1
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made as of
this 21st day of February, 1997, by and between Xxxxxx X.
XxxXxxxxxxxx ("Xx.XxxXxxxxxxxx"), an individual, and Federal-Mogul
Corporation ("Federal-Mogul"), a Michigan corporation.
WHEREAS, Xx. XxxXxxxxxxxx was serving as Senior Vice
President and Chief Financial Officer of Federal-Mogul;
WHEREAS, Federal-Mogul has decided to undertake
certain changes in its management structure; and
WHEREAS, in light of these changes, Xx. XxxXxxxxxxxx
and Federal-Mogul desire an orderly separation of Xx. XxxXxxxxxxxx'x
employment with Federal-Mogul.
NOW, THEREFORE, in consideration of the covenants
undertaken in this Agreement, and for other good and valuable
consideration, Xx. XxxXxxxxxxxx and Federal-Mogul hereby
agree as follows:
1. RESIGNATION AS AN OFFICER AND EMPLOYEE: Xx.
XxxXxxxxxxxx hereby acknowledges that he was terminated from his
position as Senior Vice President and Chief Financial Officer of
Federal-Mogul effective at the close of business on February 21, 1997
(the "Termination Date"). Xx. XxxXxxxxxxxx also hereby resigns from
any and all other positions he holds as an employee, director or
officer of Federal-Mogul or any of its subsidiaries, related,
or affiliated companies, such resignation to be effective at the
close of business on the Termination Date. Federal-Mogul will pay to
Xx. XxxXxxxxxxxx his base salary at the annual rate of Two Hundred
Fifty-Five Thousand Dollars and No Cents ($255,000.00), less
applicable income tax withholdings and other normal payroll
deductions, through the Termination Date, in accordance with
Federal-Mogul's regular payroll practices. Federal-Mogul will also
continue to provide employment benefits generally available to
executives, including medical and dental insurance, life insurance,
pension and other benefits, through the Termination Date.
2. SEVERANCE PAY AND BENEFITS: Federal-Mogul hereby
agrees that the following compensation and benefits will be provided
to Xx. XxxXxxxxxxxx in accordance with the terms of this Agreement:
2
X. Xxxxxxxxx Payment: Federal-Mogul will make a lump
sum payment to Xx. XxxXxxxxxxxx in the sum of Two Hundred Seventy Six
Thousand Two Hundred Fifty Dollars and No Cents ($276,250.00)
(thirteen (13) months of Xx. XxxXxxxxxxxx'x annual base salary),
less applicable income tax withholdings and other normal payroll
deductions. Such payment represents severance pay and shall be in
lieu of any other severance pay or other compensation, if any, that
Xx. XxxXxxxxxxxx normally would have been granted from Federal-Mogul
upon the termination of his employment, including without limitation
any payments under Federal-Mogul's Severance Plan for Salaried
Employees. Xx. XxxXxxxxxxxx shall be entitled to such severance
payment in accordance with the terms of this Agreement following the
effective date of this Agreement (the last day of the seven-day
revocation period as set forth in Paragraph 5 of this Agreement),
unless Xx. XxxXxxxxxxxx revokes this Agreement in accordance with
Paragraph 5. Federal-Mogul will also make a separate payment of
Eighteen Thousand Four Hundred Eighty Dollars and No Cents
($18,480.00), less applicable income tax withholdings, in
lieu of any and all other benefits which Xx. XxxXxxxxxxxx might
otherwise be eligible to receive (except as otherwise provided in
this Paragraph 2), including without limitation payments for
home security, executive physical, and travel and related expenses
associated with outplacement services (travel and related expenses to
be grossed-up if documented and non-reimbursable by
any other party). Such payment will be made following the last day
of the seven-day revocation period as set forth in Paragraph 5 of
this Agreement, unless Xx. XxxXxxxxxxxx revokes this Agreement in
accordance with Paragraph 5.
B. Vacation and Other Leave Benefits:
Federal-Mogul will pay to Xx. XxxXxxxxxxxx the sum of Nineteen
Thousand Six Hundred Fifteen Dollars and No Cents ($19,615.00),
less applicable income tax withholdings and other normal payroll
deductions, representing his 1997 vacation benefit entitlement.
In addition, Federal-Mogul will pay Xx. XxxXxxxxxxxx Six Thousand
Eight Hundred Sixty Five and No Cents ($6,865.00), less applicable
income tax withholdings and other normal payroll deductions for
unused and deferred 1996 vacation benefits that he is entitled to
receive prior to the Termination Date pursuant to Federal-Mogul's
Vacations for Salaried Personnel Plan, less applicable income tax
withholdings and other normal payroll deductions. Such payments
will be made at the time payments under Paragraph 2A are made.
Effective on the Termination Date, Xx. XxxXxxxxxxxx shall not be
eligible for or entitled to any additional vacation or other leave
benefits, including without limitation any sick or personal leave.
C. Medical And Dental Coverage: Effective on the
Termination Date, Xx. XxxXxxxxxxxx will be eligible to continue to
participate in Federal-Mogul's CHOICE plan for hospital-surgical-medical,
dental, life and vision insurance coverage (the "CHOICE
Plan"), at Federal-Mogul's expense, for a period of up to the earlier
of (x) the date he is eligible for such coverage under any new
3
employer's plan or (y) twelve (12) months after the Termination Date,
subject to the terms of such plan, and subject to Xx. XxxXxxxxxxxx
electing to continue such coverage in accordance with the
Consolidated Omnibus Budget Reconciliation Act ("COBRA"). During
such period, Xx. XxxXxxxxxxxx shall continue to pay the cost of his
share of such coverage, in the same manner that he shared in the cost
of coverage prior to the Termination Date. After such twelve-month
period, Xx. XxxXxxxxxxxx may continue coverage under the CHOICE Plan
for an additional period of six (6) months, entirely at Xx.
XxxXxxxxxxxx'x expense, in accordance with and subject to COBRA.
Federal-Mogul shall also continue to provide Xx. XxxXxxxxxxxx with
the annual credit for 1997 under the Company's Executive
(Supplemental) Medical Plan in the amount of up to Three Thousand
Dollars and No Cents ($3,000.00), in accordance with the terms
of such plan and subject to Xx. XxxXxxxxxxxx continuing to
participate in the CHOICE Plan.
D. Split Dollar Life Insurance Plan: Effective on
the Termination Date, Xx. XxxXxxxxxxxx'x participation in
Federal-Mogul's Split Dollar Life Insurance Plan (the "SDLIP") will
terminate in accordance with the terms of the SDLIP. On or after the
Termination Date, Federal-Mogul may withdraw the sum of all premium
payments Federal-Mogul has made in connection with such policy.
Xx. XxxXxxxxxxxx agrees to sign an insurance form entitled "Life
Policy Service Request -- Surrender, Tax Withholding Options, Release
of Interest," and to submit such form to Federal-Mogul on or before
the date of execution of this Agreement.
E. Outplacement: Federal-Mogul will pay the
reasonable costs of a mutually agreeable outplacement firm, provided
such costs do not exceed Forty Thousand Dollars and No Cents
($40,000.00).
F. Executive Lease Car Program: Effective on
March 7, 1997, Xx. XxxXxxxxxxxx'x participation in Federal-Mogul's
Executive Lease Car Program (the "Lease Car Program") will
terminate. Xx. XxxXxxxxxxxx will return the 1996 Jeep Grand
Cherokee. In lieu of extending the participation of Xx. XxxXxxxxxxxx
in the Lease Car Program, Federal-Mogul will make a payment to Xx.
XxxXxxxxxxxx of Fourteen Thousand Dollars and No Cents ($14,000.00),
less applicable income tax withholdings. Such payment will be made
following the effective date of this Agreement (the last day of the
seven-day revocation period as set forth in Paragraph 5), unless Xx.
XxxXxxxxxxxx revokes this Agreement in accordance with Paragraph 5.
Xx. XxxXxxxxxxxx will be responsible for all car lease, insurance
payments and other costs in connection with the 1995 Blazer and 1996
Lincoln Continental.
G. Country Club Membership: Federal-Mogul will
continue to pay the monthly dues of Xx. XxxXxxxxxxxx'x membership in
the Pine Lake Country Club (the "Country Club") from the Termination
Date through and including December 31, 1997. Following the
4
Termination Date, Federal-Mogul will no longer be responsible for any
other costs or fees in connection with Xx. XxxXxxxxxxxx'x membership
in the Country Club. Xx. XxxXxxxxxxxx will be responsible for all
monthly dues after December 31, 1997.
H. Retirement Plans: Federal-Mogul shall distribute
to Xx. XxxXxxxxxxxx amounts due to Xx. XxxXxxxxxxxx through the
Termination Date, if any, from the Personal Retirement Account
("PRA"), the Supplemental Executive Retirement Program (the "SERP"),
and the Thrift Plan (including the 401(k) Plan, the Salaried
Employees' Investment Program (the "XXXX"), and the Employee
Stock Ownership Plan (the "ESOP")), in accordance with the terms of
such plans. Federal-Mogul shall also distribute
to Xx. XxxXxxxxxxxx Sixty Thousand Nine Hundred Eighty- Five Dollars
and No Cents ($60,985.00) which represents the after tax cash
equivalent of the Federal-Mogul contributions to the PRA, SERP and
401(k) that it would have made on Xx. XxxXxxxxxxxx'x behalf between
the Termination Date and February 21, 1999. Except for any vested
benefits in such plans and the additional amounts described above,
Xx. XxxXxxxxxxxx'x participation in all such plans shall
terminate effective on the Termination Date.
I. Home Computer Equipment: Subject to the
limitations in this subparagraph (I), Xx. XxxXxxxxxxxx may continue
to use at his home the personal computer and other home office
equipment provided to him by Federal-Mogul during his employment (the
"Home Office Equipment"). Xx. XxxXxxxxxxxx shall be responsible for
any maintenance and other costs in connection with the Home Office
Equipment. Xx. XxxXxxxxxxxx shall deliver the Home Office
Equipment to Federal-Mogul (in care of Xxxxx X. Xxxx, Esq., Vice
President, General Counsel and Secretary of Federal-Mogul) in good
working condition no later than the earlier of (x) the
date he receives other employment or (y) December 31, 1997.
J. 1989 Performance Incentive Stock Plan: Federal-Mogul
acknowledges that Xx. XxxXxxxxxxxx is entitled to receive the
benefit of all awards under Federal-Mogul's 1989 Performance
Incentive Stock Plan (the "1989 Plan") to which he was entitled to
immediate exercise or receipt as of the Termination Date.
Xx. XxxXxxxxxxxx acknowledges that he has no claim to any restricted
shares or stock options under the 1989 Plan, except as follows:
An award of 3,000 restricted shares, granted on
February 7, 1996 as a long-term incentive grant,
and with respect to which restrictions have
lapsed.
The parties acknowledge and agree that Xx. XxxXxxxxxxxx has
received the restricted shares described above. The parties further
acknowledge and agree that Xx. XxxXxxxxxxxx is not eligible for
additional vesting of any unvested restricted shares or stock
options. The parties further acknowledge and agree that, except as
otherwise provided above, no other restrictions on restricted shares
under the 1989 Plan will lapse.
5
K. Tax Preparation and Financial and Estate
Planning: Xx. XxxXxxxxxxxx will be eligible for tax preparation
assistance for his 1996 income tax returns (One Thousand Dollars
and No Cents ($1,000.00) allowance grossed-up), in accordance with
Federal-Mogul's policies regarding tax preparation assistance for
executives. In addition, Xx. XxxXxxxxxxxx will be eligible for
financial and estate planning assistance in 1997 (Five
Thousand Dollars and No Cents ($5,000.00) allowance grossed-up), in
accordance with Federal-Mogul's policies regarding financial and
estate planning assistance for executives.
L. Executive AT&T Card: Xx. XxxXxxxxxxxx may
continue to use the Federal-Mogul Executive AT&T Card until the
earlier of (x) the date he receives other employment or
(y) December 31, 1997.
3. NO OTHER PAYMENTS OR BENEFITS: Except for the payments
made and benefits provided in this Agreement, Xx. XxxXxxxxxxxx
acknowledges and agrees that he is entitled to no other benefits,
compensation, or payments from Federal-Mogul, including without
limitation salary, bonus (including any Supplemental Compensation
award), incentive compensation, severance pay, pension, vacation pay,
life insurance or any other fringe benefits of Federal-Mogul.
4. RELEASE OF FEDERAL-MOGUL: In consideration for the
compensation and benefits provided in this Agreement, and for all
other good and valuable consideration, Xx. XxxXxxxxxxxx hereby
knowingly, voluntarily, and willingly releases, discharges, and
covenants not to xxx Federal-Mogul and its direct and indirect
parents, subsidiaries, affiliates, and related companies, past and
present, as well as each of their directors, officers, employees,
representatives, attorneys, agents, trustees, insurers, assigns, and
successors, past and present (collectively hereinafter referred to as
the "RELEASEES"), from and with respect to any and all actions,
claims, or lawsuits, whether known or unknown, suspected or
unsuspected, in law or in equity, which against the RELEASEES,
Xx. XxxXxxxxxxxx, and his heirs, executors, administrators,
successors, assigns, dependents, descendants, and attorneys ever had,
now have, or hereafter can, shall, or may have arising out of or in
any way relating to Xx. XxxXxxxxxxxx'x employment by Federal-Mogul or
his separation from that employment, including without limitation the
following:
i. any and all claims arising out of or
in any way relating to breach of oral or written employment contracts
(whether such contracts were express or implied), or any and all tort
claims;
6
ii. any and all claims arising out of or
in any way relating to age, race, sex, religion, national origin,
disability, or other form of employment discrimination, including
without limitation any claims under Title VII of the Civil Rights Act
of 1964, as amended, the Age Discrimination in Employment Act of
1967, as amended, the Americans with Disabilities Act of 1990, the
Employee Retirement Income Security Act of 1974, as amended, the
Michigan Civil Rights Act, or any other federal, state or local law,
statute,ordinance, or administrative regulation; or
iii. any and all claims for salary, bonus, severance
pay, pension, vacation pay, life insurance, health or medical
insurance, or any other fringe benefits, workers' compensation or
disability, other than the payments and benefits provided for in this
Agreement; provided, however, that Xx. XxxXxxxxxxxx is not releasing
any claims he may have under any pension plan of Federal-Mogul in
which he participated during his employment with Federal-Mogul.
It is the express intention of Xx. XxxXxxxxxxxx and Federal-Mogul
that this Agreement constitutes a full and comprehensive release of
all claims and potential claims, to the fullest extent permitted by
law. Xx. XxxXxxxxxxxx acknowledges that he may hereafter discover
claims or facts in addition to or different from those which he now
knows or believes to exist with respect to the subject matter of this
Agreement and which, if known or suspected at the time of executing
this Agreement, may have materially affected this Agreement or his
decision to enter into it. Nevertheless, Xx. XxxXxxxxxxxx hereby
waives any right, claim or cause of action that might arise as a
result of such different or additional claims or facts.
5. ADEA WAIVER OF CLAIMS: Xx. XxxXxxxxxxxx expressly
acknowledges and agrees that his release and waiver of rights and
claims is knowing and voluntary, that by this Agreement he will
receive compensation beyond that which he was already entitled to
receive before entering into this Agreement, that he has been given
a period of twenty-one (21) days within which to consider this
Agreement, and that he elects to execute this Agreement on this
date. Xx. XxxXxxxxxxxx shall have seven (7) days following the
execution of this Agreement by both parties within which he may
revoke this Agreement, and this Agreement shall not become effective
or enforceable until such seven-day revocation period has expired and
Xx. XxxXxxxxxxxx has not revoked this Agreement. To be effective,
such revocation must be in writing and delivered to counsel for
Federal-Mogul on or before the last day of the seven-day
revocation period. Xx. XxxXxxxxxxxx certifies that he understands
and agrees to all of the terms of this Agreement, and has had an
opportunity to discuss these terms with an attorney of his own
choosing. Xx. XxxXxxxxxxxx further acknowledges that he has been
advised previously by Federal-Mogul, and by this writing is again
advised by Federal-Mogul, to consult with an attorney prior to
executing this Agreement and regarding his release of claims herein,
including without limitation the release of claims under the Age
Discrimination in Employment Act of 1967, as amended.
7
6. CONFIDENTIALITY:
A. Confidentiality of Agreement: Xx. XxxXxxxxxxxx
agrees that he shall keep this Agreement, and the terms and
conditions of this Agreement, confidential. Xx.XxxXxxxxxxxx shall
not in any manner or for any reason disclose this Agreement, or
the terms hereof, without the express prior written consent of
Federal-Mogul, except (i) to members of his family, his attorneys,
and his accountants on a "need to know" basis, (ii) to the Internal
Revenue Service, and (iii) as otherwise required by law.
B. Confidential Information: Xx. XxxXxxxxxxxx
acknowledges that by reason of his employment with Federal-Mogul, he
has been given access to financial information, other corporate
information (including without limitation contractual arrangements,
plans, strategies, tactics, and intellectual property), marketing
information (including without limitation sales or business plans,
strategies, methods, customer lists, and market research data),
technical information, personnel information, and similar
confidential and proprietary materials and information respecting
Federal-Mogul's business. Xx. XxxXxxxxxxxx represents and
warrants that he has kept and will continue to keep all such
materials and information confidential, and that he will not use such
information for any purpose without the prior written consent of
Federal-Mogul. Xx. XxxXxxxxxxxx further agrees that, on
and after the Termination Date, Federal-Mogul's Patent Assignment and
Confidentiality Agreement (the "Confidentiality Agreement") shall
remain in full force and effect and Xx. XxxXxxxxxxxx shall remain
bound by the terms and conditions of such Confidentiality Agreement.
7. NON-SOLICITATION: In consideration of the payments and
benefits conferred on Xx. XxxXxxxxxxxx by Federal-Mogul under
Paragraph 2 of this Agreement, Xx.XxxXxxxxxxxx agrees that he will
not, for a period of one (1) year following the date of execution of
this Agreement, solicit any employees of Federal-Mogul to work for
any business, individual, partnership, firm, corporation, or other
entity.
8. NON-DISPARAGEMENT: In consideration of the payments
and benefits conferred on Xx. XxxXxxxxxxxx by Federal-Mogul under
Paragraph 2 of this Agreement, Xx. XxxXxxxxxxxx agrees that he will
not make or cause to be made any statements to any person, firm,
corporation, or governmental or other entity which reflect
negatively on Federal-Mogul or on its directors, officers, employees,
affiliates, and related companies.
9. ADDITIONAL PROVISIONS: The following additional terms
and conditions shall apply to this Agreement:
A. No Claim Filed And No Assignment of Claims:
Xx. XxxXxxxxxxxx represents and warrants that neither he nor any of
his representatives have filed, or will file, any complaints, charges
8
or lawsuits with any court or government agency arising out of or
relating to any claims being released by Xx. XxxXxxxxxxxx in this
Agreement.
Xx. XxxXxxxxxxxx further represents and warrants that neither he nor
any of his representatives have assigned or transferred, or will
assign or transfer, to any other person other than Federal-Mogul any
of the released matters set forth in this Agreement, and that he
shall defend, indemnify and hold harmless Federal-Mogul from and
against any claim (including the payment of attorneys' fees and costs
actually incurred whether or not litigation is commenced) based on or
in connection with or arising out of any such assignment or transfer.
B. Severability of Provisions: If any of
the provisions, terms, or clauses of this Agreement are held invalid,
illegal, unenforceable or ineffective, such provisions, terms and
clauses shall be deemed severable such that all other provisions,
terms, and clauses of this Agreement shall remain valid and binding
upon the parties.
C. Choice of Law: This Agreement and the rights and
obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the
State of Michigan, without regard to principles of conflict of laws.
D. Arbitration: Any and all controversies, claims or
disputes arising out of or in any way relating to this Agreement
shall be resolved by final and binding arbitration in Detroit,
Michigan before a single arbitrator licensed to practice law and
in accordance with the Commercial Arbitration Rules of the
American Arbitration Association (the "AAA"). The arbitration shall
be commenced by filing a demand for arbitration with the AAA within
sixty (60) days after the occurrence of the facts giving rise to any
such controversy, claim or dispute. The arbitrator shall decide all
issues relating to arbitrability. The costs of such arbitration,
including the arbitrator's fees, shall be split between the parties
to the arbitration. Each party shall be responsible to pay its own
attorneys' fees.
E. Entire Agreement: This Agreement is an integrated
document and constitutes and contains the complete understanding and
agreement of the parties with respect to the subject matter addressed
herein, and supersedes and replaces all prior negotiations and
agreements, whether written or oral, concerning the subject matter
hereof. No provision of this Agreement may be amended or waived
except by written agreement signed by the parties hereto.
F. No Waiver of Breach: No waiver of any breach of
any term or provision of this Agreement shall be construed to be, or
shall be, a waiver of any other breach of this Agreement. No waiver
shall be binding unless in writing and signed by the party waiving
the breach.
9
G. Representation: Xx. XxxXxxxxxxxx and Federal-Mogul
each represent and agree that they have carefully read and
understand this Agreement, and agree that neither they nor any
of Federal-Mogul's officers, agents, directors, or employees have
made any representations other than those contained herein. Further,
the parties each expressly agree that they have entered into
this Agreement freely and voluntarily and without pressure or
coercion from anyone.
H. Captions: The captions of this Agreement are for
descriptive purposes only and are not part of the provisions hereof
and shall have no force or effect.
I. Counterparts: This Agreement may be executed in
counterparts, and each counterpart, when executed, shall have
the effect of a signed original. Photographic copies of
such signed counterparts may be used in lieu of the original for any
purpose.
IN WITNESS WHEREOF, Xx. XxxXxxxxxxxx and Federal-Mogul,
intending to be legally bound, have executed this Agreement as of the
date first written above.
XXXXXX X. XXXXXXXXXXXX
-----------------------------------
Date:------------------------------
FEDERAL-MOGUL CORPORATION
By:--------------------------------
[Name of Officer or Director]
Date:------------------------------
