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