UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the first quarter ended January 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _______________
Commission File Number 1-3013
WESTVACO CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-1466285
(State of Incorporation) (I.R.S. Employer Identification No.)
299 Park Avenue, New York, New York 10171
(Address of principal executive offices)
212-688-5000
(Registrants's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. YES X NO
At January 31, 1999, the latest practicable date, there were 100,176,445
shares outstanding of Common Stock, $5 par value.
WESTVACO CORPORATION
and Consolidated Subsidiary Companies
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Statement of Income for the three
months ended January 31, 1999 and 1998
Consolidated Balance Sheet as of January 31, 1999
and October 31, 1998
Consolidated Statement of Cash Flows for the
three months ended January 31, 1999 and 1998
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
WESTVACO CORPORATION
and Consolidated Subsidiary Companies
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED STATEMENT OF INCOME
[Unaudited]
In thousands, except per share data
Three Months Ended
January 31
1999 1998
Sales $ 650,715 $ 702,113
Other income (expense) 8,705 4,260
659,420 706,373
Cost of products sold (excluding
depreciation shown below) 464,360 501,290
Selling, research and administrative expenses 55,006 57,307
Depreciation and amortization 69,331 69,500
Interest expense 30,601 27,460
619,298 655,557
Income before taxes 40,122 50,816
Income taxes 14,900 18,300
Net income $ 25,222 $ 32,516
Net income per share:
Basic $.25 $.32
Diluted $.25 $.32
Shares used to compute net income per share:
Basic 100,261 101,691
Diluted 100,468 102,419
Cash dividends per share of common stock $.22 $.22
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED BALANCE SHEET
In thousands
January 31 October 31
1999 1998
[Unaudited]
ASSETS
Cash and marketable securities $ 94,786 $ 105,050
Receivables 260,257 286,423
Inventories 300,548 285,783
Prepaid expenses 68,901 61,936
Current assets 724,492 739,192
Plant and timberlands:
Machinery 5,056,901 5,079,177
Buildings 659,437 655,020
Other property, including plant land 221,697 224,229
5,938,035 5,958,426
Less: accumulated depreciation 2,647,992 2,634,702
3,290,043 3,323,724
Timberlands - net 258,775 273,975
Construction in progress 159,456 204,732
3,708,274 3,802,431
Other assets 486,572 467,045
$ 4,919,338 $ 5,008,668
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $ 313,908 $ 346,552
Notes payable and current maturities of
long-term obligations 134,523 99,072
Income taxes 23,339 21,501
Current liabilities 471,770 467,125
Long-term obligations 1,522,257 1,526,343
Deferred income taxes 775,205 768,752
Shareholders' equity:
Common stock, $5 par, at stated value
shares authorized: 300,000,000
shares issued: 103,170,667
(1998-103,170,667) 764,811 764,574
Retained income 1,590,969 1,588,932
Cumulative translation adjustment (128,059) (32,167)
Common stock in treasury, at cost
shares held: 2,994,222 (1998-2,844,300) (77,615) (74,891)
2,150,106 2,246,448
$ 4,919,338 $ 5,008,668
The accompanying notes are an integral part of these financial
statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
[Unaudited]
In thousands
Three Months Ended
January 31
1999 1998
Cash flows from operating activities:
Net income $ 25,222 $ 32,516
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for depreciation and amortization 69,331 69,500
Provision for deferred income taxes 10,801 10,845
(Gains) losses on sales of plant and
timberlands (5,880) (45)
Pension credits and other employee benefits (18,187) (9,665)
Foreign currency translation (gains) losses (122) 336
Changes in assets and liabilities:
(Increase) decrease in receivables 16,975 10,301
(Increase) decrease in inventories (24,550) (18,208)
(Increase) decrease in prepaid expenses (10,662) (6,097)
(Decrease) increase in accounts payable
and accrued expenses (15,552) (9,114)
(Decrease) increase in income taxes payable 3,731 3,371
Other, net 2,834 1,393
Net cash provided by operating activities 53,941 85,133
Cash flows from investing activities:
Additions to plant and timberlands (64,169) (112,280)
Proceeds from sales of plant and timberlands 8,734 605
Other, net (92) 147
Net cash used in investing activities (55,527) (111,528)
Cash flows from financing activities:
Proceeds from issuance of common stock 1,298 859
Proceeds from issuance of debt 278,251 7,242
Treasury stock purchases (5,152) (15,754)
Dividends paid (22,056) (22,420)
Repayment of notes payable and long-term
obligations (241,104) (4,218)
Net cash (used in) provided by financing
activities 11,237 (34,291)
Effect of exchange rate changes on cash (19,915) (935)
Increase (decrease) in cash and marketable
securities (10,264) (61,621)
Cash and marketable securities:
At beginning of period 105,050 175,354
At end of period $ 94,786 $ 113,733
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
[Unaudited]
1. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been prepared
in accordance with Form 10-Q instructions and in the opinion of management
contain all adjustments (consisting of only normal recurring accruals) necessary
to present fairly the financial position and the results of operations for the
interim periods presented. These results have been determined on the basis of
generally accepted accounting principles and practices applied consistently with
those used in the preparation of the company's 1998 Annual Report on Form 10-K.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that the accompanying
consolidated financial statements be read in conjunction with the financial
statements and notes thereto incorporated by reference in the company's 1998
Annual Report on Form 10-K.
2. Current Assets
Marketable securities of $32,992,000 ($12,032,000 at October 31, 1998) are
valued at cost, which approximates market.
Inventories included in the consolidated balance sheet consist of the following:
January 31 October 31
In thousands 1999 1998
Raw materials $ 53,690 $ 55,580
Production materials, stores
and supplies 66,987 74,338
Finished and in process goods 179,871 155,865
Total $ 300,548 $ 285,783
3. Foreign Operations
Results of unbleached operations for Rigesa, Ltda., our Brazilian
subsidiary, were as follows:
Three Months Ended
In thousands January 31
1999 1998
Sales $ 39,531 $ 43,048
Net income $ 3,108 $ 5,579
Rigesa's results for the first quarter of 1999 were negatively
affected by decreases in price and product mix of 24.0%, including
the effect of the devaluation of the Brazilian real, both partially
offset by an increase in volume of 15.8%.
4. Net Income Per Common Share
Basic earnings per share for all the periods presented have been
calculated using the weighted average shares outstanding. In
computing diluted earnings per share, incremental shares issuable
upon the assumed exercise of stock options have been added to the
weighted average shares outstanding.
5. Comprehensive Income
Effective November 1, 1998, the company adopted Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This statement requires the disclosure of
comprehensive income to reflect changes in equity that result from
transactions and economic events from nonowner sources.
Comprehensive income for the periods presented below included
foreign cumulative translation adjustments associated with the
company's Brazilian and Czech Republic operations. There was no
tax expense or tax benefit associated with the foreign currency
translation items. Comprehensive income (loss) for the first
quarter ended January 31, 1999 and 1998, was $(70.7) million and
$10.5 million, respectively.
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
[Unaudited]
Business Segment Information
Three Months Ended
January 31
1999 1998
In millions
Sales
Bleached $ 442.6 $ 478.7
Unbleached 135.4 146.8
Chemicals 74.2 79.3
Corporate and other items (1.5) (2.7)
Consolidated sales $ 650.7 $ 702.1
Operating profit
Bleached $ 61.3 $ 66.6
Unbleached 17.3 22.2
Chemicals 17.5 16.2
Corporate and other items (56.0) (54.2)
Consolidated income before taxes $ 40.1 $ 50.8
Results of Operations
Overall, the results of the first quarter of 1999 reflect the
challenging market conditions affecting the entire U.S. paper
industry resulting from weak global demand and increased capacity
for a variety of industry products on the part of foreign
competitors. Sales of $650.7 million for the 1999 first quarter
were down 7.3% from the 1998 first quarter reflecting a 4.9% percent
decline in price and product mix, and a 2.4% decline in volume. Net
income from operations for the first quarter ended January 31, 1999
was $ 25.2 million or $.25 per share (basic and diluted), compared
to $32.5 million or $.32 per share (basic and diluted) for the 1998
period and included a gain of approximately $4 million, or $.04 per
share, from the sales of nonstrategic timberlands. Coated paper
markets in particular have experienced the effects of increased
imports which, along with exchange rate disadvantages, have caused
prices for certain coated paper grades to have fallen approximately
8% from prior year levels. Export sales from the United States were
down 15% compared to the first quarter of 1998, principally in bleached
paperboard and certain chemical products, and accounted for approximately
15% of the company's first quarter sales. Total sales outside of the
United States, including sales of our foreign operating
subsidiaries, decreased 14% from the prior year period, and
accounted for approximately 22% of consolidated sales. Gross
profit margin for the first quarter of 1999 was 18% compared with
19% for the prior year period due principally to price and volume
decreases which were only partially offset by the benefits of our
cost reduction program. First quarter 1999 operating expenses also
benefited from an increase in the non-cash pension credits of $6.4
million, reflecting cumulative favorable investment returns on
pension plan assets.
Bleached
Bleached segment sales for the first quarter decreased 7.6% from the
comparable 1998 quarter due to a decrease in price and product mix of
4.3% and a 3.3% decrease in unit volume. Bleached segment operating
profit was down 8% in the first quarter ended January 31, 1999 compared
to the same 1998 period principally due to lower prices for certain
coated paper grades. Despite a decline in sales volume influenced
by very soft international demand, our bleached board business
reflected improved operating income as a result of enhanced product
mix and stringent cost management. Our Envelope Division recovered
from a strike last winter, and its sales and profits have now
returned to pre-strike levels. The company's consumer packaging
business declined primarily as a result of lower volume of
shipments, due to continuing softness in tobacco markets. During
the first quarter of 1999, approximately 21% of bleached segment
sales were made to the tobacco industry for packaging tobacco
products compared to approximately 24% for the 1998 comparable
period. Approximately 13% (1998 -15%) of the segment sales were
exported or used to produce products for export with the remaining
8% (1998-9%) made for the domestic tobacco industry for sale in the
United States. The current legal, regulatory and legislative
pressures on the tobacco industry may have an adverse effect on
bleached segment profitability. While we would expect to
compensate for such an adverse effect by continuing growth in other
consumer product markets, these alternatives may not, in the short
run, fully offset any decline in profitability related to sales to
the tobacco industry.
Unbleached
Sales for the unbleached segment decreased 7.7% compared to the
1998 first quarter due to a decrease in price and product mix of
8.2%, partially offset by an increase in unit volume. Operating
profit for the unbleached segment decreased to $17.3 million from
the 1998 first quarter profit of $22.2 million, reflecting a sharp
year-over-year decline in linerboard prices driven by soft global
demand. In addition, the economic slowdown in Brazil continued to
affect results at Rigesa, despite higher shipment volume and improved
product mix. Rigesa's unbleached operation accounted for approximately
17% of segment operating profit in the first quarter of 1999, compared
to approximately 18% for the 1998 comparable period.
Chemicals
Sales for the chemicals segment decreased 6.4% from the 1998 first
quarter primarily due to a decrease in price and product mix of
3.8% and a decrease in volume of 2.6% due to market weakness in
several domestic product segments and weak global demand. The 1999
first quarter operating profit for the chemicals segment increased
7.8% to $17.5 million from the prior year period benefitting from
enhanced productivity at our activated carbon plants at Covington,
VA, and Wickliffe, KY.
Other Items
The effective tax rate for the first quarter of fiscal 1999 was 37.1%,
compared to 36.0% for the same period in the prior year. This
increase was due principally to the favorable fiscal 1998 settlement
of an IRS audit of prior tax years, and a higher foreign effective tax
rate in fiscal 1999.
Liquidity And Capital Resources
At January 31, 1999 the ratio of current assets to current
liabilities was 1.5 compared to 1.6 at October 31, 1998. Cash and
marketable securities decreased in the first quarter as cash used
for investing activities exceeded cash flows from operations and
due to the effect of exchange rate changes as a result of the
devaluation of the Brazilian real. Cash flows from operations
totaled $53.9 million for the three months ended January 31, 1999,
compared to $85.1 million for the comparable 1998 period. Overall
inventories were up from the October 1998 level. Finished goods
inventories have increased since October, reflecting increased
competition in several of our major business areas. During the
first quarter, the company took downtime of approximately 22,000
tons of paper and board to more closely match production and
shipments during this seasonally slower period and following
industry additions to capacity in certain sectors. Cash
expenditures for capital investments totaled $64.2 million for the
first quarter of 1999, compared to $112.3 million for the
comparable 1998 period. This planned lower level of capital
spending follows the completion of several important initiatives
that added significant support to our long-term strategy. At
January 31, 1999, the amounts committed to complete all authorized
capital projects were approximately $208 million. Total capital
expenditures are expected to approximate $275 million in 1999,
primarily in support of the company's current production levels.
The company may from time to time use outside sources as needed to
finance future capital investments, as it has in the past. The
company maintains a $500 million revolving credit agreement and
there was no borrowing under this arrangement during the current
period. The ratio of debt to total capital employed was 34% at
January 31, 1999, and October 31, 1998.
Year 2000
Westvaco has implemented a structured program encompassing both
information and noninformation technology systems to identify and
eliminate all Year 2000 problems. Domestically and abroad, the
program consists of six phases (inventory, assessment of business
criticality, technical assessment of potential Year 2000 failures,
remediation, testing and contingency planning) and includes a review
of all computer hardware and software, whether used directly to
support business and manufacturing processes or embedded in
components of machinery and other equipment. The first two phases
have been completed as planned. As of January 31, 1999, nearly 100%
of business systems and 98% of process control systems components
have been assessed for possible Year 2000 failures. The remaining
phases are planned, staffed and scheduled to be completed by June 30,
1999.
As of January 31, 1999, about 95% of business systems and 68% of
process control systems components requiring remediation have been
remediated. Approximately 93% of business systems and 61% of process
control systems components scheduled for testing have been tested.
Originally scheduled for completion by December 31, 1998, and
rescheduled for completion by January 31, 1999, remediation and
testing of business systems are presently projected to be completed
by April 30, 1999. Remediation and testing of process control
systems, originally scheduled for completion by April 30, 1999, will
now be delayed in part until May 31, 1999, so that this work may be
coordinated with other required equipment outages. Remediation and
testing of business systems is generally closer to completion than
that for process control systems as the latter are more heavily
reliant for assessment and remediation upon the manufacturers of the
company's major process control equipment. Despite the revisions in
schedule, the company remains confident it will meet its ultimate
target date of June 30, 1999.
Westvaco has contacted all vendors whose noncompliance, either
individually or cumulatively, could materially impact the company's
business. As of January 31, 1999, 65% of vendors contacted have
responded, substantially all indicating they have addressed or expect
to address their Year 2000 issues in a timely manner. The company
continues to follow up with vendors yet to respond satisfactorily or
at all to its inquiries. Separately, the company also is actively
seeking information and assurances of a more technical nature from
certain vendors regarding the compliance status of specific
equipment. The Year 2000 disclosures of customers having similar
significance to the company's business are reviewed on an ongoing
basis. Westvaco cannot provide assurance that the Year 2000
compliance plans of its vendors and customers, particularly those in
international markets, will be successfully completed in a timely
manner.
Program costs continue to be estimated to be between $9 and $12
million. This estimate includes internal costs (i.e., related
payroll and required downtime) and external costs (i.e., hiring
outside consultants to assist in compliance efforts). Program costs
do not include the cost of major new business system implementations
scheduled prior to the company's specific Year 2000 compliance
efforts described herein and completed during the last two years.
Estimated costs would have been substantially greater but for the
fact that recent modernization of many of the company's business
systems involved the replacement of software with new software that
is Year 2000 compliant at a cost of approximately $30 million. As of
January 31, 1999, approximately $5 million in program costs have been
funded by operating cash flows and expensed as incurred except for
newly installed systems which were capitalized in accordance with the
company's accounting policies. Although such costs may be
significant to the company's results of operations in one or more
fiscal quarters, Westvaco does not expect a material adverse impact
on its long-term results of operations, liquidity or financial
position. Cost estimates may be refined as technical assessment,
remediation and testing continue and as compliance status information
becomes available from third-party business partners.
If Westvaco were not taking any of the remedial steps detailed above,
Year 2000 issues would possibly cause significant technological
problems for the company, disrupting business and resulting in a
decline in earnings. At this time, however, management does not
believe that this will happen.
The most reasonably likely worst case scenario should Westvaco, its
customers or vendors be unable to adequately resolve Year 2000
issues, would include a temporary slowdown or abrupt stoppage of
operations at one or more of the company's facilities due to the
failure of one or more critical process control elements or business
systems. Such failures could result in interruptions in
manufacturing, safety and/or environmental systems; and/or a
temporary inability to receive raw materials, ship finished products
and process orders and invoices.
Although management does not believe that this will happen, if such
or similar scenarios were to occur, they could, depending on their
duration, have a material impact on the company's results of
operations and financial position. Such theoretical consequences are
of a kind and magnitude generally shared with other manufacturing
companies. Assuming the successful completion of its Year 2000
program in a timely manner, the company expects that any Year 2000
disruptions which occur, should there be any, will be minor and not
material to its business.
The company is in the early stages of contingency planning for
possible business and process control system failures. Program
managers are undertaking detailed analysis concerning progress
assessment and priority resource allocation to ensure that this work
is completed by the ultimate target date. Contingency plans will, as
appropriate, include the identification of alternate suppliers,
vendors and service providers; the accumulation of inventory; the
identification of manual alternatives and the arranging for rapid
access to qualified vendor technical support. As developed,
contingency plans will continue to be reassessed and refined as
additional information becomes available.
Estimates and conclusions herein contain forward-looking statements
and are based on management's best estimates of future events.
Accounting changes: In 1999, the company is adopting two new
accounting standards issued by the Financial Accounting Standards
Board: Statement of Financial Accounting Standards (SFAS) 130,
Reporting Comprehensive Income, and SFAS 131, Disclosures about
Segments of an Enterprise and Related Information. Also, the
company is required to adopt a new accounting standard in fiscal
year 2000, SFAS 133, Accounting for Derivative Instruments and
Hedging Activities. The company does not believe that the adoption
of these statements will have a material effect on the results of
operations.
Environmental Matters
In 1995, the company authorized removal of elemental chlorine from
all of its pulp bleaching processes. This important initiative,
completed during 1997 at a cost of approximately $110 million,
represents a major step by Westvaco in addressing subsequent EPA
regulations for the U.S. pulp and paper industry regarding air and
water quality. These regulations, known as the Cluster Rule, were
published in the Federal Register in April 1998. The company
anticipates additional capital costs to comply with other parts of
these new regulations over the next several years to be in the range
of $100 million to $150 million which will also increase operating
costs in the range of $3 million to $7 million annually.
Environmental organizations are challenging the EPA regarding certain
aspects of the Cluster Rule in the U. S. Court of Appeals. Westvaco
and other companies are participating in that litigation. If the
legal challenge by environmental organizations to the regulations is
successful, the company could face additional compliance costs of up
to $150 million over the next several years.
The company is currently named as a potentially responsible party
with respect to the cleanup of a number of hazardous waste sites
under the Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA) and similar state laws. While joint and
several liability is authorized under CERCLA, as a practical matter,
remediation costs will be allocated among the waste generators and
others involved. The company has accrued approximately $5 million
for estimated potential cleanup costs based upon its close monitoring
of ongoing activities and its past experience with these matters. In
addition, the company is involved in the remediation of certain other
than CERCLA sites and has accrued approximately $9 million for
remediation of these sites.
Forward-looking statements
Certain statements in this document and elsewhere by management of
the company that are neither reported financial results nor other
historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such information includes, without limitation, the business
outlook, assessment of market conditions, anticipated financial
and operating results, strategies, future plans, contingencies and
contemplated transactions of the company. Such forward-looking
statements are not guarantees of future performance and are
subject to known and unknown risks, uncertainties and other
factors which may cause or contribute to actual results of company
operations, or the performance or achievements of the company, or
industry results, to differ materially from those expressed in or
implied by the forward-looking statements. In addition to any
such risks, uncertainties and other factors discussed elsewhere
herein, risks, uncertainties and other factors that could cause or
contribute to actual results differing materially from those
expressed in or implied by the forward-looking statements include,
but are not limited to, competitive pricing for the company's
products; changes in raw materials, energy and other costs; impact
of Year 2000 issues; fluctuations in demand and changes in
production capacities; changes to economic growth in the U.S. and
international economies, especially in Asia and Brazil;
governmental policies and regulations, including but not limited
to those affecting the environment and the tobacco industry; and
currency movements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Shareholders of Westvaco Corporation
was held on February 23, 1999.
(b) The directors named in the Proxy Statement were elected to
three-year terms expiring in 2002, with the following
results:
Shares Shares
Voted For Withheld
W. L. Lyons Brown, Jr. 87,199,356 6,967,236
Michael E. Campbell 87,197,780 6,968,812
John A. Luke, Jr. 87,196,021 6,970,571
William R. Miller 87,197,709 6,968,883
Directors whose terms of office continue: David L. Hopkins,
Jr., Douglas S. Luke, Jane L. Warner, Richard A. Zimmerman,
Samuel W. Bodman III, Dr. Thomas W. Cole, Jr. and Rudolph G.
Johnstone, Jr.
(c) The appointment of PricewaterhouseCoopers LLP as independent
accountants was ratified by a vote of 93,632,383 shares in
favor, 228,873 shares in opposition and 305,336 shares
abstained.
(d) The approval of the 1999 Salaried Employee Stock Incentive
was ratified by a vote of 83,221,589 shares in favor,
10,001,024 shares in opposition and 943,979 shares
abstained.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
10(a). Employment Agreement dated as of January 25, 1999, by
and between Westvaco Corporation and John A. Luke, Jr.
10(b). Employment Agreement dated as of January 26, 1999, by and
between Westvaco Corporation and Rudolph G. Johnstone, Jr.
10(c). Employment Agreement dated as of January 29, 1999, by and
between Westvaco Corporation and Philip H. Emery, Jr.
10(d). Employment Agreement dated as of January 25, 1999, by and
between Westvaco Corporation and Jack A. Hammond.
10(e). Employment Agreement dated as of January 27, 1999, by and
between Westvaco Corporation and R. Scott Wallinger.
10(f). Form of Employment Agreement by and between Westvaco
Corporation and certain individual officers of the company
dated January 1999.
10(g). Form of Employment Agreement by and between Westvaco
Corporation and certain individual officers of the company
dated January 1999.
27. Financial data schedule
(b) Reports on Form 8-K:
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned there unto duly
authorized.
WESTVACO CORPORATION
(Registrant)
March 17, 1999 /s/ Helen Murphy
Helen Murphy
Senior Vice President
(Principal Financial Officer)
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and John A. Luke, Jr. (the
"Executive"), dated as of the 25th day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of
this Agreement, or any other action by the Company
which results in a diminution in such position,
authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by
the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
John A. Luke, Jr.
81 Canoe Hill Road
New Canaan, CT 06840
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
John A. Luke, Jr.
WESTVACO CORPORATION
By_________________________________
Richard A. Zimmerman
Chairman, Compensation
Committee
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and Rudolph G. Johnstone,
Jr. (the "Executive"), dated as of the 26th day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated. Notwithstanding clause (A) of the preceding sentence,
the Executive's position need not comply with the requirements of
clause (A) provided that both of the conditions set forth in the
proviso to clause (i) of Section 5(c) are satisfied.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by clause (A) of the
last sentence of Section 4(a) of this Agreement, or any
other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive; provided, that such assignment or other
action shall not be considered "Good Reason" under this
clause (i) if (A) the individual who was the Chief
Executive Officer of the Company immediately before the
Effective Date remains an employee of the Company or of
its parent company at the time of such assignment or
action, and (B) after such assignment or action, the
Executive's position has responsibilities and authority
comparable to those of the Executive's position
immediately before the Effective Date (and in
determining such comparability, the Executive's title
and reporting responsibilities shall not be
dispositive);
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Rudolph G. Johnstone, Jr.
37 Langner Lane
Weston, CT 06883
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Rudolph G. Johnstone, Jr.
WESTVACO CORPORATION
By
John W. Hetherington
Vice President and Corporate
Secretary
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and Philip H. Emery, Jr.
(the "Executive"), dated as of the 29th day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated. Notwithstanding clause (A) of the preceding sentence,
the Executive's position need not comply with the requirements of
clause (A) provided that both of the conditions set forth in the
proviso to clause (i) of Section 5(c) are satisfied.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by clause (A) of the
last sentence of Section 4(a) of this Agreement, or any
other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive; provided, that such assignment or other
action shall not be considered "Good Reason" under this
clause (i) if (A) the individual who was the Chief
Executive Officer of the Company immediately before the
Effective Date remains an employee of the Company or of
its parent company at the time of such assignment or
action, and (B) after such assignment or action, the
Executive's position has responsibilities and authority
comparable to those of the Executive's position
immediately before the Effective Date (and in
determining such comparability, the Executive's title
and reporting responsibilities shall not be
dispositive);
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Philip H. Emery, Jr.
11740 Paddock Drive
Apartment #102-2
Midlothian, VA 23113
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Philip H. Emery, Jr.
WESTVACO CORPORATION
By
John W. Hetherington
Vice President and Corporate
Secretary
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and Jack A. Hammond (the
"Executive"), dated as of the 25th day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated. Notwithstanding clause (A) of the preceding sentence,
the Executive's position need not comply with the requirements of
clause (A) provided that both of the conditions set forth in the
proviso to clause (i) of Section 5(c) are satisfied.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by clause (A) of the
last sentence of Section 4(a) of this Agreement, or any
other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive; provided, that such assignment or other
action shall not be considered "Good Reason" under this
clause (i) if (A) the individual who was the Chief
Executive Officer of the Company immediately before the
Effective Date remains an employee of the Company or of
its parent company at the time of such assignment or
action, and (B) after such assignment or action, the
Executive's position has responsibilities and authority
comparable to those of the Executive's position
immediately before the Effective Date (and in
determining such comparability, the Executive's title
and reporting responsibilities shall not be
dispositive);
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
Jack A. Hammond
Box 306
Iron Gate, VA 24448-0306
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
Jack A. Hammond
WESTVACO CORPORATION
By
John W. Hetherington
Vice President and Corporate
Secretary
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and R. Scott Wallinger (the
"Executive"), dated as of the 27th day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated. Notwithstanding clause (A) of the preceding sentence,
the Executive's position need not comply with the requirements of
clause (A) provided that both of the conditions set forth in the
proviso to clause (i) of Section 5(c) are satisfied.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by clause (A) of the
last sentence of Section 4(a) of this Agreement, or any
other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive; provided, that such assignment or other
action shall not be considered "Good Reason" under this
clause (i) if (A) the individual who was the Chief
Executive Officer of the Company immediately before the
Effective Date remains an employee of the Company or of
its parent company at the time of such assignment or
action, and (B) after such assignment or action, the
Executive's position has responsibilities and authority
comparable to those of the Executive's position
immediately before the Effective Date (and in
determining such comparability, the Executive's title
and reporting responsibilities shall not be
dispositive);
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
R. Scott Wallinger
28 Crooked Mile Road
Darien, CT 06820
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
R. Scott Wallinger
WESTVACO CORPORATION
By
John W. Hetherington
Vice President and Corporate
Secretary
VERSION A
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and __________________ (the
"Executive"), dated as of the ___ day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated. Notwithstanding clause (A) of the preceding sentence,
the Executive's position need not comply with the requirements of
clause (A) provided that both of the conditions set forth in the
proviso to clause (i) of Section 5(c) are satisfied.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by clause (A) of the
last sentence of Section 4(a) of this Agreement, or any
other action by the Company which results in a
diminution in such position, authority, duties or
responsibilities, excluding for this purpose an
isolated, insubstantial and inadvertent action not
taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the
Executive; provided, that such assignment or other
action shall not be considered "Good Reason" under this
clause (i) if (A) the individual who was the Chief
Executive Officer of the Company immediately before the
Effective Date remains an employee of the Company or of
its parent company at the time of such assignment or
action, and (B) after such assignment or action, the
Executive's position has responsibilities and authority
comparable to those of the Executive's position
immediately before the Effective Date (and in
determining such comparability, the Executive's title
and reporting responsibilities shall not be
dispositive);
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.
IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to the authorization from its
Board of Directors, the Company has caused these presents to be
executed in its name on its behalf, all as of the day and year
first above written.
[Executive]
WESTVACO CORPORATION
By
VERSION B
EMPLOYMENT AGREEMENT
AGREEMENT by and between Westvaco Corporation, a
Delaware corporation (the "Company") and __________________ (the
"Executive"), dated as of the ___ day of January, 1999.
The Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company
and its shareholders to assure that the Company will have the
continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is
imperative to diminish the inevitable distraction of the
Executive by virtue of the personal uncertainties and risks
created by a pending or threatened Change of Control and to
encourage the Executive's full attention and dedication to the
Company currently and in the event of any threatened or pending
Change of Control, and to provide the Executive with compensation
and benefits arrangements upon a Change of Control which ensure
that the compensation and benefits expectations of the Executive
will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these
objectives, the Board has caused the Company to enter into this
Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date"
shall mean the first date during the Change of Control Period (as
defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the
Executive's employment with the Company is terminated prior to
the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of
employment (i) was at the request of a third party who has taken
steps reasonably calculated to effect a Change of Control or (ii)
otherwise arose in connection with or anticipation of a Change of
Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change of Control Period" shall mean the
period commencing on the date hereof and ending on the third
anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the
"Renewal Date"), unless previously terminated, the Change of
Control Period shall be automatically extended so as to terminate
three years from such Renewal Date, unless at least 60 days prior
to the Renewal Date the Company shall give notice to the
Executive that the Change of Control Period shall not be so
extended.
(c) The "Multiple" means the least of (i) three, (ii)
the greater of one and the number of years and fractions thereof
during the period from the Date of Termination (as hereinafter
defined) and the Executive's 65th birthday, and (iii) if the
Executive had announced his intention to retire before the Date
of Termination, the number of years and fractions thereof from
the Date of Termination until the date of such intended
retirement.
2. Change of Control. For the purpose of this
Agreement, a "Change of Control" shall mean:
(a) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"))
(a "Person") of beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities");
provided, however, that for purposes of this subsection (a), the
following acquisitions shall not constitute a Change of Control:
(i) any acquisition directly from the Company, (ii) any
acquisition by the Company, (iii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company or (iv) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (i), (ii) and (iii) of subsection (c) of
this Section 2; or
(b) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director subsequent to the date
hereof whose election, or nomination for election by the
Company's shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of
the Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person
other than the Board; or
(c) Consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 60% of,
respectively, the then outstanding shares of common stock and the
combined voting power of the then outstanding voting securities
entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which
as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be, (ii)
no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of
the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination
or the combined voting power of the then outstanding voting
securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were members
of the Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board, providing for
such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
3. Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby
agrees to remain in the employ of the Company subject to the
terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties.
(i) During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements),
authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant
of those held, exercised and assigned at any time during the 120-day
period immediately preceding the Effective Date and (B) the
Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date,
any office or location less than 35 miles from such location, or
any other location to which the Company's Headquarters Office,
Corporate Department Office, Division Office where the Executive
was employed immediately preceding the Effective Date is
relocated.
(ii) During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of
the Company and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period
it shall not be a violation of this Agreement for the Executive
to (A) serve on corporate, civic or charitable boards or
committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly
interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to
the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature
and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the
Executive's responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the
Employment Period, the Executive shall receive an annual base
salary ("Annual Base Salary"), which shall be paid at a monthly
rate, at least equal to twelve times the highest monthly base
salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its
affiliated companies in respect of the twelve-month period
immediately preceding the month in which the Effective Date
occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and
thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the
Executive under this Agreement. Annual Base Salary shall not be
reduced after any such increase and the term Annual Base Salary
as utilized in this Agreement shall refer to Annual Base Salary
as so increased. As used in this Agreement, the term "affiliated
companies" shall include any company controlled by, controlling
or under common control with the Company.
(ii) Annual Bonus. In addition to Annual Base Salary,
the Executive shall be awarded, for each fiscal year ending
during the Employment Period, an annual bonus (the "Annual
Bonus") in cash at least equal to the average of the Executive's
bonus under the Company's Annual Incentive Plan, or any
comparable bonus under any predecessor or successor plan, for
each of the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed
by the Company for the whole of such fiscal year) (the "Recent
Annual Bonus"). Each such Annual Bonus shall be paid no later
than the end of the third month of the fiscal year next following
the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans.
During the Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other
peer executives of the Company and its affiliated companies, but
in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to
the extent, if any, that such distinction is applicable), savings
opportunities and retirement benefit opportunities, in each case,
less favorable, in the aggregate, than the most favorable of
those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs
as in effect at any time during the 120-day period immediately
preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(iv) Welfare Benefit Plans. During the Employment
Period, the Executive and/or the Executive's family, as the case
may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and
programs provided by the Company and its affiliated companies
(including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and
travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans,
practices, policies and programs provide the Executive with
benefits which are less favorable, in the aggregate, than the
most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to
the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its
affiliated companies.
(v) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the
Company and its affiliated companies in effect for the Executive
at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period,
the Executive shall be entitled to fringe benefits, including,
without limitation, tax and financial planning services, payment
of club dues, and, if applicable, use of an automobile and
payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company
and its affiliated companies in effect for the Executive at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the
Employment Period, the Executive shall be entitled to an office
or offices of a size and with furnishings and other appointments,
and to exclusive personal secretarial and other assistance, at
least equal to the most favorable of the foregoing provided to
the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the
Executive shall be entitled to paid vacation in accordance with
the most favorable plans, policies, programs and practices of the
Company and its affiliated companies as in effect for the
Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with
respect to other peer executives of the Company and its
affiliated companies.
5. Termination of Employment. (a) Death or
Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment
Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment
Period (pursuant to the definition of Disability set forth
below), it may give to the Executive written notice in accordance
with Section 12(b) of this Agreement of its intention to
terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective
on the 30th day after receipt of such notice by the Executive
(the "Disability Effective Date"), provided that, within the 30
days after such receipt, the Executive shall not have returned to
full-time performance of the Executive's duties. For purposes of
this Agreement, "Disability" shall mean the absence of the
Executive from the Executive's duties with the Company on a full-
time basis for 180 consecutive business days as a result of
incapacity due to mental or physical illness which is determined
to be total and permanent by a physician selected by the Company
or its insurers and acceptable to the Executive or the
Executive's legal representative.
(b) Cause. The Company may terminate the Executive's
employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" shall mean:
(i) the willful and continued failure of the Executive
to perform substantially the Executive's duties with the
Company or one of its affiliates (other than any such
failure resulting from incapacity due to physical or mental
illness), after a written demand for substantial performance
is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically
identifies the manner in which the Board or Chief Executive
Officer believes that the Executive has not substantially
performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal
conduct, gross misconduct or a clearly established violation
of the Company's Code of Conduct, in each case which is
materially and demonstrably injurious to the Company.
For purposes of this provision, no act or failure
to act, on the part of the Executive, shall be considered
"willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of
the Company. Any act, or failure to act, based upon
authority given pursuant to a resolution duly adopted by the
Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the
advice of counsel for the Company shall be conclusively
presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company.
(c) Good Reason. The Executive's employment may be
terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean:
(i) the assignment to the Executive of any duties
inconsistent in any respect with the Executive's
position (including status, offices, titles and
reporting requirements), authority, duties or
responsibilities as contemplated by Section 4(a) of
this Agreement, or any other action by the Company
which results in a diminution in such position,
authority, duties or responsibilities, excluding for
this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith and which is remedied by
the Company promptly after receipt of notice thereof
given by the Executive;
(ii) any failure by the Company to comply with any
of the provisions of Section 4(b) of this Agreement,
other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is
remedied by the Company promptly after receipt of
notice thereof given by the Executive;
(iii) the Company's requiring the Executive to
be based at any office or location other than as
provided in Section 4(a)(i)(B) hereof or the Company's
requiring the Executive to travel on Company business
to a substantially greater extent than required
immediately prior to the Effective Date;
(iv) any purported termination by the Company of
the Executive's employment otherwise than as expressly
permitted by this Agreement; or
(v) any failure by the Company to comply with and
satisfy Section 11(c) of this Agreement.
For purposes of this Section 5(c), any good faith
determination of "Good Reason" made by the Executive shall
be conclusive.
(d) Notice of Termination. Any termination by the
Company for Cause, or by the Executive for Good Reason, shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 12(b) of this Agreement. For
purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated and (iii)
if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the termination date
(which date shall be not more than thirty days after the giving
of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively,
from asserting such fact or circumstance in enforcing the
Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means
(i) if the Executive's employment is terminated by the Company
for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if the Executive's employment
is terminated by the Company other than for Cause or Disability,
the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the
Executive's employment is terminated by reason of death or
Disability, the Date of Termination shall be the date of death of
the Executive or the Disability Effective Date, as the case may
be.
6. Obligations of the Company upon Termination. (a)
Good Reason; Other Than for Cause, Death or Disability. If,
during the Employment Period, the Company shall terminate the
Executive's employment other than for Cause or Disability or the
Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a
lump sum in cash within 30 days after the Date of
Termination the aggregate of the following amounts:
A. the sum of (1) the Executive's Annual
Base Salary through the Date of Termination to the
extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and
(II) the Annual Bonus paid or payable, including
any bonus or portion thereof which has been earned
but deferred (and annualized for any fiscal year
consisting of less than twelve full months or
during which the Executive was employed for less
than twelve full months), for the most recently
completed fiscal year during the Employment
Period, if any (such higher amount being referred
to as the "Highest Annual Bonus") and (y) a
fraction, the numerator of which is the number of
days in the current fiscal year through the Date
of Termination, and the denominator of which is
365 and (3) any compensation previously deferred
by the Executive (together with any accrued
interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described
in clauses (1), (2), and (3) shall be hereinafter
referred to as the "Accrued Obligations"); and
B. the amount equal to the product of (1)
the Multiple, (2) the sum of (x) the Executive's
Annual Base Salary, (y) the Highest Annual Bonus
and (z) the aggregate amount of the employer
contributions made with respect to the most
recently completed plan year before the Date of
Termination to the Executive's account(s) in the
Company's Savings and Investment Plan and Savings
and Investment Restoration Plan and any successor
or other qualified defined contribution plan
sponsored by the Company or any of its affiliated
companies in which the Executive participated and
any related nonqualified plans; and
C. an amount equal to the excess of (a) the
actuarial equivalent of the benefit under the
Company's Retirement Income Plan and any successor
or other qualified defined benefit retirement plan
sponsored by the Company or any of its affiliated
companies (such plans collectively, the
"Retirement Plan") (utilizing actuarial
assumptions no less favorable to the Executive
than those in effect under the Company's
Retirement Plan immediately prior to the Effective
Date), and the Retirement Income Restoration Plan
and any successor or other nonqualified excess or
supplemental defined benefit retirement plan in
which the Executive participates (together, the
"SERP") which the Executive would receive if the
Executive's employment continued for a number of
years equal to the Multiple after the Date of
Termination assuming for this purpose that all
accrued benefits are fully vested, and, assuming
that the Executive's compensation in each of such
years is that required by Section 4(b)(i) and
Section 4(b)(ii), over (b) the actuarial
equivalent of the Executive's actual benefit (paid
or payable), if any, under the Retirement Plan and
the SERP as of the Date of Termination;
(ii) for a number of years equal to the Multiple
after the Executive's Date of Termination, or such
longer period as may be provided by the terms of the
appropriate plan, program, practice or policy, the
Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which
would have been provided to them in accordance with the
plans, programs, practices and policies described in
Section 4(b)(iv) of this Agreement if the Executive's
employment had not been terminated or, if more
favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer
executives of the Company and its affiliated companies
and their families, provided, however, that if the
Executive becomes reemployed with another employer and
is eligible to receive medical or other welfare
benefits under another employer provided plan, the
medical and other welfare benefits described herein
shall be secondary to those provided under such other
plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time
of commencement of benefits) of the Executive for
retiree benefits pursuant to such plans, practices,
programs and policies, the Executive shall be
considered to have remained employed until the
expiration of a number of years after the Date of
Termination equal to the Multiple and to have retired
on the last day of such period;
(iii) the Company shall, at its sole expense
as incurred, provide the Executive with outplacement
services the scope and provider of which shall be
reasonable and consistent with industry practice for
similarly situated executives; and
(iv) to the extent not theretofore paid or
provided, the Company shall timely pay or provide to
the Executive any other amounts or benefits required to
be paid or provided or which the Executive is eligible
to receive under any plan, program, policy or practice
or contract or agreement of the Company and its
affiliated companies (such other amounts and benefits
shall be hereinafter referred to as the "Other
Benefits").
(b) Death. If the Executive's employment is
terminated by reason of the Executive's death during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive's legal representatives under this
Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued
Obligations shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days
of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this
Section 6(b) shall include, without limitation, and the
Executive's estate and/or beneficiaries shall be entitled to
receive, benefits at least equal to the most favorable benefits
provided by the Company and affiliated companies to the estates
and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and
policies relating to death benefits, if any, as in effect with
respect to other peer executives and their beneficiaries at any
time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate
and/or the Executive's beneficiaries, as in effect on the date of
the Executive's death with respect to other peer executives of
the Company and its affiliated companies and their beneficiaries.
(c) Disability. If the Executive's employment is
terminated by reason of the Executive's Disability during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive, other than for payment of Accrued
Obligations and the timely payment or provision of Other
Benefits. Accrued Obligations shall be paid to the Executive in
a lump sum in cash within 30 days of the Date of Termination.
With respect to the provision of Other Benefits, the term Other
Benefits as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date
to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its
affiliated companies to disabled executives and/or their families
in accordance with such plans, programs, practices and policies
relating to disability, if any, as in effect generally with
respect to other peer executives and their families at any time
during the 120-day period immediately preceding the Effective
Date or, if more favorable to the Executive and/or the
Executive's family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and its
affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the
Executive's employment shall be terminated for Cause during the
Employment Period, this Agreement shall terminate without further
obligations to the Executive other than the obligation to pay to
the Executive (x) his Annual Base Salary through the Date of
Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) Other Benefits, in each case
to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a
termination for Good Reason, this Agreement shall terminate
without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other
Benefits. In such case, all Accrued Obligations shall be paid to
the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and
for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement
with the Company or any of its affiliated companies; provided,
that the Executive shall not be entitled to receive any pay or
benefits under the Company's Significant Change Severance Pay
Plan for Salaried Employees or any successor or other severance
pay plan, policy or program sponsored by the Company or any of
its affiliated companies in connection with a termination of
employment that occurs on or after the Effective Date. Amounts
which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, policy, practice or program
of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination
shall be payable in accordance with such plan, policy, practice
or program or contract or agreement except as explicitly modified
by this Agreement.
8. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of
the amounts payable to the Executive under any of the provisions
of this Agreement and such amounts shall not be reduced whether
or not the Executive obtains other employment. The Company
agrees to pay as incurred, to the full extent permitted by law,
all legal fees and expenses which the Executive may reasonably
incur as a result of any contest (regardless of the outcome
thereof) by the Company, the Executive or others of the validity
or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a
result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest
on any delayed payment at the applicable Federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of
1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding and except as set forth below, in the event it
shall be determined that any payment or distribution by the
Company or its affiliates 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 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or 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,
are 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 such that after
payment by the Executive of 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, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
Notwithstanding the foregoing provisions of this Section 9(a), if
it shall be determined that the Executive is entitled to a Gross-Up
Payment, but that the Payments do not exceed 110% of the
greatest amount (the "Reduced Amount") that could be paid to the
Executive such that the receipt of Payments would not give rise
to any Excise Tax, then no Gross-Up Payment shall be made to the
Executive and the Payments, in the aggregate, shall be reduced to
the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all
determinations required to be made under this Section 9,
including whether and when a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made such
certified public accounting firm as may be designated by the
Executive (the "Accounting Firm"), which shall provide detailed
supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the
Executive that there has been a Payment, or such earlier time as
is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive
shall appoint another nationally recognized accounting firm to
make the determinations required hereunder (which accounting firm
shall then be referred to as the Accounting Firm hereunder). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five 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 will not
have been made by the Company should have been made
("Underpayment"), consistent with the calculations required to be
made hereunder. In the event that the Company exhausts its
remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, 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) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten 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. 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:
(i) give the Company any information
reasonably requested by the Company relating to such
claim,
(ii) take such action in connection with
contesting such claim 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,
(iii) cooperate with the Company in good
faith in order effectively to contest such claim, and
(iv) 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 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 Section 9(c), the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forgo 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 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 which a Gross-Up
Payment would be payable hereunder 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) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 9(c), the
Executive becomes entitled to receive any refund with respect to
such claim, the Executive shall (subject to the Company's
complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), a determination is made that
the Executive shall not be entitled to any refund with respect to
such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid
and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their
respective businesses, which shall have been obtained by the
Executive during the Executive's employment by the Company or any
of its affiliated companies and which shall not be or become
public knowledge (other than by acts by the Executive or
representatives of the Executive in violation of this Agreement).
After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this
Section 10 constitute a basis for deferring or withholding any
amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to
the Executive and without the prior written consent of the
Company shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and
be binding upon the Company and its successors and assigns.
(c) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or
assets of the Company to assume expressly 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. As used in this Agreement, "Company" shall mean the
Company as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by and construed in accordance with the laws of the
State of Delaware, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a
written agreement executed by the parties hereto or their
respective successors and legal representatives.
(b) All notices and other communications hereunder
shall be in writing and shall be given by hand delivery to the
other party or by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Executive:
If to the Company:
Westvaco Corporation
299 Park Avenue
New York, NY 10171
Attention: General Counsel
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement.
(d) The Company may withhold from any amounts payable
under this Agreement such Federal, state, local or foreign taxes
as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) The Executive's or the Company's failure to insist
upon strict compliance with any provision of this Agreement or
the failure to assert any right the Executive or the Company may
have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be
a waiver of such provision or right or any other provision or
right of this Agreement.
(f) The Executive and the Company acknowledge that,
except as may otherwise be provided under any other written
agreement between the Executive and the Company, the employment
of the Executive by the Company is "at will" and, subject to
Section 1(a) hereof, prior to the Effective Date, the Executive's
employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date,
in which case the Executive shall have no further rights under
this Agreement, provided, that this Agreement may not be
terminated by the Company if it is reasonably demonstrated by the
Executive that such termination (i) was at the request of a third
party who has taken steps reasonably calculated to effect a
Change of Control or (ii) otherwise arose in connection with or
anticipation of a Change of Control. From and after the
Effective Date this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof,
other than the Westvaco Intellectual Property Agreement between
the Executive and the Company.<PAGE>
IN WITNESS WHEREOF, the Executive
has hereunto set the Executive's hand and, pursuant to the
authorization from its Board of Directors, the Company has caused
these presents to be executed in its name on its behalf, all as of
the day and year first above written.
[Executive]
WESTVACO CORPORATION
By
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0
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