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Exhibit (10)(c)
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (this "Agreement"), dated as of , by and
between The Lubrizol Corporation, an Ohio corporation (the "Company"), and
(the "Executive");
WITNESSETH:
WHEREAS, the Executive is a senior executive of the Company and has made
and is expected to continue to make major contributions to the profitability,
growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case for most publicly
held companies, the possibility of a Change in Control (as that term is
hereafter defined) exists;
WHEREAS, the Company desires to assure itself of both present and future
continuity of management in the event of a Change in Control and desires to
establish certain minimum compensation rights of its key senior executive
officers, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that it's senior executives are not
practically disabled from discharging their duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter materially the
compensation and benefits which the Executive could reasonably expect to receive
from the Company absent a Change in Control and, accordingly, although effective
and binding as of the date hereof, this Agreement shall become operative only
upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services to the Company on the
terms and subject to the conditions set forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of Agreement
(a) This Agreement shall be effective and binding immediately upon its
execution, but, anything in this Agreement to the contrary notwithstanding, this
Agreement shall not be operative unless and until there shall have occurred a
Change in Control. For purposes of this Agreement, a "Change in Control" shall
have occurred if at any time during the Term (as that term is hereafter defined)
any of the following events shall occur:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, and immediately after such
merger, consolidation or reorganization less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such transaction are held in the
aggregate by the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such transaction;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, less than a majority of the
combined voting power of the then-outstanding securities of such
corporation or person immediately after such sale are held in the
aggregate by the holders of Voting Stock of the Company immediately prior
to such sale;
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(iii) There is a report filed on Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner" is defined under Rule
13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined voting power
of the then-outstanding securities entitled to vote generally in the
election of directors of the Company ("Voting Stock");
(iv) The Company files a report or proxy statement with the Securities
and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein) that a change in control of the Company has or
may have occurred or will or may occur in the future pursuant to any then
existing contract or transaction; or
(v) If during any period of 2 consecutive years, individuals who at the
beginning of any such period constitute the Directors of the Company
cease for any reason to constitute at least a majority thereof, provided,
however, that for purposes of this clause (v), each Director who is first
elected, or first nominated for election by the Company's stockholders by
a vote of at least two-thirds of the Directors of the Company (or a
committee thereof) then still in office who were Directors of the Company
at the beginning of any such period will be deemed to have been a
Director of the Company at the beginning of such period.
Notwithstanding the foregoing provisions of Section 1(a)(iii) or 1(a)(iv)
hereof, unless otherwise determined in a specific case by majority vote of the
Board of Directors of the Company (the "Board"), a "Change in Control" shall not
be deemed to have occurred for purposes of this Agreement solely because (i) the
Company, (ii) an entity in which the Company directly or indirectly beneficially
owns 50% or more of the voting securities (a "Subsidiary"), or (iii) any
Company-sponsored employee stock ownership plan or any other employee benefit
plan of the Company, either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item therein)
under the Exchange Act, disclosing beneficial ownership by it of shares of
Voting Stock, whether in excess of 20% or otherwise, or because the Company
reports that a change in control of the Company has or may have occurred or will
or may occur in the future by reason of such beneficial ownership.
(b) Upon the occurrence of a Change in Control at any time during the Term,
this Agreement shall become immediately operative.
(c) The period during which this Agreement shall be in effect (the "Term")
shall commence as of the date hereof and shall expire as of the later of (i)
the close of business on and (ii) the expiration of the Period of
Employment (as that term is hereinafter defined); provided, however, that (A)
commencing on January 1 , and each January 1 thereafter, the term of this
Agreement shall automatically be extended for an additional year unless, not
later than September 30 of the immediately preceding year, the Company or the
Executive shall have given notice that it or he, as the case may be, does not
wish to have the Term extended and (B) subject to Section 10 hereof, if, prior
to a Change in Control, the Executive ceases for any reason to be an employee
of the Company and any Subsidiary, thereupon the Term shall be deemed to have
expired and this Agreement shall immediately terminate and be of no further
effect.
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2. Employment; Period of Employment
(a) Subject to the terms and conditions of this Agreement, upon the occurrence
of a Change in Control, the Company shall continue the Executive in its employ
and the Executive shall remain in the employ of the Company and/or a
Subsidiary, as the case may be, for the period set forth in Section 2(b) hereof
(the "Period of Employment"), in the position and with substantially the same
duties and responsibilities that he had immediately prior to the Change in
Control, or to which the Company and the Executive may hereafter mutually agree
in writing. Throughout the Period of Employment, the Executive shall devote
substantially all of his time during normal business hours (subject to
vacations, sick leave and other absences in accordance with the policies of the
Company as in effect for senior executives immediately prior to the Change in
Control) to the business and affairs of the Company, but nothing in this
Agreement shall preclude the Executive from devoting reasonable periods of time
during normal business hours to (i) serving as a director, trustee or member of
or participant in any organization or business so long as such activity would
not constitute Competitive Activity (as that term is hereafter defined) if
conducted by the Executive after the Executive's Termination Date (as that term
is hereafter defined), (ii) engaging in charitable and community activities, or
(iii) managing his personal investments.
(b) The Period of Employment shall commence on the date of an occurrence of a
Change in Control and, subject only to the provisions of Section 4 hereof, shall
continue until the earliest of (i) the expiration of the third anniversary of
the occurrence of the Change in Control, (ii) the Executive's death, (iii) by
reason of the Executive's disability and the actual receipt of disability
benefits in accordance with Section 4(a)(ii), or (iv) the Executive's attainment
of age 65; provided, however, that commencing on each anniversary of the Change
of Control, the Period of Employment shall automatically be extended for an
additional year unless, not later than 90 calendar days prior to such
anniversary date, either the Company or the Executive shall have given written
notice to the other that the Period of Employment shall not be so extended.
3. Compensation During Period of Employment
(a) Upon the occurrence of a Change in Control, the Executive shall receive
during the Period of Employment (i) annual base salary at a rate not less than
the Executive's annual fixed or base compensation (payable monthly or otherwise
as in effect for senior executives of the Company immediately prior to the
occurrence of a Change in Control) or such higher rate as may be determined from
time to time by the Board or the Compensation Committee thereof (which base
salary at such rate is herein referred to as "Base Pay," and 1 year's worth of
such Base Pay is herein referred to as the "Annual Base Pay Amount") and (ii) an
annual amount (the "Annual Incentive Pay Amount") equal to not less than the
highest aggregate annual bonus, incentive or other payments of cash compensation
in addition to the amounts referred to in clause (i) above made or to be made in
regard to services rendered in any calendar year during the 3 calendar years
immediately preceding the year in which the Change in Control occurred pursuant
to any bonus, incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement (whether or not funded)
of the Company or any successor thereto providing benefits at least as great as
the benefits payable thereunder prior to a Change in Control ("Incentive Pay");
provided, however, that (A) with the prior written consent of the Executive,
nothing herein shall preclude a change in the mix between Base Pay and Incentive
Pay so long as that the aggregate cash compensation received by the Executive in
any 1 calendar year is not reduced in connection therewith or as a result
thereof, (B) in no event shall any increase in the Executive's aggregate cash
compensation or any portion thereof in any way diminish any other obligation of
the Company under this Agreement, and (C) no duplicate payment hereunder will be
made in respect of any
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amount actually paid to the Executive pursuant to any such agreement, policy,
plan, program or arrangement.
(b) For his service pursuant to Section 2(a) hereof during the Period of
Employment the Executive shall be a full participant in, and shall be entitled
to the perquisites, benefits and service credit for benefits as provided under,
any and all employee retirement income and welfare benefit policies, plans,
programs or arrangements in which senior executives of the Company participate,
including without limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive retirement or other
retirement income or welfare benefit, deferred compensation, incentive
compensation, group and/or executive life, health, medical/ hospital or other
insurance (whether funded by actual insurance or self-insured by the Company),
disability, salary continuation, expense reimbursement and other employee
benefit policies, plans, programs or arrangements that may now exist or any
equivalent successor policies, plans, programs or arrangements that may be
adopted hereafter by the Company providing perquisites, benefits and service
credit for benefits at least as great as are payable thereunder prior to a
Change in Control (collectively, "Employee Benefits"); provided, however, that
except as expressly provided in, and subject to the terms of, Section 3(a)
hereof, the Executive's rights thereunder shall be governed by the terms thereof
and shall not be enlarged hereunder or otherwise affected hereby. If and to the
extent such perquisites, benefits or service credit for benefits are not payable
or provided under any such policy, plan, program or arrangement as a result of
the amendment or termination thereof, then the Company shall itself pay or
provide therefor. Nothing in this Agreement shall preclude improvement or
enhancement of any such Employee Benefits, provided that no such improvement
shall in any way diminish any other obligation of the Company under this
Agreement.
4. Termination Following a Change in Control
(a) In the event of the occurrence of a Change in Control, the Executive's
employment may be terminated by the Company during the Period of Employment and
the Executive shall not be entitled to the benefits provided by Sections 5 and 6
hereof only upon the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive shall become permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant
to, the long-term disability plan in effect for senior executives of the
Company immediately prior to the Change in Control; or
(iii) The Executive's attainment of age 65;
(iv) "Cause", which for purposes of this Agreement shall mean that,
prior to any termination pursuant to Section 4(b) hereof, the Executive
shall have committed:
(A) an intentional act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment
with the Company and/or any Subsidiary;
(B) intentional wrongful damage to property of the Company
and/or any Subsidiary;
(C) intentional wrongful disclosure of secret processes or
confidential information of the Company and/or any
Subsidiary; or
(D) intentional wrongful engagement in any Competitive
Activity;
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and any such act shall have been materially harmful to the Company. For
purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be deemed "intentional" if it was due primarily to an
error in judgment or negligence, but shall be deemed "intentional" only
if done, or omitted to be done, by the Executive not in good faith and
without reasonable belief that his action or omission was in the best
interest of the Company. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for "Cause" hereunder unless
and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the Board then in office at a meeting of the Board
called and held for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive, together with his
counsel, to be heard before the Board), finding that, in the good faith
opinion of the Board, the Executive had committed an act set forth above
in Section 4(a)(iv) and specifying the particulars thereof in detail.
Nothing herein shall limit the right of the Executive or his
beneficiaries to contest the validity or propriety of any such
determination.
(b) In the event of the occurrence of a Change in Control, this Agreement may
be terminated by the Executive during the Period of Employment with the right
to severance compensation as provided in Sections 5 and 6 hereof upon the
occurrence of one or more of the following events (regardless of whether any
other reason, other than Cause as hereinabove provided, for such termination
exists or has occurred, including without limitation other employment):
(i) Any termination by the Company of the employment of the Executive
prior to the date upon which the Executive shall have attained age 65,
which termination shall be for any reason other than for Cause or as a
result of the death of the Executive or by reason of the Executive's
disability and the actual receipt of disability benefits in accordance
with Section 4(a)(ii) hereof; or
(ii) Termination by the Executive of his employment with the Company and
any Subsidiary within 3 years after the Change in Control upon the
occurrence of any of the following events:
(A) Failure to elect or reelect or otherwise to maintain the
Executive in the office or the position, or a substantially
equivalent office or position, of or with the Company and/or a
Subsidiary, as the case may be, which the Executive held
immediately prior to a Change in Control, or the removal of the
Executive as a Director of the Company (or any successor thereto)
if the Executive shall have been a Director of the Company
immediately prior to the Change in Control;
(B) A significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached
to the position with the Company and any Subsidiary which the
Executive held immediately prior to the Change in Control, a
reduction in the aggregate of the Executive's Base Pay and
Incentive Pay received from the Company and any Subsidiary, or the
termination or denial of the Executive's rights to Employee
Benefits as herein provided, any of which is not remedied within 10
calendar days after receipt by the Company of written notice from
the Executive of such change, reduction or termination, as the case
may be;
(C) A determination by the Executive made in good faith that as a
result of a Change in Control and a change in circumstances
thereafter significantly affecting his position, including without
limitation a change in the scope of the
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business or other activities for which he was responsible
immediately prior to a Change in Control, he has been rendered
substantially unable to carry out, has been substantially hindered
in the performance of, or has suffered a substantial reduction in,
any of the authorities, powers, functions, responsibilities or
duties attached to the position held by the Executive immediately
prior to the Change in Control, which situation is not remedied
within 10 calendar days after written notice to the Company from
the Executive of such determination;
(D) The liquidation, dissolution, merger, consolidation or
reorganization of the Company or transfer of all or a significant
portion of its business and/or assets, unless the successor or
successors (by liquidation, merger, consolidation, reorganization
or otherwise) to which all or a significant portion of its business
and/or assets have been transferred (directly or by operation of
law) shall have assumed all duties and obligations of the Company
under this Agreement pursuant to Section 12 hereof;
(E) The Company shall relocate its principal executive offices, or
require the Executive to have his principal location of work
changed, to any location which is in excess of 25 miles from the
location thereof immediately prior to the Change of Control or to
travel away from his office in the course of discharging his
responsibilities or duties hereunder significantly more (in terms
of either consecutive days or aggregate days in any calendar year)
than was required of him prior to the Change of Control without, in
either case, his prior written consent; or
(F) Without limiting the generality or effect of the foregoing,
any material breach of this Agreement by the Company or any
successor thereto.
(iii) Termination by the Executive of his employment with the Company and
any Subsidiary, for any reason or for no reason, at any time during the
90 day period commencing on the first anniversary of the Change in
Control, provided that the Executive remains employed by the Company up
to the date of that termination by the Executive.
(c) A termination by the Company pursuant to Section 4(a) hereof or by the
Executive pursuant to Section 4(b) hereof shall not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits (except as provided in
Section 5(a)(v) hereof), which rights shall be governed by the terms thereof. If
this Agreement or the employment of the Executive is terminated under
circumstances in which the Executive is not entitled to any payments under
Sections 3, 5 or 6 hereof, the Executive shall have no further obligation or
liability to the Company hereunder with respect to his prior or any future
employment by the Company.
5. Severance Compensation
(a) If, following the occurrence of a Change in Control, the Company shall
terminate the Executive's employment during the Period of Employment other than
pursuant to Section 4(a) hereof, or if the Executive shall terminate his
employment pursuant to Section 4(b) hereof, the Company shall continue to
provide the following benefits and shall further pay to the Executive the
following amounts within 5 business days after the date (the "Termination Date")
that the Executive's employment is terminated (the effective date of which shall
be the date of termination, or such other date that may be specified by the
Executive if the termination is pursuant to Section 4(b) hereof):
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(i) Base Pay through the Termination Date, to the extent not previously
paid to the Executive.
(ii) Incentive Pay for any calendar year ended before the Termination
Date in the same amount that would have been payable to the Executive
with respect to that calendar year if the Executive had remained in the
employ of the Company through the end of the Period of Employment, to the
extent not previously paid to the Executive.
(iii) An amount constituting a pro rata Incentive Pay award for the
partial year ending on the Termination Date and equal to (A) the greater
of (I) the Annual Incentive Pay Amount or (II) the aggregate Incentive
Pay to which the Executive would have been entitled pursuant to this
Agreement or any agreement, policy, plan, program or arrangement referred
to therein had he remained in the employ of the Company through the end
of the calendar year in which his employment is terminated, multiplied by
(B) a fraction, the numerator of which is the number of days from January
1 of the calendar year in which the Termination Date occurs to the
Termination Date, inclusive, and the denominator of which is 365.
(iv) In lieu of any further payments to the Executive for periods
subsequent to the Termination Date, but without affecting the rights of
the Executive referred to in Section 5(b) hereof, a lump sum payment (the
"Severance Payment") in an amount equal to 3 times the sum of (A) the
Annual Base Pay Amount (at the highest rate in effect for any period
prior to the Termination Date), plus (B) the Annual Incentive Pay Amount.
(v) For the period commencing on the Termination Date and ending on the
third anniversary of the Termination Date (the "Benefit Continuation
Period"), the Company shall arrange to provide the Executive with
Employee Benefits that are welfare benefits, but not stock option, stock
purchase, stock appreciation, or similar compensatory benefits,
substantially similar to those which the Executive was receiving or
entitled to receive immediately prior to the Termination Date (and if and
to the extent that such benefits shall not or cannot be paid or provided
under any policy, plan, program or arrangement of the Company or any
Subsidiary, as the case may be, then the Company shall itself pay or
provide for the payment to the Executive, his dependents and
beneficiaries, such Employee Benefits). Without otherwise limiting the
purposes or effect of Section 7 hereof, Employee Benefits otherwise
receivable by the Executive pursuant to the first sentence of this
Section 5(a)(ii) shall be reduced to the extent comparable welfare
benefits are actually received by the Executive from another employer
during the Benefit Continuation Period, and any such benefits actually
received by the Executive shall be reported by the Executive to the
Company. Notwithstanding the foregoing, the Benefit Continuation Period
shall be considered service with the Company for the purpose of
determining service credits and benefits due and payable to the Executive
under the Company's retirement income, supplemental executive retirement
and other benefit plans of the Company applicable to the Executive or his
beneficiaries immediately prior to the Termination Date.
(b) Upon written notice given by the Executive to the Company prior to the
occurrence of a Change in Control, the Executive, at his sole option, without
reduction to reflect the present value of such amounts as aforesaid, may elect
to have all or any of the Severance Payment payable pursuant to Section 5(a)
hereof paid to him on a quarterly or monthly basis during the Benefit
Continuation Period.
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(c) There shall be no right of set-off or counterclaim in respect of any
claim, debt or obligation against any payment to or benefit for the Executive
provided for in this Agreement, except as expressly provided in Section 5(a)(v)
hereof.
(d) Without limiting the rights of the Executive at law or in equity, if the
Company fails to make any payment required to be made hereunder on a timely
basis, the Company shall pay interest on the amount thereof at an annualized
rate of interest equal to the then-applicable discount rate required to be
utilized for purposes of Section 280G of the Code or any successor provision
thereto, or if no such rate is so required to be used, a rate equal to the then
applicable interest rate prescribed by the Pension Benefit Guarantee Corporation
for benefit valuations in connection with non-multiemployer pension plan
terminations assuming the immediate commencement of benefit payments.
(e) Notwithstanding any other provision hereof, the parties' respective rights
and obligations under this Section 5 will survive any termination or expiration
of this Agreement or the termination of the Executive's employment for any
reason whatsoever.
6. Certain Additional Payments by the Company
(a) Anything in this Agreement to the contrary notwithstanding, in the event
that this Agreement shall become operative and it shall be determined (as
hereafter provided) that any payment or distribution by the Company or any of
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 pursuant to or by reason of any other agreement, policy, plan, program
or arrangement, including without limitation any stock option, stock
appreciation right or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the foregoing
(individually and collectively a "Payment"), would be subject to the excise tax
imposed by Section 4999 of the Code (or any successor provision thereto) by
reason of being considered "contingent on a change in ownership or control" of
the Company, within the meaning of Section 280G of the Code (or any successor
provision thereto), or any interest or penalties with respect to such excise tax
(such excise tax, together with any such interest and penalties, being hereafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments (individually and
collectively, a "Gross-Up Payment"). The Gross-Up Payment shall be 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 any 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 Payment.
(b) Subject to the provisions of Section 6(e) hereof, all determinations
required to be made under this Section 6, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (the "Accounting Firm") selected by the Executive in
his sole discretion. The Executive shall direct the Accounting Firm to submit
its determination and detailed supporting calculations to both the Company and
the Executive within 30 calendar days after the Termination Date, if applicable,
and any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by
the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within 5 business days after receipt of such determination and
calculations with respect to any Payment to the Executive. The federal tax
returns filed by the Executive shall be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to the Excise Tax
payable by the Executive. If the Accounting Firm determines that no Excise Tax
is payable by the Executive, it shall, at the same time as it makes such
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determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal
income tax return. As a result of the uncertainty in the application of Section
4999 of the Code (or any successor provision thereto) at the time of any
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 (an
"Underpayment"), consistent with the calculations required to be made hereunder.
In the event that the Company exhausts or fails to pursue its remedies pursuant
to Section 6(e) hereof and the Executive thereafter is required to make a
payment of any Excise Tax, the Executive shall direct the Accounting Firm to
determine the amount of the Underpayment that has occurred and to submit its
determination and detailed supporting calculations to both the Company and the
Executive as promptly as possible. Any such Underpayment shall be promptly paid
by the Company to, or for the benefit of, the Executive within 5 business days
after receipt of such determination and calculations.
(c) The Company and the Executive shall each provide the Accounting Firm
access to and copies of any books, records and documents in the possession of
the Company or the Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting Firm in connection
with the preparation and issuance of the determinations and calculations
contemplated by Section 6(b) hereof.
(d) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
6(b) hereof shall be borne by the Company. If such fees and expenses are
initially paid by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within 5 business days after receipt from
the Executive of a statement therefor and reasonable evidence of his payment
thereof.
(e) 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 a Gross-Up Payment. Such notification shall be given as promptly as
practicable but no later than 10 business days after the Executive actually
receives notice of such claim and the Executive shall further apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The
Executive shall not pay such claim prior to the earlier of (i) the expiration of
the 30-calendar-day period following the date on which he gives such notice to
the Company and (ii) the date that any payment of amount 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) provide the Company with any written records or documents in his
possession relating to such claim reasonably requested by the Company;
(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 competent in respect of the subject matter and
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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive on an after-tax
basis, for and against any Excise Tax or
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income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without
limiting the foregoing provisions of this Section 6(e), the Company shall
control all proceedings taken in connection with the contest of any claim
contemplated by this Section 6(e) and, at its sole option, may pursue or forego
any and all administrative appeals, proceedings, hearings and conferences with
the taxing authority in respect of such claim (provided, however, that the
Executive may participate therein at his own cost and expense) and may, at its
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 the tax claimed 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; and provided further, however,
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of any such contested claim 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.
(f) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 6(e) hereof, the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 6(e) hereof) promptly pay to the Company the
amount of such refund (together with any interest paid or credited thereon
after any taxes applicable thereto). If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Section 6(e) hereof, 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 or refund prior to the expiration
of 30 calendar days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of any such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this Section 6.
7. No Mitigation Obligation
The Company hereby acknowledges that it will be difficult, and may be
impossible, for the Executive to find reasonably comparable employment following
the Termination Date and that the noncompetition covenant contained in Section 8
hereof will further limit the employment opportunities for the Executive. In
addition, the Company acknowledges that its severance pay plans applicable in
general to its salaried employees do not provide for mitigation, offset or
reduction of any severance payment received thereunder. Accordingly, the parties
hereto expressly agree that the payment of the severance compensation by the
company to the Executive in accordance with the terms of this Agreement will be
liquidated damages, and that the Executive shall not be required to mitigate the
amount of any payment provided for in this Agreement by seeking other employment
or otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive hereunder or otherwise, except as
expressly provided in Section 5(a)(v) hereof.
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8. Competitive Activity
During a period ending 1 year following the Termination Date, if the Executive
shall have received or shall be receiving benefits under Section 5 hereof and,
if applicable, Section 6 hereof, the Executive shall not, without the prior
written consent of the Company, which consent shall not be unreasonably
withheld, engage in any Competitive Activity. For purposes of this Agreement,
the term "Competitive Activity" shall mean the Executive's participation,
without the written consent of an officer of the Company, in the management of
any business enterprise if such enterprise engages in substantial and direct
competition with the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company amounted to 25%
of such enterprise's net sales for its most recently completed fiscal year and
if the Company's net sales of said product or service amounted to 25% of the
Company's net sales for its most recently completed fiscal year. "Competitive
Activity" shall not include (i) the mere ownership of securities in any such
enterprise and exercise of rights appurtenant thereto or (ii) participation in
management of any such enterprise other than in connection with the competitive
operations of such enterprise.
9. Legal Fees and Expenses
(a) It is the intent of the Company that the Executive not be required to
incur legal fees and the related expenses associated with the enforcement or
defense of his rights under this Agreement by litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Executive hereunder. Accordingly, if it
should appear to the Executive that the Company has failed to comply with any
of its obligations under this Agreement or in the event that the Company or any
other person takes or threatens to take any action to declare this Agreement
void or unenforceable, or institutes any litigation or other action or
proceeding designed to deny, or to recover from, the Executive the benefits
provided or intended to be provided to the Executive hereunder, the Company
irrevocably authorizes the Executive from time to time to retain counsel of his
choice, at the expense of the Company as hereafter provided, to represent the
Executive in connection with the initiation or defense of any litigation or
other legal action, whether by or against the Company or any Director, officer,
stockholder or other person affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client relationship between the
Company and such counsel, the Company irrevocably consents to the Executive's
entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship
shall exist between the Executive and such counsel. Without respect to whether
the Executive prevails, in whole or in part, in connection with any of the
foregoing, the Company shall pay or cause to be paid and shall be solely
responsible for any and all attorneys' and related fees and expenses incurred
by the Executive in connection with any of the foregoing.
(b) Without limiting the generality or effect of Section 9(a) hereof, in order
to ensure the benefits intended to be provided to the Executive under Section
9(a) hereof, the Company will promptly use its best efforts to secure an
irrevocable standby letter of credit (the "Letter of Credit"), issued by
National City Bank or another bank having combined capital and surplus in excess
of $500 million (the "Bank") for the benefit of the Executive and certain other
of the officers of the Company and providing that the fees and expenses of
counsel selected from time to time by the Executive pursuant to this Section 9
shall be paid, or reimbursed to the Executive if paid by the Executive, on a
regular, periodic basis upon presentation by the Executive to the Bank of a
statement or statements prepared by such counsel in accordance with its
customary practices. The Company shall pay all amounts and take all action
necessary to maintain the Letter of Credit during the Period of Employment and
for 2 years thereafter and
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if, notwithstanding the Company's complete discharge of such obligations, such
Letter of Credit shall be terminated or not renewed, the Company shall obtain a
replacement irrevocable clean letter of credit drawn upon a commercial bank
selected by the Company and reasonably acceptable to the Executive, upon
substantially the same terms and conditions as contained in the Letter of
Credit, or any similar arrangement which, in any case, assures the Executive
the benefits of this Agreement without incurring any cost or expense in
connection therewith.
(c) Notwithstanding any other provision hereof, the parties' respective rights
and obligations under this Section 9 will survive any termination or expiration
of this Agreement or the termination of the Executive's employment for any
reason whatsoever.
10. Employment Rights
Nothing expressed or implied in this Agreement shall create any right or duty on
the part of the Company or the Executive to have the Executive remain in the
employment of the Company prior to any Change in Control; provided, however,
that any termination of employment of the Executive or the removal of the
Executive from his office or position in the Company or any Subsidiary following
the commencement of any discussion with a third person that ultimately results
in a Change in Control shall be deemed to be a termination or removal of the
Executive after a Change in Control for purposes of this Agreement.
11. Withholding of Taxes
The Company may withhold from any amounts payable under this Agreement all
federal, state, city or other taxes as shall be required pursuant to any law or
government regulation or ruling.
12. Successors and Binding Agreement
(a) The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of the Company, by agreement in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent the Company
would be required to perform if no such succession had taken place. This
Agreement shall be binding upon and inure to the benefit of the Company and any
successor to the Company, including without limitation any persons acquiring
directly or indirectly all or substantially all of the business and/or assets of
the Company whether by purchase, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the "Company" for the
purposes of this Agreement), but shall not otherwise be assignable, transferable
or delegable by the Company.
(b) This Agreement shall inure to the benefit of and be enforceable by the
Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the parties hereto
shall, without the consent of the other, assign, transfer or delegate this
Agreement or any rights or obligations hereunder except as expressly provided in
Sections 12(a) and 12(b) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a security
interest or otherwise, other than by a transfer by his will or by the laws of
descent and distribution and, in the event of any attempted assignment or
transfer contrary to this Section 12(c), the Company shall have no liability to
pay any amount so attempted to be assigned, transferred or delegated.
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(d) The Company and the Executive recognize that each party will have no
adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, the Company and the
Executive hereby agree and consent that the other shall be entitled to a decree
of specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
13. Notice
For all purposes of this Agreement, all communications including without
limitation notices, consents, requests or approvals, provided for herein shall
be in writing and shall be deemed to have been duly given when delivered or 5
business days after having been mailed by United States registered or certified
mail, return receipt requested, postage prepaid, addressed to the Company (to
the attention of the Secretary of the Company) at its principal executive office
and to the Executive at his principal residence, or to such other address as any
party may have furnished to the other in writing and in accordance herewith,
except that notices of change of address shall be effective only upon receipt.
14. Governing Law
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of Ohio, without giving effect to the
principles of conflict of laws of such State.
15. Validity
If any provision of this Agreement or the application of any provision hereof to
any person or circumstances is held invalid, unenforceable or otherwise illegal,
the remainder of this Agreement and the application of such provision to any
other person or circumstances shall not be affected, and the provision so held
to be invalid, unenforceable or otherwise illegal shall be reformed to the
extent (and only to the extent) necessary to make it enforceable, valid and
legal.
16. Miscellaneous
No provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party hereto at any time of any
breach by the other party hereto or compliance with any condition or provision
of this Agreement to be performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise, expressed
or implied with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
17. Counterparts
This Agreement may be executed in one or more counterparts, each of which shall
be deemed to be an original but all of which together will constitute one and
the same agreement.
18. Prior Agreement
This Agreement amends and restates the Agreement, dated as of June 10, 1996 (the
"Prior Agreement"), between the Company and the Executive, which Prior
Agreement, shall, without further action, be superseded as of the date hereof.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first above written.
EXECUTIVE THE LUBRIZOL CORPORATION
By:
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