Exhibit 10.13
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT ("Agreement"), made as of July 2, 1999, by and
between CONSOLIDATED CONTAINER COMPANY LLC, a Delaware limited liability company
(the "Company"), and WILLIAM ESTES ("Executive").
RECITALS
Executive is willing to accept employment and perform services for the
Company, on the terms and conditions hereinafter set forth.
It is therefore hereby agreed by and between the parties as follows:
1. Employment.
1.1 Subject to the terms and conditions of this Agreement, the Company
agrees to employ Executive during the Term (as hereinafter defined) as its Chief
Executive Officer. In his capacity as Chief Executive Officer, Executive shall
report to the Company's Management Committee (the "Committee"). As Chief
Executive Officer of the Company, Executive shall have the customary powers,
responsibilities and authorities of chief executive officers of companies of the
size, type and nature of the Company, as it exists from time to time, as well as
those assigned by the Committee. Executive shall be provided with secretarial
and other support personnel and an office as are reasonably necessary for him to
carry out his duties and responsibilities hereunder.
1.2 Subject to the terms and conditions of this Agreement, Executive
hereby accepts employment as the Company's Chief Executive Officer, commencing
on the date hereof, and agrees to devote his full working time and efforts, to
the best of his ability, experience and
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talent, to the performance of services, duties and responsibilities in
connection therewith. Executive shall perform such duties and exercise such
powers, commensurate with his position, as the Chief Executive Officer of the
Company, as the Committee shall from time to time delegate to him on such terms
and conditions and subject to such restrictions as such Committee may reasonably
from time to time impose.
1.3 Nothing in this Agreement shall preclude Executive, so long as in the
reasonable determination of the Committee such activities do not materially
interfere with his duties and responsibilities hereunder, from engaging in
charitable and community affairs or from serving as a member of the boards of
directors of up to two companies which are not involved in the purchase, sale,
lease, management of or other dealing in any property or the rendering of any
service purchased, sold, leased, managed, dealt in or rendered by the Company or
any affiliate.
2. Term of Employment. Executive's term of employment under this Agreement
shall commence on the date hereof and, subject to the terms hereof, shall
terminate on the earlier of (i) the fifth anniversary of the date hereof (the
"Termination Date") or (ii) the termination of Executive's employment pursuant
to Section 6 of this Agreement; PROVIDED, HOWEVER, that any termination of
employment by Executive (other than for death or Permanent Disability) may only
be made upon 90 days prior written notice to the Company; PROVIDED, FURTHER,
that this Agreement shall be automatically renewed and the term extended for
additional one-year periods commencing on the fifth anniversary of the date
hereof, and on each anniversary date thereafter, unless the Company or Executive
provides 90 days' prior written notice in accordance with Section 8 before the
end of such initial term or any such one-year renewal term (any reference to the
"Term" of this Agreement will include the initial term and any renewal thereof).
3. Compensation.
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3.1 Salary. The Company shall pay Executive a salary (the "Salary") at the
rate of $400,000 per annum for the period commencing on the beginning of
Executive's term of employment hereunder and ending on the expiration of the
Term. The Salary shall be payable in accordance with the ordinary payroll
practices of the Company. The Salary shall be reviewed by the Committee annually
beginning in January 2000 and any increase in the Salary shall be in the
discretion of the Committee and, as so increased, shall constitute "Salary"
hereunder. Salary may not be reduced below $400,000 per annum.
3.2 Annual Bonus. In addition to his Salary, Executive shall be eligible
to participate in the Company's annual bonus plan (the "Bonus Plan", and any
award or payment under the Bonus Plan, the "Bonus") during the Term and shall
have a target bonus (the "Target Bonus") equal to 50% of the Salary and a
maximum bonus (the "Maximum Bonus") of 100% of Salary, in each case based upon
performance criteria determined by the Committee in its sole discretion.
3.3 Compensation Plans and Programs. Executive shall be eligible to
participate in any compensation plan or program maintained by the Company in
which other senior executives of the Company participate on terms comparable to
those applicable to such other senior executives.
3.4 Related Agreements. On the date hereof, Executive shall also enter
into an Option Agreement (the "Option Agreement") permitting the Executive to
purchase interests in Consolidated Container Holdings, LLC ("Holdings"), a
parent of the Company, and shall become a party to the Registration Rights
Agreement (the "Registration Rights Agreement") and the Limited Liability
Company Agreement (the "LLC Agreement") of Holdings.
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3.5 Perquisites. In addition, during the Term, the Company shall reimburse
Executive for his annual membership dues in the [name of country club] at an
annual cost of up to $5,000.
4. Employee Benefits; Expenses.
4.1 Employee Benefit Programs, Plans and Practices. The Company shall
provide Executive during the Term with coverage under all employee pension and
welfare benefit programs, plans and practices (commensurate with his positions
in the Company and to the extent permitted under any employee benefit plan) in
accordance with the terms thereof, which the Company makes generally available
to its senior executives.
4.2 Vacation. Executive shall be entitled each year to vacation for a
period of four (4) weeks to be taken at mutually convenient times, during which
time Salary shall be paid in full.
4.3 EXPENSES. Executive is authorized to incur reasonable costs and
expenses in carrying out his duties and responsibilities under this Agreement,
including, without limitation, expenses for travel and similar items related to
such duties and responsibilities. The Company will reimburse Executive for all
such expenses upon presentation by Executive from time to time of appropriately
itemized and approved (consistent with the Company's policy) accounts of such
expenditures.
5. Excise Taxes. (a) Gross-Up Payment. Anything in this Agreement to the
contrary notwithstanding and except as set forth below, if it is determined that
any payment or distribution (a "payment") by the Company to or for the benefit
of the Executive (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 5) including,
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without limitation, vesting of options, would be subject to the excise tax
imposed by Section 4999 of the Code, or if any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, being hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount sufficient to
pay all taxes (including any interest or penalties imposed with respect to such
taxes), including, without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up
Payment.
(b) CALCULATION OF GROSS-UP PAYMENT. Subject to the provisions of
paragraph (c) of this Section 5, all determinations required to be made under
this Section 5, including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be used in arriving
at such determination, shall be made by a certified public accounting firm
selected by the Company and reasonably acceptable to the Executive (the
"Accounting Firm"), which shall be retained to provide detailed supporting
calculations both to the Company and the Executive. All fees and expenses of the
Accounting Firm shall be paid solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 5, shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which should
have been made will not have been made by the Company ("Underpayment"),
consistent with the calculations required to be made hereunder. If the Company
exhausts its remedies pursuant to paragraph (c) of this Section 5 and the
Executive
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thereafter is required to pay an Excise Tax in an amount that exceeds the
Gross-Up Payment received by the Executive the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such Underpayment shall
be promptly paid by the Company to or for the benefit of the Executive.
(c) CONTESTED TAXES. The Executive shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would result in
an Underpayment. Such notification shall be given as soon as practicable but no
later than ten (10) business days after the Executive is informed in writing of
such claim and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid or appealed. The Executive
shall not pay such claim prior to the expiration of the 30-day period following
the date on which it gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is due).
If the Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(1) give the Company any information reasonably requested by the
Company relating to such claim,
(2) take such action in connection with contesting such claims as
the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect
to such claim by an attorney reasonably selected by the Company,
(3) cooperate with the Company in good faith in order to effectively
contest such claim, and
(4) permit the Company to participate in any proceedings relating to
such claim;
provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or
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income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this paragraph (c), the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or to contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, HOWEVER, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be limited to issues
with respect to the amount of the Gross-Up Payment, and the Executive shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) REFUNDS. If, after the receipt by the Executive of an amount advanced
by the Company pursuant to this Section 5, the Executive becomes entitled to
receive any refund with
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respect to such claim, the Executive shall promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon after
taxes applicable thereto).
6. Termination of Employment.
6.1 Termination Not for Cause or for Good Reason. (a) The Company may
terminate Executive's employment at any time for any reason. If Executive's
employment is terminated by the Company, other than for Cause (as defined in
Section 6.4(b) hereof) or as a result of Executive's death or Permanent
Disability (as defined in Section 6.2 hereof), or if Executive terminates his
employment for Good Reason (as defined in 6.1(c) hereof), in each case prior to
the expiration of the Term, Executive shall receive such payments, if any, under
applicable plans or programs, including but not limited to those referred to in
Sections 3.3 and 4.1 hereof, to which he is entitled pursuant to the terms of
such plans or programs. In addition, if Executive's employment is terminated as
provided in the prior sentence prior to the second anniversary of the date
hereof, Executive shall be entitled to receive an amount (the "Termination
Amount") equal to one and one-half times the sum of the Salary and Target Bonus.
The Termination Amount, if any, shall be payable in equal monthly installments
over the eighteen month period following the termination of the Executive's
employment. In addition, Executive shall be entitled to receive a cash lump sum
payment in respect of accrued but unused vacation days (not to exceed 4 weeks of
Salary) (the "Vacation Payment") and to compensation earned but not yet paid
(the "Compensation Payment") and to continued coverage for twenty-four months
following the termination of the Executive's employment under any employee
medical, life, dental and long-term disability insurance plans in accordance
with the respective terms thereof (unless such coverage is provided by
Executive's subsequent employer).
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(b) The Compensation Payment shall be paid by the Company to Executive
within 30 days after the termination of Executive's employment.
(c) For purposes of this Agreement, "Good Reason" shall mean any of the
following (without Executive's express prior written consent):
(i) (A) any reduction in the amount of the Executive's Salary, (B)
any reduction in Executive's potential Target Bonus or Maximum Bonus, or
(C) any significant reduction in the value of the Executive's benefits in
effect from time (unless in the case of either B or C, such reduction is
pursuant to a general change in the compensation or benefits applicable to
all similarly situated employees of the Company or its affiliates);
(ii) (A) the removal of the Executive from the Executive's position
as Chief Executive Officer of the Company (or as Chief Executive Officer
of any successor to the operations of the Company) or (B) any other
significant reduction in the nature or status of the Executive's duties or
responsibilities; or
(iii) the transfer of the Executive's principal place of employment
to a metropolitan area other than that of the Executive's place of
employment immediately following the date hereof.
6.2 Permanent Disability. If the Executive suffers a "permanent and total
disability" within the meaning of Section 22(e)(3) of the Internal Revenue Code
of 1986, as amended ("Permanent Disability"), the Company or Executive may
terminate Executive's employment on written notice thereof, and Executive shall
receive or commence receiving, as soon as practicable:
(i) for 18 months following his termination of employment, monthly
payments equal to the excess of (a) one-twelfth of the Salary over (b) any
amounts payable during such month pursuant to the terms of a disability
insurance policy or similar arrangement, if any;
(ii) the Compensation Payment and the Vacation Payment;
(iii) the Target Bonus in respect of the fiscal year in which his
termination occurs, prorated by a fraction, the numerator of which is the
number of days of the fiscal year until termination and the denominator of
which is 365 (the "Prorated Bonus"); and
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(iv) such payments under applicable plans or programs, including but
not limited to those referred to in Sections 3.3 and 4.1 hereof, to which
he is entitled pursuant to the terms of such plans or programs.
6.3 Death. In the event of Executive's death during the Term Executive's
estate or designated beneficiaries shall receive or commence receiving, as soon
as practicable:
(i) amounts payable pursuant to the terms of a life insurance policy
or similar arrangement, if any;
(ii) the Compensation Payment and the Vacation Payment;
(iii) the Prorated Bonus; and
(iv) such payments under applicable plans or programs, including but
not limited to those referred to in Sections 3.3 and 4.1 hereof, to which
Executive's estate or designated beneficiaries are entitled pursuant to
the terms of such plans or programs.
6.4 Voluntary Termination by Executive; Discharge for Cause. (a) The
Company shall have the right to terminate the employment of Executive for Cause.
In the event that Executive's employment is terminated by the Company for Cause,
as hereinafter defined, or by Executive other than for Good Reason or other than
as a result of the Executive's Permanent Disability or death, during the Term,
Executive shall only be entitled to receive the Compensation Payment and
Executive shall not be entitled, among other things, to the payment of any Bonus
in respect of all or any portion of the fiscal year in which such termination
occurs. After the termination of Executive's employment under this Section 6.4,
the obligations of the Company under this Agreement to make any further payments
(except for the Compensation Payment and the Vacation Payment), or provide any
benefits specified herein, to Executive shall thereupon cease and terminate.
(b) As used herein, the term "Cause" shall be limited to (i) willful
malfeasance or willful misconduct by Executive in connection with his
employment, (ii) continuing refusal by
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Executive to perform his duties hereunder or any lawful direction of the
Committee as required under Section 1.2, after notice of any such refusal to
perform such duties or direction was given to Executive, (iii) any breach of the
provisions of Section 12 of this Agreement by Executive or (iv) the commission
by Executive of (a) any felony or (b) a misdemeanor involving moral turpitude.
Termination of Executive pursuant to this Section 6.4 shall be made by delivery
to Executive of a copy of a resolution duly adopted in good faith by the
affirmative vote of not less than a majority of the Committee members at a
meeting of the Committee called and held for the purpose (after 30 days prior
written notice to Executive and reasonable opportunity for Executive to be heard
before the Committee prior to such vote), finding that in the reasonable
judgment of such Committee, Executive was guilty of conduct set forth in any of
clauses (i) through (iv) above and specifying the particulars thereof.
7. Mitigation of Damages. Executive shall not be required to mitigate
damages or the amount of any payment provided for under this Agreement by
seeking other employment or otherwise after the termination of his employment
hereunder.
8. Notices. All notices or communications hereunder shall be in writing,
addressed as follows:
To the Company:
Consolidated Container Company LLC
2515 McKinney Avenue
Suite 855
Dallas, TX 75201
with copies to:
James P. Kelley, Managing Director
Vestar Capital Partners
1225 Seventeenth Street, Suite 1660
Denver, CO 80202
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and
Alvin H. Brown, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
To Executive:
William Estes
370 Oak Trail
Double Oak, TX 75067
Any such notice or communication shall be delivered by hand or by courier or
sent certified or registered mail, return receipt requested, postage prepaid,
addressed as above (or to such other address as such party may designate in a
notice duly delivered as described above), and the third business day after the
actual date of mailing shall constitute the time at which notice was given.
9. Separability; Legal Fees. If any provision of this Agreement shall be
declared to be invalid or unenforceable, in whole or in part, such invalidity or
unenforceability shall not affect the remaining provisions hereof which shall
remain in full force and effect. Each party shall bear the costs of any legal
fees and other fees and expenses which may be incurred in respect of enforcing
its respective rights under this Agreement.
10. Assignment. This Agreement shall be binding upon and inure to the
benefit of the heirs and representatives of Executive and the assigns and
successors of the Company, but neither this Agreement nor any rights or
obligations hereunder shall be assignable or otherwise subject to hypothecation
by Executive (except by will or by operation of the laws of intestate
succession) or by the Company, except that the Company may assign this Agreement
to any successor (whether by merger, purchase or otherwise) to all or
substantially all of the stock,
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assets or businesses of the Company, if such successor expressly agrees to
assume the obligations of the Company hereunder.
11. Amendment. This Agreement may only be amended by written agreement of
the parties hereto.
12. Nondisclosure of Confidential Information. (a) Executive shall not,
without the prior written consent of the Company, use, divulge, disclose or make
accessible to any other person, firm, partnership, corporation or other entity
any Confidential Information pertaining to the business of the Company, Suiza
Foods Corporation ("Suiza"), Franklin Plastics, Inc. ("Franklin"), Reid Plastics
Holdings, Inc. ("Reid"), Holdings or any of their respective affiliates, except
(i) while employed by the Company, in the business of and for the benefit of the
Company, or (ii) when required to do so by a court of competent jurisdiction, by
any governmental agency having supervisory authority over the business of the
Company, or by any administrative body or legislative body (including a
committee thereof) with jurisdiction to order Executive to divulge, disclose or
make accessible such information. For purposes of this Section 12(a),
"Confidential Information" shall mean non-public information concerning the
financial data, strategic business plans, product development (or other
proprietary product data), customer lists, marketing plans and other non-public,
proprietary and confidential information of the Company, Suiza, Franklin, Reid,
Holdings and all of their respective affiliates (the "Restricted Group") or
customers, that, in any case, is not otherwise available to the public (other
than by Executive's breach of the terms hereof).
(b) During the period of his employment hereunder and for eighteen months
thereafter, Executive agrees that, without the prior written consent of the
Company, (A) he will not, directly or indirectly, either as principal, manager,
agent, consultant, officer, stockholder,
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partner, investor, lender or employee or in any other capacity, carry on, be
engaged in or have any financial interest in, any business which is in
competition with the business of the Restricted Group and (B) he shall not, on
his own behalf or on behalf of any person, firm or company, directly or
indirectly, solicit or offer employment to any person who has been employed by
the Restricted Group at any time during the 12 months immediately preceding such
solicitation.
(c) For purposes of this Section 12, a business shall be deemed to be in
competition with the Restricted Group if it is principally involved in the
purchase, sale or other dealing in any property or the rendering of any service
purchased, sold, dealt in or rendered by the Restricted Group as a material part
of the business of the Restricted Group within the same geographic area in which
they effect such purchases, sales or dealings or renders such services. Nothing
in this Section 12 shall be construed so as to preclude Executive from investing
in any publicly or privately held company, provided Executive's beneficial
ownership of any class of such company's securities does not exceed 1% of the
outstanding securities of such class.
(d) Executive and the Company agree that this covenant not to compete is a
reasonable covenant under the circumstances, and further agree that if in the
opinion of any court of competent jurisdiction such restraint is not reasonable
in any respect, such court shall have the right, power and authority to excise
or modify such provision or provisions of this covenant as to the court shall
appear not reasonable and to enforce the remainder of the covenant as so
amended. Executive agrees that any breach of the covenants contained in this
Section 12 would irreparably injure the Company. Accordingly, Executive agrees
that the Company may, in addition to pursuing any other remedies it may have in
law or in equity, cease making any payments otherwise required by this Agreement
and obtain an injunction against Executive from
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any court having jurisdiction over the matter restraining any further violation
of this Agreement by Executive.
(e) As additional consideration for Executive's commitments pursuant to
this Section 12, the Company shall, if Executive's employment is terminated by
the Company without Cause (other than as a result of Permanent Disability or
death) or by the Executive for Good Reason, pay to the Executive an amount equal
to one and one-half times the sum of the Salary and Target Bonus in eighteen
equal monthly installments commencing during the month following the month in
which Executive's employment was terminated.
13. Beneficiaries; References. Executive shall be entitled to select (and
change, to the extent permitted under any applicable law) a beneficiary or
beneficiaries to receive any compensation or benefit payable hereunder following
Executive's death, and may change such election, in either case by giving the
Company written notice thereof. In the event of Executive's death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
14. Survivorship. The respective rights and obligations of the parties
hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations. The
provisions of this Section 14 are in addition to the survivorship provisions of
any other section of this Agreement.
15. Governing Law and Venue. This Agreement shall be construed under and
governed by the laws of the State of New York applicable to contracts made and
to be performed therein and the parties hereto agree to submit themselves to the
jurisdiction of the federal and state courts of the State of New York for the
purpose of any suit, action or other proceeding
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arising out of this Agreement; PROVIDED, HOWEVER, that in the event of the
Executive's breach of the provisions of Section 12 hereof, the Company may bring
an action in any jurisdiction in which the Company believes the Executive has
breached those provisions and the Executive agrees to submit to the courts of
such jurisdiction.
16. Effect on Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and supersedes in all respects any
prior or other agreement or understanding between the Company or any affiliate
of the Company and Executive regarding Executive's employment. The Option
Agreement, the Registration Rights Agreement and the LLC Agreement shall remain
in effect.
17. Withholding. The Company shall be entitled to withhold from payment
any amount of withholding required by law.
18. Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original.
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IN WITNESS WHEREOF, the parities hereto have executed this Agreement as of
the date first written above.
CONSOLIDATED CONTAINER
COMPANY LLC
By: /s/ John R. Woodard
-----------------------------
Name: John R. Woodard
Title: Vice President
/s/ William Estes
-----------------------------
WILLIAM ESTES