Form of Severance Compensation Agreement Albemarle Corporation
Exhibit 10.1
Form of Severance Compensation Agreement
Albemarle Corporation
000 Xxxxx Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
, 2006
[Insert Name]
[Insert home address]
Dear :
The Board of Directors (the “Board”) of Albemarle Corporation (the “Corporation”) recognizes that the possibility of a Change in Control of the Corporation exists, and the uncertainty and questions which it may raise among management may result in the departure or distraction of management personnel to the detriment of the Corporation.
The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Corporation’s management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from a possible Change in Control of the Corporation.
In order to induce you to remain in the employ of the Corporation and in consideration of your continued service to the Corporation, the Corporation agrees that you shall receive certain benefits in the event of a Change in Control and certain severance benefits in the event your employment with the Corporation is terminated subsequent to a Change in Control, as set forth in this Severance Compensation Agreement (“Agreement”).
| 1. | Definitions. |
a. “Change in Control” means the occurrence of any of the following events:
| (i) | any Person, or “group” as defined in section 13(d)(3) of the Securities Exchange Act of 1934 (excluding Xxxxx X. Xxxxxxxx, members of his family and any Affiliate), becomes, directly or indirectly, the Beneficial Owner of 20% or more of the combined voting power of the then outstanding securities of the Corporation that are entitled to vote generally for the election of the Corporation’s directors (the “Voting Securities”) (other than as a result of an issuance of securities by the Corporation approved by Continuing Directors, or open market purchases approved by Continuing Directors at the time the purchases are made). However, if any such Person or “group” becomes the Beneficial Owner of 20% or more, and less than 30%, of the Voting Securities, the Continuing Directors may determine, by a vote of at least two-thirds of the Continuing Directors, that the same does not constitute a Change in Control; |
| (ii) | as the direct or indirect result of, or in connection with, a reorganization, merger, share exchange or consolidation (a “Business Combination”), a contested election of directors, or any combination of these transactions, Continuing Directors cease to constitute a majority of the Corporation’s board of directors, or any successor’s board of directors, within two years of the last of such transactions; |
| (iii) | the shareholders of the Corporation approve a Business Combination, unless immediately following such Business Combination, (1) all or substantially all of the Persons who were the Beneficial Owners of the Voting Securities outstanding immediately prior to such Business Combination Beneficially Own more than 60% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Corporation resulting from such Business Combination (including, without limitation, a company which as a result of such transaction owns the Corporation through one or more Subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the Voting Securities, (ii) no Person (excluding Xxxxx X. Xxxxxxxx, members of his family and any Affiliate and any employee benefit plan or related trust of the Corporation or the Corporation resulting from such Business Combination) Beneficially Owns 30% or more of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the Corporation resulting from such Business Combination, and (iii) at least a majority of the members of the board of directors of the Corporation resulting from such Business Combination are Continuing Directors. |
For purposes of this paragraph 1.a. and other provisions of this Agreement, the following terms shall have the meanings set forth below:
(A) Affiliate and Associate shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended and as in effect on the date of this Agreement (the “Exchange Act”).
(B) Beneficial Owner means that a Person shall be deemed the “Beneficial Owner” and shall be deemed to “beneficially own,” any securities:
(i) that such Person or any of such Person’s Affiliates or Associates owns, directly or indirectly;
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(ii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to acquire (whether such right is exercisable immediately or only after the passage of time) pursuant to any agreement, arrangement or understanding (whether or not in writing) or upon the exercise of conversion rights, exchange rights, rights, warrants or options, or otherwise; provided, however, that, a Person shall not be deemed to be the “Beneficial Owner” of, or to “beneficially own,” securities tendered pursuant to a tender or exchange offer made by such Person or any such Person’s Affiliates or Associates until such tendered securities are accepted for purchase or exchange;
(iii) that such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has the right to vote, including pursuant to any agreement, arrangement or understanding, whether or not in writing; provided, however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” any security under this subsection as a result of an agreement, arrangement or understanding to vote such security if such agreement, arrangement or understanding: (1) arises solely from a revocable proxy given in response to a public proxy solicitation made pursuant to, and in accordance with the applicable provisions of the General Rules and Regulations under the Exchange Act and (2) is not also then reportable by such Person on Schedule 13D under the Exchange Act (or any comparable or successor report); or
(iv) that are beneficially owned, directly or indirectly, by any other Person (or any Affiliate or Associates thereof) with which such Person (or any of such Person’s Affiliates or Associates) has any agreement, arrangement or understanding (whether or not in writing), for the purpose of acquiring, holding, voting (except pursuant to a revocable proxy as described in ‘the proviso to subsection (iii) of this definition) or disposing of any voting securities of the Corporation provided, however, that notwithstanding any provision of this definition, any Person engaged in business as an underwriter of securities who acquires any securities of the Corporation through such Person’s participation in good faith in a firm commitment underwriting registered under the Securities Act of 1933, shall not be deemed the “Beneficial Owner” of, or to “beneficially own,” such securities until the expiration of forty days after the date of acquisition; and provided, further, that in no case shall an officer or director of the Corporation be deemed (1) the beneficial owner of any securities beneficially owned by another officer or director of the Corporation solely by reason of actions undertaken by such persons in their capacity as officers or directors of the Corporation; or (2) the beneficial owner of securities held of record by the trustee of any employee benefit plan of the Corporation or any Subsidiary of the Corporation for the benefit of any employee of the Corporation or any Subsidiary of the Corporation, other than the officer or director, by reason of any influences that such officer or director may have over the voting of the securities held in the trust.
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(C) Continuing Directors means any member of the Corporation’s Board, while a member of that Board, and (i) who was a member of the Corporation’s Board prior to December 13, 2006, or (ii) whose subsequent nomination for election or election to the Corporation’s Board was recommended or approved by a majority of the Continuing Directors.
(D) Person means any individual, firm, company, partnership or other entity.
(E) Subsidiary means, with references to any Person, any company or other entity of which an amount of voting securities sufficient to elect a majority of the directors or Persons having similar authority of such company or other entity is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person.
b. “Code” shall mean the Internal Revenue Code of 1986, as amended.
c. “Date of Termination” shall mean:
| (i) | in case your employment is terminated for Total Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and |
| (ii) | in all other cases, the date specified in the Notice of Termination (which shall not be less than thirty (30) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given). |
d. “Good Reason for Resignation” shall mean, without your express written consent, any of the following:
| (i) | a change in your position with the Corporation which in your reasonable judgment does not represent a promotion from your status or position immediately prior to the Change in Control or the assignment to you of any duties or responsibilities or diminution of duties or responsibilities which in your reasonable judgment are inconsistent with your position with the Corporation in effect immediately prior to the Change in Control, it being understood that any of the foregoing in connection with termination of your employment for Cause, Retirement, or Total Disability shall not constitute Good Reason for Resignation; |
| (ii) | a reduction by the Corporation in the annual rate of your base salary as in effect immediately prior to the date of a Change in Control; |
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| (iii) | the Corporation’s requiring your office nearest to your principal residence to be located at a different place which is more than thirty-five (35) miles from where such office is located immediately prior to a Change in Control; |
| (iv) | the failure by the Corporation to continue in effect compensation or benefit plans in which you participate, which in the aggregate provide you compensation and benefits substantially equivalent to those prior to a Change in Control; |
| (v) | the failure of the Corporation to obtain a satisfactory agreement from any Successor (as defined in Paragraph 5a hereof) to assume and agree to perform this Agreement, as contemplated in Paragraph 5a hereof; |
| (vi) | any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements hereof; for purposes of this Agreement, no such purported termination shall be effective for any purpose except to constitute a Good Reason for Resignation. |
e. “Incentive Compensation Award” shall mean payment or payments under Incentive Compensation Plans.
f. “Incentive Compensation Plans” shall mean any variable compensation or other incentive compensation plans maintained by the Corporation, in which awards are paid in cash, stock or other property including, but not limited to: (i) the Albemarle Corporation 2003 Incentive Plan, as amended (ii) any variable compensation plan, (iii) or any successor plan thereto.
g. “Normal Retirement Date” shall have the meaning set forth in Section 3.01 of the Pension Plan.
h. “Notice of Termination” shall mean a written notice as provided in Paragraph 14 hereof.
i. “Pension Plan” shall mean the Albemarle Corporation Pension Plan, as it may be amended prior to a Change in Control.
j. “Pension Program” shall mean the Pension Plan, the Albemarle Corporation Supplemental Executive Retirement Plan (as amended prior to a Change in Control), plus any other excess or supplemental pension plans maintained by the Corporation.
k. “Retirement” shall mean (1) voluntary retirement before your mandatory retirement age, if any, (termination of your employment by you before your mandatory retirement age, if any, with Good Reason for Resignation shall not be deemed a Retirement for purposes of this Agreement) or (2) termination in accordance with any retirement arrangement other than under the Pension Program, which is established with your consent with respect to you or (3) mandatory retirement as set forth under the policy of the Corporation as it existed prior to the Change in Control or as agreed to by you following a Change in Control.
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l. “Termination for Cause” shall mean termination of your employment upon your willfully engaging in conduct demonstrably and materially injurious to the Corporation, monetarily or otherwise, provided that there shall have been delivered to you a copy of a resolution duly adopted by the unanimous affirmative vote of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of the conduct set forth and specifying the particulars thereof in detail.
For purposes of this Paragraph L, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Corporation. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by the Board or based upon the advice of counsel for the Corporation shall be conclusively presumed to be done or omitted to be done by you in good faith and in the best interests of the Corporation.
m. “Severance Multiple” shall mean the lesser of (a) two (2), and (b) the number obtained by multiplying two (2) by a fraction, the numerator of which is the number of days from the Date of Termination to your Normal Retirement Date and the denominator of which is 730 but such number under this clause (m) shall not be less than one (1).
n. “Total Disability” shall mean total physical or mental disability rendering you unable to perform the duties of your employment for a continuous period of six (6) months. Any question as to the existence of your Total Disability upon which you and the Corporation cannot agree shall be determined by a qualified physician not employed by the Corporation and selected by you (or, if you are unable to make such selection, it shall be made by any adult member of your immediate family), and approved by the Corporation. The determination of such physician made in writing to the Corporation and to you shall be final and conclusive for all purposes of this Agreement.
2. Compensation Upon Termination or While Disabled. Following a Change in Control, you shall be entitled to the following benefits:
a. Termination Benefits. If your employment by the Corporation shall be terminated subsequent to the Change in Control and during the term of this Agreement (a) by reason of your death after you have received a Notice of Termination, (b) by the Corporation other than for Cause, or (c) by you for Good Reason for Resignation, then you shall be entitled to the benefits provided below, without regard to any contrary provision of any plan:
| (i) | Accrued Salary. The Corporation shall pay you, not later than the fifth (5th) day following the Date of Termination, your full base salary and vacation pay accrued through the Date of Termination at the rate in effect at the time the Notice of Termination is given (or at the rate in effect immediately prior to a Change in Control, if such amounts were higher). |
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| (ii) | Accrued Incentive Compensation. The Corporation shall pay you, not later than five (5) days following your Date of Termination, the amount of your accrued Incentive Compensation which consists of the annual cash bonus. If the Date of Termination is after the end of a Variable Compensation Year, but before such Incentive Compensation for said Variable Compensation Year has been determined, the Corporation shall pay you as such Incentive Compensation for that Variable Compensation Year the greater of the amount of your target variable compensation for such Variable Compensation Year and the amount of your actual variable compensation for the last Variable Compensation Year preceding the year in which the Change in Control occurs for which such Incentive Compensation had been determined. |
In addition, if the Date of Termination is other than the first day of a Variable Compensation Year, the Corporation shall pay you, as such cash Incentive Compensation for the Variable Compensation Year in which the Date of Termination occurs, the greater of your target variable compensation for the year in which the Change in Control occurs and your actual variable compensation for the Variable Compensation Year preceding the year in which the Change in Control occurs, multiplied by a fraction, the numerator of which is the total number of days which have elapsed in the current Variable Compensation Year to the Date of Termination, and the denominator of which is three hundred sixty-five (365). Payments under this clause (ii) shall be made to you not later than five (5) days after the Date of Termination.
If there is more than one Incentive Compensation Program, your accrued Incentive Compensation shall be calculated separately for each Program.
For the purpose of determining the amount of your accrued Incentive Compensation under this Paragraph 2a(ii), you will be deemed to have been paid the full amount of all prior variable and incentive compensation, whether or not such award was includible in your gross income for Federal Income tax purposes.
For the purpose of this Paragraph 2a(ii), “Incentive Compensation Program” means any of the Incentive Compensation Plans defined in Paragraph 1f and any other plan or program for the payment of incentive compensation, variable compensation, bonus, benefits or awards for which you were, or your position was, eligible to participate; “Incentive Compensation” means any compensation, variable compensation, bonus, benefit or award paid or payable under an Incentive Compensation Program; and “Variable Compensation Year” means a calendar or fiscal plan year of an Incentive Compensation Program.
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| (iii) | Insurance Coverage. The Corporation shall arrange to provide you (and your dependents, if applicable) with the following: |
(a) If you are eligible, you shall participate in the Corporation’s retiree medical benefit plans as if you retired from the Corporation on your Date of Termination, except that the Corporation shall provide such medical coverage at no cost to you for two (2) years following your Date of Termination and thereafter, you shall participate therein on the same terms as other retired employees;
(b) If you are not eligible for the retiree medical plans, you will no longer continue to participate in the Corporation’s medical benefit plans, except for COBRA, and (i) the Corporation shall provide you with a cash payment in an amount equal to the amount required by you to pay for coverage under COBRA for the first eighteen (18) months following your loss of medical coverage, and thereafter, (ii) the Corporation shall, for the subsequent six (6) months, purchase for you, at its cost, a policy of medical insurance providing benefits substantially similar to the benefits you would have received under the Corporation’s medical benefit plans.
| (iv) | Retirement Benefits. The calculation of the Short Service Benefits provided to you pursuant to Section 3.01(b) of the Albemarle Corporation Supplemental Executive Retirement Plan (“SERP”) shall be determined without regard to the benefit offsets provided for in Section 3.01(b)(i)(B) of the SERP. |
| (v) | Outplacement Counseling. The Corporation shall make available to you, at the Corporation’s expense, outplacement counseling. You may select the organization that will provide the outplacement counseling, however, the Corporation’s obligation to provide you benefits under this subsection (v) shall be limited to $25,000. |
| (vi) | Financial Counseling. Following your Date of Termination, the Corporation shall make available to you, financial counseling services with a nationally recognized financial counseling firm. The financial counseling firm may also provide you with tax counseling and tax preparation services. You may select the organization that will provide the financial and tax counseling, however, the Corporation’s obligation to provide you benefits under this subsection (vi) shall be limited to $10,000. |
| (vii) | Severance Payment. The Corporation shall pay as severance pay to you, not later than the fifth (5th) day following the Date of Termination, a lump sum severance payment (the “Severance Payment”) equal to the Severance Multiple times the following: |
(a) the greater of your annual base compensation which was payable to you by the Corporation immediately prior to the Date of Termination and your annual base compensation which was payable to you by the Corporation immediately prior to a Change in Control, whether or not such annual base compensation was includible in your gross income for federal income tax purposes; plus
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(b) the greater of the amount of your actual annual variable compensation payment you received for the year preceding the date on which the Change in Control occurs and your target variable compensation for the year in which the Change in Control occurs, (whether or not such award was includible in your gross income for federal income tax purposes).
The Severance Payment shall be reduced by the amount paid to you under paragraph 7(c) below.
| (viii) | Reduction of Severance Payment. |
If the payments or benefits to which you will be entitled under this Agreement would cause you to be liable for the federal excise tax levied on certain “excess parachute payments” under Code Section 4999, then the following provisions shall apply.
If such payments or benefits exceed 2.99 times your “Base Amount” ( as defined in Code Section 280G) (the “Parachute Limit”), by the lesser of (A) 10% of the Parachute Limit, and (B) $100,000, then your Severance Payment (but not other payments or benefits under this Agreement) shall be reduced by an amount so that your payments and benefits under this Agreement are 2.99 times the Base Amount.
Whether payments to you are to be reduced, and the extent to which they are to be so reduced, will be determined by the Corporation in good faith and the Corporation will notify you in writing of its determination. Any such notice shall describe in reasonable detail the basis of the Corporation’s determination. If you accept the Corporation’s determination, you shall so advise the Corporation of your determination within thirty (30) days of receipt of notice from the Corporation. If you object to such determination within thirty (30) days of receipt of notice from the Corporation, the Corporation will retain, at its expense, a nationally recognized public accounting firm, employment consulting firm or law firm selected by the Corporation and reasonably acceptable to you to review the matter. Such firm shall meet with you and your representatives and the Corporation and its representatives and thereafter render its written opinion as to the extent, if any, that in such firm’s reasonable judgment the payments and benefits otherwise due to you hereunder must be reduced hereunder. The decision of such firm concerning the extent of any required reduction in such payments and benefits shall be final and binding on both you and the Corporation.
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| (ix) | Payment of Taxes. |
(a) For purposes of this subparagraph (ix), the following terms shall have the following meanings:
| (I) | Payment shall mean any payment or distribution (or acceleration of benefits) by the Corporation to or for your benefit (whether paid or payable or distributed or distributable (or accelerated) pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this subsection (ix)). In addition, Payment shall mean the amount of income deemed to be received by you as a result of the acceleration of the exercisability of any of your options to purchase stock of the Corporation or the acceleration of the lapse of any restrictions on performance stock or restricted stock of the Corporation or Performance Units held by you or the acceleration of any payment from any deferral plan of the Corporation. |
| (II) | Excise Tax shall mean the excise tax imposed by Section 4999 of the Code, or any interest or penalties incurred by you with respect to such excise tax. |
| (III) | Income Tax shall mean all taxes other than the Excise Tax (including any interest or penalties imposed with respect to such taxes) including, without limitation, any income and employment taxes imposed by any federal (including (i) FICA and medicare taxes, and (ii) the tax resulting from the loss of any federal deductions or exemptions which would have been available to you but for receipt of the Payment), state, local, commonwealth or foreign government. |
(b) Except as provided in subparagraph (viii) above, in the event it shall be determined that a Payment would be subject to an Excise Tax, then you shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by you of Income Tax and Excise Tax imposed upon the Gross-Up Payment, you retain an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment. However, the Corporation shall be obligated to pay you no more than Five Million Dollars ($5,000,000) under this clause (b).
(c) All determinations required to be made under this subsection (ix), 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
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such determination, shall be made by the public accounting or actuarial consulting firm that is retained by the Corporation as of the date immediately prior to the Change in Control (the “Firm”) which shall provide detailed supporting calculations both to the Corporation and to you within fifteen (15) business days of the receipt of notice from you that there has been a Payment, or such earlier time as is requested by the Corporation (collectively, the “Determination”). In the event that the Firm is serving as accountant, auditor or consultant for the individual, entity or group affecting the Change in Control, you may appoint another nationally recognized public Firm to make the determinations required hereunder (which Firm shall then be referred to as the Firm hereunder). All fees and expenses of the Firm shall be borne solely by the Corporation. Any Gross-Up Payment, as determined pursuant to this subsection (viii), shall be paid by the Corporation to you within ten (10) days of your receipt of the Determination. If the Firm determines that no Excise Tax is payable by you, you may request the Firm to furnish you with a written opinion that failure to report the Excise Tax on your applicable federal income tax return would not result in the imposition of a negligence or similar penalty. The Determination by the Firm shall be binding upon the Corporation and you. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the Determination, it is possible that Gross-Up Payments which will not have been made by the Corporation should have been made (“Underpayment”), consistent with the calculations required to be made hereunder. In the event that the Corporation exhausts its remedies pursuant to Section (ix)(d) below and you thereafter are required to make payment of any Excise Tax or Income Tax, the Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Corporation to or for your benefit.
(d) You shall notify the Corporation in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Corporation of the Gross-Up Payment or the Underpayment. Such notification shall be given as soon as practicable but no later than ten (10) business days after you are informed in writing of such claim and shall apprise the Corporation of the nature of such claim and the date on which such claim is requested to be paid. You shall not pay such claim prior to the expiration of the 30-day period following the date on which you give such notice to the Corporation (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Corporation notifies you in writing prior to the expiration of such period that it desires to contest such claim, you shall:
| (1) | give the Corporation any information reasonably requested by the Corporation relating to such claim, |
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| (2) | take such action in connection with contesting such claim as the Corporation 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 Corporation, |
| (3) | cooperate with the Corporation in good faith in order effectively to contest such claim, and |
| (4) | permit the Corporation to participate in any proceeding relating to such claim; provided, however, that the Corporation 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 you harmless, on an after-tax basis, for any Excise Tax or Income Tax imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section (ix)(d), the Corporation shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct you to pay the tax claimed and xxx for a refund or contest the claim in any permissible manner, and you agree 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 Corporation shall determine; provided further, that if the Corporation directs you to pay such claim and xxx for a refund, the Corporation shall advance the amount of such payment to you on an interest-free basis and shall indemnify and hold you harmless, on an after-tax basis, from any Excise Tax or Income Tax imposed with respect to such advance or with respect to any imputed income with respect to such advance; and provided further, that any extension of the statute of limitations relating to payment of taxes for your taxable year with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Corporation’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and you 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. |
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(e) If, after the receipt by you of an amount advanced by the Corporation pursuant to Section (ix)(d) above, you become entitled to receive, and receive, any refund with respect to such claim, you shall (subject to the Corporation’s complying with the requirements of Section (ix)(d)) promptly pay to the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by you of an amount advanced by the Corporation pursuant to Section (ix)(d), a determination is made that you shall not be entitled to any refund with respect to such claims and the Corporation does not notify you in writing of its intent to contest such denial of refund prior to the expiration of thirty (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 be offset, to the extent thereof, the amount of the Gross-Up Payment required to be paid.
| (x) | No Duty to Mitigate. You shall not be required to mitigate the amount of any payment provided for in this Paragraph 2 by seeking other employment or otherwise, nor shall the amount of any payment or benefit hereunder be reduced by any compensation earned by you as the result of employment by another employer or by retirement benefits after the Date of Termination. |
b. Payments While Disabled. During any period prior to the Date of Termination and during the term of this Agreement that you are unable to perform your full-time duties with the Corporation, whether as a result of your Total Disability or as a result of a physical or mental disability that is not total or is not permanent and therefore is not a Total Disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all other compensation and benefits that are payable or provided under the Corporation’s benefit plans, including its disability plans. After the Date of Termination, your benefits shall be determined in accordance with the Corporation’s Pension Program, insurance and other applicable programs. The compensation and benefits, other than salary, payable or provided pursuant to this Paragraph 2b shall be the greater of (x) the amounts computed under the Pension Program, disability benefit plans, insurance and other applicable programs in effect immediately prior to a Change in Control and (y) the amounts computed under the Pension Program, disability benefit plans, insurance and other applicable programs in effect at the time the compensation and benefits are paid.
c. Payments if Termination for Cause, or by You Except With Good Reason. If your employment shall be terminated by the Corporation for Cause or by you other than with Good Reason for Resignation, the Corporation shall pay you your full base salary and accrued vacation pay then in effect through the Date of Termination, at the rate in effect at the time Notice of
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Termination is given plus any benefits or awards which have been earned or become payable but which have not yet been paid to you. You shall receive any payment due under this subsection c. on your Date of Termination. Thereafter the Corporation shall have no further obligation to you under this Agreement.
d. After Retirement or Death. If your employment shall be terminated by your Retirement, or by reason of your death, your benefits shall be determined in accordance with the Corporation’s Pension Program and insurance programs then in effect except that if your death occurs after the execution of a definitive agreement which results in a Change in Control, then you shall be entitled to the benefits under this Agreement as if the Corporation issued you a Notice of Termination terminating your employment thirty (30) days after a Change in Control.
3. Vesting Upon a Change in Control.
a. Upon a Change in Control, all unvested stock options and restricted stock held by you under the Incentive Compensation Programs shall immediately vest and be non-forfeitable.
b. With respect to any outstanding Performance Units granted to you under the Incentive Compensation Programs which have not then vested and been paid to you, then upon a Change in Control the following provisions shall apply to such Performance Units:
| (i) | Any Performance Units which have been earned but not yet vested, shall become vested and non-forfeitable and paid to you on the date of the Change in Control; |
| (ii) | That portion of the unearned Performance Units as specified in clause (iii) below will become vested and non-forfeitable and paid to you on the date of the Change in Control; |
| (iii) | The number of Performance Units to be vested and paid in accordance with clause (ii) above shall equal the greater of: |
| (A) | the target number of Performance Units granted to you; and |
| (B) | a number of Performance Units based on actual performance of the Corporation against the performance criteria for the Performance Units for that portion of the performance period for the Performance Units elapsed up to the end of the most recently completed calendar quarter prior to the date of the Change in Control and based on target performance during the balance of such performance period in accordance with the following formula: |
| Number of Units to be vested and paid |
= | ( QC/8) x ( AP/TP) x Number of Target Units + ((8-QC)/8) x Number of Target Units |
| Where: | QC = | the number of completed calendar quarters of the performance period prior to a Change in Control. | ||
| AP = | actual performance of the Corporation under the criteria for the Performance Units for the relevant period. | |||
| TP = | target performance of the Corporation under the criteria for the Performance Units for the relevant period. | |||
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4. Term of Agreement. This Agreement shall commence on the date hereof and shall continue in effect through December 31, 2007; provided, however, that commencing on January 1, 2008 and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30 of the preceding year, the Corporation or you shall have given notice that it or you do not wish to extend this Agreement. Notwithstanding any such notice by the Corporation or you not to extend the Agreement, if a Change in Control shall have occurred prior to such termination of this Agreement, the attempted termination of this Agreement shall be deemed ineffective and this Agreement shall continue in full force and effect. In any event, the term of this Agreement shall expire on the second (2nd) anniversary of the date of the Change in Control. This Agreement shall terminate if your employment is terminated by you or the Corporation prior to a Change in Control.
5. Successors; Binding Agreement.
a. Successors of the Corporation. The Corporation will require any Successor to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree, by an agreement in form and substance satisfactory to you, to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. Failure of the Corporation to obtain such assent at least five business days prior to the time a person becomes a Successor (or where the Corporation does not have at least five business days advance notice that a person may become a Successor, within three business days after having notice that such person may become or has become a Successor) shall constitute Good Reason for Resignation by you and, if a Change in Control has occurred or thereafter occurs, shall entitle you immediately to the benefits provided in Paragraph 2a hereof upon delivery by you of a Notice of Termination which the Corporation, by executing this Agreement, hereby assents to. For purposes of this Agreement, “Successor” shall mean any person that purchases all or substantially all of the assets of the Corporation or the Surviving Corporation (and Parent Corporation, if applicable) or obtains or succeeds to, or has the practical ability to control (either immediately or with the passage of time), the Corporation’s business directly, by merger or consolidation, or indirectly, by purchase of voting securities of the Corporation or by acquisition of rights to vote voting securities of the Corporation or otherwise, including but not limited to any person or group that acquires the beneficial ownership or voting rights described in Paragraph 1a(ii).
b. Your Successor. This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators, successors, heirs, distributees, devises and legatees. If you should die following your
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Date of Termination while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate.
6. Confidentiality.
a. You acknowledges that: (i) the business conducted by the Corporation and its subsidiaries (the “Business”) is intensely competitive and the your position with the Corporation has exposed the you to knowledge of Confidential Information (as defined below); (ii) the direct and indirect disclosure of any such Confidential Information to existing or potential competitors of the Corporation would place the Corporation at a competitive disadvantage and would do damage, monetary or otherwise, to the Corporation’s business; and (iii) the engaging by you in any of the activities prohibited by this Agreement may constitute improper appropriation and/or use of Confidential Information. For purposes of this Agreement, “Confidential Information” shall mean trade secrets, know-how and other proprietary information of the Corporation known to you, and which gives the Corporation a competitive advantage, relating to the Corporation’s business, but shall not include information generally available to or known by the public or information that is or becomes available to you on a non-confidential basis from a source other than the Corporation or its directors, officers or employees (other than by reason of a breach of any obligation of confidentiality).
b. From and after the date of termination of your employment with the Corporation (“Date of Termination”) until the first anniversary thereof (the “Non-Competition Period”), you shall not, directly or indirectly, whether individually, as a director, stockholder, owner, partner, employee, consultant, principal or agent of any business, or in any other capacity, make known, disclose, furnish make available or utilize any of the Confidential Information, other than in the proper performance of the duties contemplated herein, or as required by law or by a court of competent jurisdiction or other administrative or legislative body; provided that if required to disclose any of the Confidential Information by law or by a court or other administrative or legislative body, you shall promptly notify the Corporation so that the Corporation may seek a protective order or other appropriate remedy.
c. You also agree to comply with the Patent and Confidentiality Agreement previously signed by you and delivered to the Corporation, including those provisions which are applicable after your Date of Termination.
7. Non-Compete; Consideration.
a. During the Non-Competition Period, you shall not engage in Competition (as defined below) with the Corporation. For purposes of this Agreement, “Competition” by you shall mean your engaging in, or otherwise directly or indirectly being employed by or acting as a consultant to, or being a director, officer, employee, principal, agent, stockholder, member, owner, joint venturer or partner of, or permitting the your name to be used in connection with the competitive activities of any other business or organization in competition with the business of the Corporation as the same shall be constituted on the date of the Change in Control; provided that it shall not be a violation of this Agreement for you to: (i) become the registered or beneficial
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owner of less than five percent (5%) of any class of the capital stock of a competing corporation registered under the Securities Exchange Act of 1934, as amended, provided that you do not actively participate in the business of such corporation until the expiration of the Non-Competition Period; (ii) be involved with the activities of any other business or organization which did not compete, directly or indirectly, with the business of the Corporation as the same shall be constituted on the date of the Change in Control; or (iii) be engaged in any business from which the Corporation derives no more than five percent (5%) of its revenues if you were not directly engaged in such business at the Corporation prior to the Date of Termination.
b. Without limiting the generality of the foregoing, during the Non-Competition Period, you agree that you will not, directly or indirectly, for your benefit or for the benefit of any other person, firm or entity, do any of the following:
| (i) | solicit from any customer doing business with the Corporation, business of the same or of a similar nature to the business conducted between the Corporation and such customer; or |
| (ii) | solicit the employment or services of, or hire, any person who at the time is employed by or a consultant to the Corporation. |
| (iii) | solicit the services of any consultant engaged in competitive activities for the Corporation. |
c. In consideration for your agreement to the provisions of this paragraph 7, the Corporation shall pay you, not later than the fifth (5th) day following the Date of Termination an amount equal to the sum of the following:
| (i) | the greater of your annual base compensation which was payable to you by the Corporation immediately prior to the Date of Termination and your annual base compensation which was payable to you by the Corporation immediately prior to a Change in Control, whether or not such annual base compensation was includible in your gross income for federal income tax purposes; plus |
| (ii) | the amount of your actual annual variable compensation payment you received for a year preceding the date on which the Change in Control occurs, (whether or not such award was includible in your gross income for federal income tax purposes). |
8. Remedies.
a. You acknowledge that your agreement to the matters set forth in paragraphs 6 and 7 is being entered into in connection with the consummation of a transaction involving a Change in Control of the Corporation and that the services rendered by you to the Corporation are of a special and unique character, which gives this agreement a particular value to the Corporation, the loss of which may not be reasonably or adequately compensated for by damages in an action at law; and that a material breach or threatened breach by you of any of the provisions contained in paragraphs 6 or 7 of this Agreement will cause the Corporation
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irreparable injury. You therefore agree that, upon breach by you of paragraph 6 or 7 of this Agreement, the Corporation shall be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining you from any such breach or threatened breaches.
b. In addition, in the event of a material breach by you of the provisions of clauses a or b of paragraph 7, the Corporation shall be entitled to obtain from you the amounts paid to you under paragraph 7.
c. You further acknowledge and agree that due to the uniqueness of your services and confidential nature of the information you possess, the covenants set forth herein are reasonable and necessary for the protection of the business and goodwill of the Corporation. It is the intent of the parties hereto that if in the opinion of any court of competent jurisdiction any provision set forth in this Agreement is not reasonable in any respect, such court shall have the right, power and authority to modify any and all such provisions as to such court shall appear not unreasonable and to enforce the remainder of this Agreement as so modified.
9. Notice to Corporation to Cure. In the event that you believe that you have a Good Reason for Resignation, you shall notify the Corporation in writing of such fact and the reasons therefor. The Corporation, may, within fifteen (15) days after your notice, elect to take such steps that would be necessary so that you would no longer have a Good Reason for Resignation.
10. Relationship to Other Agreements. To the extent that any provision of any other agreement between the Corporation and you shall limit, qualify or be inconsistent with any provision of this Agreement, then for purposes of this Agreement, while the same shall remain in force, the provision of this Agreement shall control and such provision of such other agreement shall be deemed to have been superseded, and to be of no force or effect, as if such other agreement had been formally amended to the extent necessary to accomplish such purpose.
11. Nature of Payments. All payments to you under this Agreement shall be considered either payments in consideration of your continued service to the Corporation or severance payments in consideration of your past service to the Corporation.
12. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.
14. Notice. Any purported termination of your employment by the Corporation or by you following a Change in Control shall be communicated to the other party by a Notice of Termination. A Notice of Termination shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. For the purpose of this Agreement, notices and all other
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communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Corporation shall be directed to the attention of the Board of the Corporation with a copy to the Secretary of the Corporation or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.
15. Fees and Expenses. The Corporation shall pay all legal fees and related expenses incurred by you: (i) as a result of your termination following a Change in Control, (ii) in seeking to obtain or enforce any right or benefit provided by this Agreement (including all fees and expenses, if any, incurred in contesting or disputing any such termination or incurred by you in seeking advice in connection therewith), (iii) in making the determinations under Paragraph 2.a(viii), (iv) in seeking advice to determine whether you have a Good Reason for Resignation and providing the notice to the Corporation under paragraph 9, (v) and contesting any claim by the Corporation under paragraph 8.
16. Release. Upon payment to you of the amount under paragraph 2.A.a(i), (ii), (iv) and (vii), you shall execute and deliver to the Corporation the General Release shall contain provisions set forth in Exhibit A to this Agreement and which shall otherwise be in a form reasonably acceptable to you and the Corporation.
17. Survival. The respective obligations of, and benefits afforded to, the Corporation and you as provided in Paragraphs 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 15 and 16 of this Agreement shall survive termination of this Agreement.
18. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, 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, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement.
19. Governing Law. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Virginia.
20. Amendment. No amendment to this Agreement shall be effective unless in writing and signed by both you and the Corporation.
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If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Corporation the enclosed copy of this letter which will then constitute our agreement on this subject.
| Sincerely, | ||
| ALBEMARLE CORPORATION | ||
| By: | ||
| Name: | ||
| Title: | ||
| Agreed to this day of , 2006 |
| [Name] |
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EXHIBIT A
GENERAL RELEASE
1. This General Release is given by (“Employee”) to Albemarle Corporation (the “Corporation”) and its successors.
2. Employee agrees to and hereby does release and discharge the Corporation, its subsidiaries, affiliates and their successors or assigns, directors, officers, representatives and employees (collectively “Releasees”) from any and all claims, causes of action and demands of any kind, whether known or unknown, which the Employee has or ever has had, which are based on acts or omissions occurring up to and including the date this General Release is fully executed. In this General Release, Employee further releases the Corporation and its subsidiaries and affiliated entities from any and all compensation owed to the Employee, including vacation pay and any attorneys’ fees, damages and costs Employee could recover under any statute or common law theory, except arising under the Severance Compensation Agreement between the Employee and the Corporation and any employee benefit plan of the Corporation. Included within this release, without limiting its scope, are claims arising out of Employee’s employment or the termination of the Employee employment based on Title VII of the Civil Rights Acts of 1964 as amended, the Americans with Disabilities Act of 1990 as amended, the Age Discrimination in Employment Act as amended, the Older Workers Benefit Protection Act as amended, the Fair Labor Standards Act of 1938 as amended by the Equal Pay Act of 1963, the Family and Medical Leave Act, the Employee Retirement Income Security Act of 1974 as amended, the Civil Rights Act of 1991, [insert any appropriate reference to Virginia law], the U.S. Patriot Act, the Xxxxxxxx-Xxxxx Act of 2002, and any other federal, state or local civil rights, disability, discrimination, retaliation or labor law, or any theory of contract or tort law.
