
under this Agreement shall be assumed by New Services. The Company will require
any successor, other than New Services, which is already a party to this
Agreement, by agreement in form and substance reasonably acceptable to
Executive, to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession had taken place and following such assumption all
references to the Company herein shall be deemed to mean such successor
including New Services. Except as provided in the preceding sentence, this
Agreement, and the rights and obligations of the parties hereunder, are personal
and neither this Agreement, nor any right, benefit, or obligation of either
party hereto, shall be subject to voluntary or involuntary assignment,
alienation or transfer, whether by operation of law or otherwise, without the
prior written consent
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of the other party. Subject to the foregoing, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective heirs, personal representatives, administrators, successors, and
permitted assigns.
12.3 Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.
12.4 Amendment. This Agreement may not be modified or amended except by
the written agreement of the parties.
12.5 Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 7 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required by
law and enforced in its reduced form.
12.6 Integration. This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Executive by the
Company and supersedes all prior and contemporaneous agreements (oral or
written) between them with respect to such subject matter.
12.7 Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement or interpretation of this Agreement, or because of an
alleged dispute or breach in connection with any of the provisions of this
Agreement, if Executive is the successful or prevailing party, Executive shall
be entitled to recover from the Company reasonable attorneys' fees and other
costs incurred by Executive in connection with that action or proceeding, and in
any petition for appeal or review therefrom, in addition to any other relief to
which Executive may be entitled.
12.8 Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement.
12.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
12.10 Survival. In the event of termination of this Agreement by either
party, this Agreement shall become void and there shall be no liability on the
part of Executive or the Company except to the extent such termination results
from the breach by a party hereto of its obligations hereunder (in which case
Section 12.1 shall apply); provided that Sections 6.1, 6.2, 6.3, 6.4, 7, 8, 11,
12.7 and 12.11 shall survive the termination of this Agreement.
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12.11 UST Guaranty. UST hereby irrevocably and unconditionally guarantees
to Executive the payment of all amounts and the performance of all other
obligations due from the Company in accordance with the terms of this Agreement
as and when due without requirement of presentment, demand of payment, protest
or notice of dishonor or nonpayment.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
The Company: U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
a Delaware limited liability company
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President
UST: U.S. TIMBERLANDS COMPANY, L.P.
a Delaware limited partnership
By: New Services, L.L.C., as general partner
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
New Services: NEW SERVICES, L.L.C.
a Delaware limited liability company
By: /s/ Xxxx X. Xxxxxxxx
---------------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: President and Chief Executive Officer
Executive: /s/ Xxxx X. Xxxxx
---------------------------------------------
Xxxx X. Xxxxx
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