1
EXHIBIT 10 B
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT (this "Agreement"), dated as of September 20,
1999, by and between the Dexter Corporation, a Connecticut corporation (the
"Company"), and Xxxxxx X. Xxxxxx (the "Executive").
WITNESSETH:
WHEREAS, the Executive is a senior executive or key employee of the
Company and has made and is expected to continue to make major contributions to
the short and long-term 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 exists;
WHEREAS, the Company desires to assure itself of both present and
future continuity of management and desires to establish certain minimum
severance benefits for certain of its senior executive officers and other key
employees, including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior executives and
other key employees are not practically disabled from discharging their duties
in respect of a proposed or actual transaction involving a Change in Control;
WHEREAS, the Company desires to provide additional inducement for the
Executive to continue to remain in the ongoing employ of the Company; and
WHEREAS, this agreement is intended to supersede and replace the
Agreement (the "Prior Agreement") between the Company and the Executive
described on Annex A hereto.
NOW, THEREFORE, the Company and Executive agree as follows:
1. Certain Defined Terms: In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Base Pay" means the Executive's annual base salary at a
rate not less than the Executive's annual fixed or base compensation as in
effect for Executive 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 of
Directors of the Company (the "Board") or a Committee thereof;
(b) "Cause" means that, prior to any termination pursuant to
Section 3(b) hereof, the Executive shall have committed:
(i) an intentional act of fraud, embezzlement or
theft in connection with his duties or in the course of his
employment with the Company or any Subsidiary;
2
-2-
(ii) intentional wrongful damage to property of the
Company or any Subsidiary;
(iii) intentional wrongful disclosure of secret
processes or confidential information of the Company or any
Subsidiary; or
(iv) intentional wrongful engagement in any
Competitive Activity;
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 (if the Executive
chooses to have counsel present at such meeting), to be heard before the Board,
finding that, in the good faith opinion of the Board, the Executive had
committed an act constituting "Cause" as herein defined and specifying the
particulars thereof in detail. Nothing herein will limit the right of the
Executive or his beneficiaries to contest the validity or propriety of any such
determination;
(c) "Change in Control" means the occurrence during the Term of any of
the following events:
(i) The acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of
the Exchange Act) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act)
of 19% or more of the combined voting power of the then
outstanding Voting Stock of the Company; provided, however,
that for purposes of this Section 1(c)(i), the following
acquisitions shall not constitute a Change in Control: (A) any
issuance of Voting Stock of the Company directly from the
Company that is approved by the Incumbent Board (as defined in
Section 1(c)(ii), below), (B) any acquisition by the Company
of Voting Stock of the Company, (C) any acquisition of Voting
Stock of the Company by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any
Subsidiary, or (D) any acquisition of Voting Stock of the
Company by any Person pursuant to a Business Combination that
complies with clauses (A), (B) and (C) of section 1(c)(iii)
below; or
(ii) Individuals who, as of the date hereof,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a Director
subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a
vote of at least two-thirds of the Directors then comprising
the Incumbent Board (either by a specific vote or by approval
of the proxy statement of the Company in which such person is
named as a nominee for director, without objection to such
nomination) shall be deemed to have been a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office occurs as a
result of an actual or
3
-3-
threatened election contest (within the meaning of Rule 14a-11
of the Exchange Act) with respect to the election or removal
of Directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board; or
(iii) consummation of a reorganization, merger or
consolidation, a sale or other disposition of all or
substantially all of the assets of the Company, or other
transaction (each, a "Business Combination"), unless, in each
case, immediately following such Business Combination, (A) all
or substantially all of the individuals and entities who were
the beneficial owners of Voting Stock of the Company
immediately prior to such Business Combination beneficially
own, directly or indirectly, more than two-thirds of the
combined voting power of the then outstanding shares of Voting
Stock of the entity resulting from such business Combination
(including, without limitation, an entity which as a result of
such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries), (B) no Person (other than the Company, such
entity resulting form such Business Combination, or any
employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or such entity
resulting form such Business Combination) beneficially owns,
directly or indirectly, 19% or more of the combined voting
power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination, and (C) at
least a majority of the members of the Board of Directors of
the entity resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement or of the action of the Board providing
for such Business Combination; or
(iv) approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company, except
pursuant to a Business Combination that complies with clauses
(A), (B) and (C) of Section 1(c)(iii).
(d) "Competitive Activity" means 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 10% of such enterprise's net sales for its most recently completely
fiscal year and if the Company's net sales of said product or service amounted
to 10% of the Company's net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership of securities in
any such enterprise and the exercise of rights appurtenant thereto and (ii)
participation in the management of any such enterprise other than in connection
with the competitive operations of such enterprise;
(e) "Employee Benefits" means 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
Executive is entitled to 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 or other 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
4
-4-
may be adopted hereafter by the Company, providing perquisites, benefits and
service credit for benefits at least as great in the aggregate as are payable
thereunder prior to a Change in Control;
(f) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(g) "Incentive Pay" means an annual amount equal to not less
than the highest aggregate annual bonus, incentive or other payments of cash
compensation, in addition to Base Pay, made or to be made in regard to services
rendered in any calendar year during the three 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;
(h) "Severance Period" means the period of time commencing on
the date of an occurrence of a Change in Control and continuing until the
earliest of (i) the expiration of thirty days after the first anniversary of the
occurrence of the Change in Control, (ii) the Executive's death, or (iii) the
Executive's attainment of age 65; provided, however, that commencing on the 30th
day following each anniversary of the Change in Control, the Severance Period
will automatically be extended for an additional year unless, not later than 120
calendar days prior to such date, either the Company or the Executive shall have
given written notice to the other that the Severance Period is not to be so
extended; and
(i) "Subsidiary" means an entity in which the Company directly
or indirectly beneficially owns 50% or more of the outstanding Voting Stock.
(j) "Term" means the period commencing as of the date hereof
and expiring as of the later of (i) the close of business on December 31, 2003,
or (ii) the expiration of the Severance Period; provided, however, that (A)
commencing on January 1, 2004 and each January 1 thereafter, the term of this
Agreement will 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 the Executive, as the case may be,
does not wish to have the Term extended and (B) if, prior to a Change in
Control, the Executive ceases for any reason to be an employee of the Company or
any Subsidiary, thereupon without further action the Term shall be deemed to
have expired and this Agreement will immediately terminate and be of no further
effect. For purposes of this Section 1(j), the Executive shall not be deemed to
have ceased to be an employee of the Company or any Subsidiary by reason of the
transfer of Executive's employment between the Company and any Subsidiary, or
among any Subsidiaries.
(k) "Voting Stock" means securities entitled to vote generally
in the election of directors.
2. Operation of Agreement: This Agreement will be effective and binding
immediately upon its execution, but, anything in this Agreement to the contrary
notwithstanding, this Agreement will not be operative unless and until a Change
in Control occurs, whereupon without further action this Agreement shall become
immediately operative.
3. 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
5
-5-
the Severance Period and the Executive shall not be entitled to the benefits
provided by Section 4 only upon the occurrence of one or more of the following
events:
(i) The Executive's death;
(ii) If the Executive becomes permanently disabled
within the meaning of, and begins actually to receive
disability benefits pursuant to, the long-term disability plan
in effect for, or applicable to, Executive immediately prior
to the Change in Control; or
(iii) Cause.
If, during the Severance Period, the Executive's employment is terminated by the
Company other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), the
Executive will be entitled to the benefits provided by Section 4 hereof.
b) In the event of the occurrence of a Change in Control, the
Executive may terminate employment with the Company and any Subsidiary during
the Severance Period with the right to severance compensation as provided in
Section 4 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) 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;
(ii) (I) 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; (II) a reduction
in the aggregate of the Executive's Base Pay and Incentive Pay
received from the Company and any Subsidiary; or (III) the
termination or denial of the Executive's rights to Employee
Benefits or a reduction in the scope or value thereof;
(iii) A determination by the Executive (which
determination will be conclusive and binding upon the parties
hereto provided it has been made in good faith and in all
events will be presumed to have been made in good faith unless
otherwise shown by the Company by clear and convincing
evidence) that a change in circumstances has occurred
following a Change in Control, including without limitation a
change in the scope of the business or other activities for
which the Executive was responsible immediately prior to the
Change in Control, which has rendered the Executive
substantially unable to carry out, has substantially hindered
Executive's performance of, or has caused Executive to suffer
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
6
-6-
10 calendar days after written notice to the Company from the
Executive of such determination;
(iv) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of
all or substantially all of its business and/or assets, unless
the successor or successors (by liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which
all or substantially all of its business and/or assets have
been transferred (directly or by operation of law) assumed all
duties and obligations of the Company under this Agreement
pursuant to Section 10(a);
(v) The Company relocates its principal executive
offices, or requires 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 requires the Executive to travel away
from his office in the course of discharging his
responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any
calendar quarter when annualized for purposes of comparison to
any prior year) than was required of Executive in any of the
three full years immediately prior to the Change of Control
without, in either case, his prior written consent;
(vi) During the period commencing on the 30th day
immediately preceding the date on which the Severance Period,
including any extension thereof, is scheduled to terminate
pursuant to Section 1(h) (other than termination of the
Severance Period pursuant to Section 1(h)(iii) which shall not
entitle Executive to terminate employment under this Section
3(b)(vi)) and ending on the last day of the Severance Period,
for any reason, including without limitation other employment;
or
(vii) Without limiting the generality or effect of
the foregoing, any material breach of this Agreement by the
Company or any successor thereto.
(c) A termination by the Company pursuant to Section 3(a) or
by the Executive pursuant to Section 3(b) will not affect any rights which the
Executive may have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof.
4. Severance Compensation: (a) If, following the occurrence of a Change
in Control, the Company terminates the Executive's employment during the
Severance Period other than pursuant to Section 3(a), or if the Executive
terminates his employment pursuant to Section 3(b), the Company will pay to the
Executive the following amounts within five 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 3(b)) and
continue to provide to the Executive the following benefits:
(i) A lump sum payment (the "Severance Payment") in
an amount equal to the multiple set forth under Column I on
Annex A hereto times the sum of (A) Base Pay (at the highest
rate in effect for any period prior to the Termination Date),
plus (B) Incentive Pay (determined in accordance with the
standards set forth in Section 1(g)).
7
-7-
(ii) (A) for, the number of months set forth under
Column II on Annex A hereto (the "Continuation Period")
following the Termination Date, the Company will 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 (B)
such Continuation Period will 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, his
dependents or his beneficiaries immediately prior to the
Termination Date. If and to the extent that any benefit
described in subsections (A) and (B) of this Section 4(a)(ii)
is 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 will itself pay or provide
for the payment to the Executive, his dependents and
beneficiaries, of such Employee Benefits. Without otherwise
limiting the purposes or effect of Section 5, Employee
Benefits otherwise receivable by the Executive pursuant to the
subsection (A) of this Section 4(a)(ii) will be reduced to the
extent comparable welfare benefits are actually received by
the Executive from another employer during the Continuation
Period following the Executive's Termination Date.
(b) Upon the occurrence of a Change in Control, and without
regard to the termination of the employment of the Executive, all outstanding
and unexercised options theretofore granted by the Company shall,
notwithstanding anything to the contrary set forth in the plan or agreement
relating to such options, become immediately exercisable in full.
(c) Upon the occurrence of a Change in Control, and without
regard to the termination of the employment of the Executive, any and all
restrictions on all outstanding restricted stock theretofore granted by the
Company shall, notwithstanding anything to the contrary set forth in the plan or
agreement relating to such restricted stock, expire immediately.
(d) There will 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
the last sentence of Section 4(a)(ii).
(e) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Northeast Edition of The Wall Street Journal. Such
interest will be payable as it accrues on demand. Any change in such prime rate
will be effective on and as of the date of such change.
(f) Notwithstanding any other provision hereof, the parties'
respective rights and obligations under this Section 4 and under Section 7 will
survive any termination or expiration of this Agreement following a Change in
Control or the termination of the Executive's employment following a Change in
Control for any reason whatsoever.
5. No Mitigation Obligation: The Company hereby acknowledges that it
will be difficult and may be impossible (a) for the Executive to find reasonably
comparable employment
8
-8-
following the Termination Date, and (b) to measure the amount of damages which
Executive may suffer as a result of termination of employment hereunder.
Accordingly, the payment of the severance compensation by the Company to the
Executive in accordance with the terms of this Agreement is hereby acknowledged
by the Company to be reasonable and will be liquidated damages, and the
Executive will not be required to mitigate the amount of any payment provided
for in this Agreement by seeking other employment or otherwise, nor will 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 the last
sentence of Section 4(a)(ii).
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 (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (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 to any similar tax imposed by state
or local law, or any interest or penalties with respect to such tax (such tax or
taxes, 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 (collectively, a "Gross-Up
Payment"); provided, however, that no Gross-up Payment shall be made with
respect to the Excise Tax, if any, attributable to (A) any incentive stock
option, as defined in Section 422A of the Code ("ISO") granted prior to the
execution of this Agreement, or (B) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (A).
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(f) 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 five business days after receipt of such determination and
calculations with respect to any Payment to 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 determination, furnish the Company and the Executive
an opinion that the Executive has substantial authority not to report any Excise
Tax on his federal, state or local income or other tax return. As a result of
the uncertainty in the application of Section 4999 of the Code (or any
9
-9-
successor provision thereto) and the possibility of similar uncertainty
regarding applicable state or local tax law 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(f) 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 five 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. Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the company and the Executive.
(d) The federal, state and local income or other 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. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment. If
prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five business days pay to the Company the amount of such
reduction.
(e) 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 five business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service or any other taxing authority 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:
10
-10-
(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 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(f), the Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 6(f) 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 xxx 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 xxx 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 or other 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.
(g) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 6(f) 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(f) 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(f)
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
11
-11-
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. Legal Fees and Expenses; Security. (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 interpretation, enforcement or defense of
Executive's rights under this Agreement by litigation or otherwise 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 Executive's choice, at the expense of the
Company as hereafter provided, to advise and represent the Executive in
connection with any such interpretation, enforcement or defense, including
without limitation 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 will pay and be solely financially responsible for any
and all, attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing.
(b) The severance compensation, benefits and other amounts
payable pursuant to this Agreement shall be secured by amounts deposited or to
be deposited in trust pursuant to certain trust agreements to which the Company
shall be a party.
8. Employment Rights; Termination Prior to Change in Control: Nothing
expressed or implied in this Agreement will 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 or any Subsidiary prior to or following any Change in Control.
Any termination of employment of the Executive or the removal of the Executive
from the office or position in the Company 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.
9. Withholding of Taxes: The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as the
Company is required to withhold pursuant to any law or government regulation or
ruling.
10. Successors and Binding Agreement: (a) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation,
reorganization or otherwise) to all or substantially all of the business 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 will 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 or assets of the
12
-12-
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 will not otherwise be assignable, transferable or delegable
by the Company.
(b) This Agreement will inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and 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 10(a) and 10(b) hereof. Without limiting the
generality or effect of the foregoing, the Executive's right to receive payments
hereunder will not be assignable, transferable or delegable, whether by pledge,
creation of a security interest, or otherwise, other than by a transfer by
Executive's will or by the laws of descent and distribution and, in the event of
any attempted assignment or transfer contrary to this Section 10(c), the Company
shall have no liability to pay any amount so attempted to be assigned,
transferred or delegated.
11. Notices: For all purposes of this Agreement, all communications,
including without limitation notices, consents, requests or approvals, required
or permitted to be given hereunder will be in writing and will be deemed to have
been duly given when hand delivered or dispatched by electronic facsimile
transmission (with receipt thereof orally confirmed), or five business days
after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been
sent by a nationally recognized overnight courier service such as Federal
Express, UPS, or Purolator, 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 changes of address shall be effective only upon receipt.
12. Governing Law: The validity, interpretation, construction and
performance of this Agreement will be governed by and construed in accordance
with the substantive laws of the State of Connecticut, without giving effect to
the principles of conflict of laws of such State.
13. 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 will not be
affected, and the provision so held to be invalid, unenforceable or otherwise
illegal will be reformed to the extent (and only to the extent) necessary to
make it enforceable, valid or legal.
14. 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
will 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. References to Sections are to references to Sections of this
Agreement.
13
-13-
15. 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.
16. Prior Agreement: This Agreement supersedes and replaces the Prior
Agreement which shall, without further action, be terminated as of the date
hereof.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed
and delivered as of the date first above written.
DEXTER CORPORATION
By /s/ K. Xxxxxxx Xxxxxx
K. Xxxxxxx Xxxxxx, Chairman and Chief
Executive Officer
By /s/ Xxxxxx X. Xxxxxx
Xxxxxx X. Xxxxxx
14
-14-
ANNEX A
Months of Welfare
Multiple of Annual Benefit Continuation
Prior Base Salary and and Additional Retirement
Agreement Incentive Pay Severance Income Service Credit
--------- ----------------------- ---------------------
December 20, 1991 1 12
