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FERRO CORPORATION
Executive Employment Contract
I. Recitals
(A) This Executive Employment Contract (this "Agreement") is between Ferro
Corporation (the "Company") and Xxxx X. Xxx (the "Executive") and is effective
as of November 10, 1998.
(B) The address of the Company is 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxx, Xxxx
00000. The address of the Executive is 00000 Xxxxxxxxx Xxxx, Xxxxx, Xxxx 00000.
(C) The Executive is currently employed by the Company in the capacity of
Vice President, Specialty Chemicals and the Executive is one of the key
executives of the Company.
(D) In consideration of the mutual promises contained herein and other
good and valuable consideration, the Executive and the Company have entered into
this Agreement.
II. Definitions
As used in this Agreement, the following terms shall have the meanings set
forth below:
"Agreement" means this Agreement.
"Bank" has the meaning set forth in Section VI.
"Base Salary" has the meaning set forth in Section III.D.(1).
"Benefit Plans" has the meaning set forth in Section III.E.(2).
"Board" means the Board of Directors of the Company.
"Cause" has the meaning set forth in Section IV.B(1).
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"change in control of the Company" has the meaning set forth in
Section VI.
"Company" means Ferro Corporation, as modified by Section VIII.A.
"Contract Term" has the meaning set forth in Section III.A.
"Date of Termination" has the meaning set forth in Section IV.A.(2).
"Disabled" has the meaning set forth in Section IV.C.(1).
"Excise Tax" has the meaning set forth in Section V.A.(1).
"Escrow Account" has the meaning set forth in Section VI.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Executive" means the executive named in this Agreement.
"Firm" has the meaning set forth in Section V.A.(2) and refers to
certain Excise Tax matters.
"Good Reason" has the meaning set forth in Section IV.E.
"Gross-Up Payment" has the meaning set forth in Section V.A.(1) and
refers to certain Excise Tax matters.
"Incentive Compensation Plan" has the meaning set forth in Section
III.E.(1).
"Normal Retirement Age" means the normal retirement age provided for
in the Company's Pension Plan.
"Notice of Termination" has the meaning set forth in Section
IV.A.(1).
"Payment" has the meaning set forth in Section V.A.(1) and refers to
certain Excise Tax matters.
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"Pension Plan" means the Company's salaried employees' retirement
plan, or any successor plan thereto.
"Retirement" has the meaning set forth in Section IV.D.(1).
"Total Disability" means total disability as defined in the
Company's Pension Plan.
"Underpayment" has the meaning set forth in Section V.A.(2) and
refers to certain Excise Tax matters.
III. Provisions Applicable to the Contract Term
A. Contract Term
Except as otherwise provided in this Agreement, the Company and the
Executive agree that the Executive will remain in the employ of the Company for
a primary term ending on November __, 2000 and that this Agreement will
automatically continue after such primary term unless and until either party
shall have given the other at least 24 months prior written Notice of
Termination or, if earlier, until expiration of the Contract Term. The "Contract
Term" shall refer to the period commencing on the date hereof and ending on
November __, 2000 (or any continuation thereof pursuant to the preceding
sentence); provided, however, that in no event shall the Contract Term extend
beyond the earliest to occur of (A) the Executive's attaining Normal Retirement
Age, (B) the date of death of the Executive, and (C) the Date of Termination
resulting from the termination of this Agreement for Disability (as defined in
Section IV.C.(1) hereof); and provided, further, however, that, if a change in
control of the Company (as defined in Section VI hereof) occurs during the
Contract Term, then, subject to the preceding proviso in this sentence, the
Contract Term
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shall not expire prior to the second anniversary of the date of such change in
control of the Company.
Nothing contained in this Agreement shall prevent the Company at any time
from terminating the Executive's right and obligation to perform service for the
Company or prevent the Company from removing the Executive from any position
which the Executive holds in the Company, subject to the obligation of the
Company to make payments and provide benefits if and to the extent required
under this Agreement, which payments and benefits shall be full and complete
liquidated damages for any such action taken by the Company. The Executive
specifically acknowledges that, except for this Agreement, his employment by the
Company is employment-at-will, subject to termination by the Executive, or by
the Company, at any time with or without cause. The Executive acknowledges that
such employment-at-will status cannot be modified except in a specific writing
which has been authorized or ratified by the Board.
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B. Nature of Duties
(1) The Executive agrees to serve the Company during the Contract
Term. The Executive agrees to devote his full business time during normal
business hours to the business and affairs of the Company (except as otherwise
provided herein) and to use his best efforts to promote the interests of the
Company and to perform faithfully and efficiently the responsibilities of the
positions assigned to him from time to time in the discretion of the Company
(whether officer positions or non-officer positions) in accordance with the
terms of this Agreement to the extent necessary to discharge such
responsibilities, except for (i) service on corporate, civic or charitable
boards or committees not significantly interfering with the performance of such
responsibilities, and (ii) periods of vacation and sick leave or other
legitimate absences under Company benefit plans and established practices.
(2) The Company agrees that, on or after a change in control of the
Company (as defined in Section VI hereof), it will not, without the Executive's
express written consent, (a) assign to the Executive duties inconsistent with
his current positions, duties, responsibilities and status with the Company, or
(b) change his titles as currently in effect, or (c) remove him from, or fail to
re-elect him to, any of such positions, except in connection with the
termination of his employment for Cause, Disability or Retirement or as a result
of his death or voluntary termination. Except as so limited, the powers and
duties of the Executive are to be more specifically determined and set by the
Company from time to time.
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C. Place of Employment
The Executive's initial place of employment is at the Company's principal
executive offices in Cleveland, Ohio. The Company agrees that it will not,
without the Executive's express written consent, require the Executive to be
based anywhere other than Cuyahoga County, Ohio, or a county contiguous thereto,
except for required travel on the Company's business to an extent substantially
consistent with present business travel obligations.
D. Compensation
(1) Base Salary. During the Contract Term, the Executive shall
receive an annual base salary (the "Base Salary"), payable in installments,
substantially in accordance with current practice, at an annual rate at least
equal to the aggregate annual Base Salary payable to the Executive as of the
date hereof. The Base Salary may be increased (but may not be decreased) at any
time and from time to time by action of the Board, and, if so increased, such
increased Base Salary shall thereafter be the Base Salary for the purposes of
this Agreement.
(2) Incentive Compensation. During the Contract Term, the Company
agrees to pay annual incentive compensation to the Executive in an amount at
least equal to the annual incentive compensation that would have been payable to
the Executive for such year in question under the Company's Incentive
Compensation Plan as in effect for such applicable year, and giving effect to
the highest position in the Company held by the Executive during the Contract
Term.
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E. Benefit Plans
(1) During the Contract Term, the Company agrees to continue the
Company's Annual Incentive Compensation Plan as the same may be modified from
time to time but substantially in the form presently in effect (the "Incentive
Compensation Plan"). The Company agrees to continue the Executive as a
participant in the Incentive Compensation Plan on a basis at least equivalent to
the present basis of his participation for the calendar year in which the
effective date of this Agreement occurs.
(2) During the Contract Term, the Company agrees to continue in
effect any perquisite, benefit or compensation plan (in addition to the
Incentive Compensation Plan) including its pension plan, excess benefits plans,
supplemental retirement program for short service executives, dental plan, life
insurance plan, health and accident plan or disability plan in which the
Executive is currently participating (but excluding the Company's stock option
plan and performance share plan, participation in which shall be at the sole
discretion of the Company's Board of Directors, or any applicable committee
thereof) (such plans are collectively referred to with the Incentive
Compensation Plan as the "Benefit Plans"), or to maintain plans providing
substantially similar benefits; provided, however, that the Company may make
modifications in such Benefit Plans so long as such modifications (a) are
generally applicable to all salaried employees of the Company and (b) do not
discriminate against highly-paid employees of the Company.
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(3) During the Contract Term, except as permitted in the proviso
contained in paragraph (2) above, the Company agrees not to take any action that
would adversely affect the Executive's participation in, or materially reduce
the benefits under, any of the Benefit Plans.
(4) Benefits herein provided are in lieu of any severance payment
benefit otherwise provided under any other agreement, policy, or practice
provided by the Company and, in the event of an effective Notice of Termination
hereunder, are also in lieu of any obligations of the Company in favor of the
Executive with respect to vacation or vacation pay. The Executive waives all
rights to such payments under any such agreement, policy or practice provided,
however, that this waiver shall not extend to entitlements provided under any
disability insurance plan, retirement plan, excess benefit plan, or applicable
supplemental pension plan or agreement for short service executives and any
related Benefit Plans (including health and insurance plans), other than those
relating to severance or vacation.
F. Conflicting Interests
Prior to the Date of Termination, the Executive agrees not to accept any
other employment or engage in any outside business or enterprise without the
Company's written consent. It is understood, however, that outside activities
are not prohibited provided they are legal; do not impair or interfere with the
conscientious performance of Company duties and responsibilities; do not involve
the misuse of the Company's influence, facilities or other resources; and do not
reflect discredit upon the good name and reputation of the Company.
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G. Disclosure of Information
During the Contract Term and thereafter, the Executive shall not reveal
any confidential information of the Company to anyone except those employees of
the Company entitled to receive such information, or as otherwise permitted
under any contract or commitment of the Company, or as otherwise authorized.
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H. Certain Payments Upon the Occurrence of a Change in Control of the
Company
In the event a change in control of the Company (as defined in
Section VI hereof) occurs during the Contract Term, the Company shall pay to the
Executive, within five days thereafter, an amount in cash, with respect to each
grant of Performance Shares (as defined in the Company's Amended and Restated
1997 Performance Share Plan, as amended (the "Performance Share Plan"))
previously awarded to the Executive under the Performance Share Plan (or any
predecessor thereto) in respect of a Performance Period (as defined in the
Performance Share Plan) which had not expired immediately prior to such change
in control of the Company (Performance Shares awarded in respect of any such
Performance Period being referred to as "Outstanding Performance Shares"), which
amount shall be equal to the excess (but not less than zero) of (a) over (b),
where (a) equals the product of (1) the number of Outstanding Performance Shares
awarded to the Executive in respect of the applicable Performance Period, (2)
the "fair market value of the Common Stock" (as defined in the Performance Share
Plan) and (3) a fraction (not to exceed one) the numerator of which is the sum
of (x) the number of days which had elapsed in the applicable Performance Period
as of the date of such change in control of the Company plus (y) 730, and the
denominator of which is the number of days in such applicable Performance
Period, and where (b) equals the value payable to the Executive under the
Performance Share Plan (or any predecessor thereto) in respect of such
Outstanding Performance Shares in connection with such change in control of the
Company. The provisions of this Section III.H. shall not affect in any manner
the determination of amounts payable to the Executive under the Performance
Share Plan (or any predecessor thereto).
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IV. Provisions Applicable to Termination of Employment
A. Notice of Termination; Date of Termination
(1) Any termination of the Executive's employment by the Company or
the Executive shall be communicated by written Notice of Termination to the
other party thereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the provision
so indicated. Furthermore, either the Executive or the Company may give a Notice
of Termination to the other party for the purpose of terminating this Agreement,
as such, without terminating the Executive's employment with the Company, which
Notice of Termination shall have the effect of terminating this Agreement at the
expiration of the Contract Term as in effect on the date of giving such Notice
of Termination.
(2) "Date of Termination" shall mean the date on which the
Executive's right and obligation to perform employment services for the Company
shall terminate (subject to the right of the Company to accelerate such date
pursuant to Section III.A.) and shall be:
(a) If the Agreement is terminated for Disability, thirty (30) days
after Notice of Termination is given (provided that the Executive
shall not have returned to the performance of his duties on a
full-time basis during such thirty (30) day period),
(b) If the Executive's employment is terminated by the Executive for
Good Reason, pursuant to Section IV.E., the date specified in the
Notice of Termination, which date (except with the written consent
of the Company to the contrary) shall not be more than sixty (60)
days after the date that the Notice of Termination is given,
(c) The expiration or termination of the Contract Term, and
(d) If the Executive's employment is terminated by the Company for Cause
pursuant to Section IV.B.(1), the date on which a Notice of
Termination is given.
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B. Termination for Cause
(1) The Company may terminate the Executive's employment and the
Contract Term for Cause. For the purposes of this Agreement, the Company shall
have "Cause" to terminate employment hereunder only (a) if termination shall
have been the result of an act or acts by the Executive which have been found in
an applicable court to constitute a felony; or (b) if termination shall have
been the result of an act or acts of dishonesty by the Executive resulting or
intended to result directly or indirectly in significant gain or personal
enrichment to the Executive at the expense of the Company; or (c) upon the
wilful and continued failure by the Executive substantially to perform his
duties with the Company (other than any such failure resulting from incapacity
due to mental or physical illness) after a demand in writing for substantial
performance is delivered by the Board, which demand specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed his duties, and such failure results in demonstrably material injury
to the Company. The Executive's employment shall in no event be considered to
have been terminated by the Company for Cause if such termination took place as
the result of (a) bad judgment or negligence, or (b) any act or omission
believed in good faith to have been in or not opposed to the interest of the
Company. The Executive shall not be deemed to have been terminated for Cause
unless and until there shall have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board (after reasonable
notice to the Executive and an opportunity for him, together with his counsel,
to be heard before the Board), finding that in the good faith opinion of the
Board the Executive was guilty of conduct set forth above in clauses (a), (b) or
(c) of the second sentence of this paragraph and specifying the particulars
thereof in detail.
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(2) If the Executive's employment shall be terminated for Cause, the
Company shall pay the Executive his full Base Salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given and
the Company shall have no further obligations to the Executive under this
Agreement.
C. Termination for Disability
(1) The Company may terminate this Agreement on account of the
Executive's "Disability" if the Executive is "Disabled." For purposes of this
Agreement, the Executive shall be considered Disabled only if, as a result of
his incapacity due to physical or mental illness, he shall have been absent from
his duties with the Company on a full-time basis for a period of six months and
within thirty (30) days after written Notice of Termination is given, he shall
not have returned to the full-time performance of his duties.
(2) If the Company terminates this Agreement because the Executive
is Disabled, the Company shall provide to the Executive (or his successors) the
benefits specified in Paragraph (3) (continued participation in benefit plans)
of Section IV.F. of this Agreement; provided, however, that for this purpose the
Contract Term shall be determined as of the Date of Termination, but without
regard to the termination of this Agreement by reason of the Executive's
Disability.
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D. Termination Upon Retirement
(1) This Agreement will terminate upon the Executive's Retirement.
For purposes of this Agreement, "Retirement" shall mean termination of the
Executive's employment at or after attaining Normal Retirement Age or early
retirement if effected in accordance with any retirement arrangement established
with the Executive's consent with respect to him.
(2) In the event this Agreement terminates by reason of the
Executive's Retirement, the Company shall pay to the Executive the amounts, and
provide to the Executive the benefits, specified in Paragraph (3) (continued
participation in benefit plans) of Section IV.F. of this Agreement.
(3) Notwithstanding the preceding provisions of this Section IV.D.,
unless the Executive otherwise consents in writing, a termination of the
Executive's employment which occurs on or after the date of a change in control
of the Company (as defined in Section VI hereof) shall not be deemed to be a
termination of employment for Retirement.
E. Termination of Employment by the Executive for Good Reason
(1) The Executive may terminate his employment for Good Reason. For
purposes of this Agreement, Good Reason will exist if any one or more of the
following occur:
(a) Failure by the Company to honor any of its obligations under
Sections III.B.2. (assignment of duties, responsibilities,
etc., election to positions), III.C. (place of employment),
III.D. (compensation), III.E. (benefit plans), VI (security)
or VIII.A. (successors); or
(b) Any purported termination by the Company of the Executive's
employment that is not effected pursuant to a Notice of
Termination satisfying the requirements of Section IV.A. above
and, for purposes of this Agreement, no such purported
termination shall be effective; or
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(c) The issuance by or on behalf of the Company, on or after a
change in control of the Company (as defined in Section VI
hereof), of a Notice of Termination described in the third
sentence of Section IV.A.(1) hereof which specifies that such
Notice of Termination is given for the purpose of terminating
this Agreement and which does not serve to terminate the
Executive's employment with the Company substantially
concurrently therewith; or
(d) Voluntary resignation by the Executive at any time during the
ninety-day period commencing on the first anniversary of a
change in control of the Company (as defined in Section VI
hereof).
F. Compensation Upon Termination Other Than for Cause
(1) If the Company shall terminate the Executive's employment other
than pursuant to Sections IV.B. (Cause), IV.C. (Disability) or IV.D.
(Retirement) hereof or if the Executive shall terminate his employment for Good
Reason pursuant to Section IV.E. hereof, then the Company shall pay to the
Executive the following amounts:
(a) The Executive's Base Salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given;
(b) In a lump sum (in lieu of the installment payments otherwise
payable under this Agreement), payable on or before the fifth
(5th) day following the Date of Termination, an amount equal
to the Executive's Base Salary through the conclusion of the
Contract Term;
(c) In a lump sum (in lieu of the installment payments otherwise
payable under this Agreement), payable on or before the fifth
(5th) day following the Date of Termination, an amount equal
to the Executive's annual incentive compensation payments,
applicable to periods through the conclusion of the Contract
Term. For this purpose, the annual incentive compensation
amounts payable shall be deemed to be thirty percent (30%) of
the Base Salary, or such greater percentage thereof, as may be
applicable to the Executive, at target levels, under the
Incentive Compensation Plan as in effect (i) immediately prior
to the Notice of Termination or (ii) immediately prior to a
change in control of the Company (as defined in Section VI
hereof), whichever is more favorable to the Executive;
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(d) In a lump sum, payable on or before the fifth (5th) day
following the Date of Termination, an amount equal to the pro
rata portion of the Executive's annual incentive compensation
for the calendar year in which the Date of Termination occurs,
such amount to be determined by multiplying the Executive's
annual incentive compensation amount (as described below) by a
fraction, the numerator of which is the number of days in such
calendar year which had elapsed as of the Date of Termination
and the denominator of which is 365; provided, however, that
this Section IV.F.(1)(d) shall have effect only if the Date of
Termination occurs in a calendar year following the calendar
year in which occurs a change in control of the Company (as
defined in Section VI hereof). For purposes of this paragraph,
the Executive's annual incentive compensation amount shall be
equal to the amount determined pursuant to the second sentence
of Section IV.F.(1)(c) above; and
(e) The Company shall also pay all legal fees and expenses
incurred as a result of such termination (including all such
fees and expenses, if any, incurred in seeking to obtain or
enforce any right or benefit provided by this Agreement, or in
interpreting this Agreement).
(2) If the Company shall terminate the Executive's employment other
than pursuant to Sections IV.B. (Cause), IV.C. (Disability) or IV.D.
(Retirement) hereof or if the Executive shall terminate his employment for Good
Reason pursuant to Section IV.E. hereof, then the Company shall pay him in one
sum in cash, payable on or before the fifth (5th) day following the Date of
Termination, an amount equal to the present value as of the Date of Termination
(calculated at a discount rate equal to the discount rate used at the Date of
Termination for computing the present value of commuted payments under the
Pension Plan) of (a) the lump sum value (determined as of the Executive's Normal
Retirement Age, using the same methods and assumptions used at the Date of
Termination for purposes of the Pension Plan, of the retirement pension to which
the Executive would have been entitled under the terms of the Pension Plan,
excess benefits plan and supplemental retirement program for short service
executives in which he participates (as in effect
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on the date of this Agreement) if the Executive's employment had continued
through the conclusion of the Contract Term, at compensation levels consistent
with those set forth in paragraphs (1)(b) (Base Salary) and (c) (Incentive
Compensation) above (and including any other compensation, if any, which is to
be considered under the formulas applicable to such plans), assuming
commencement of payment of the Executive's pension at Normal Retirement Age,
reduced by (b) the lump sum value (determined as of the Executive's Normal
Retirement Age using the methods and assumptions hereinabove specified) of the
retirement pension, if any, to which the Executive will be entitled under the
terms of the Pension Plan, excess benefits plan and supplemental retirement
program for short service executives in which the Executive participates (as in
effect on the Date of Termination), based upon termination of the Executive's
employment as of the Date of Termination and assuming commencement of payment of
the Executive's pension benefits at his Normal Retirement Age. The lump sum
value to be calculated under clause (a) of the immediately preceding sentence
shall be determined (y) under the assumption that the Executive is fully vested
in his retirement pension under the Pension Plan, excess benefits plan and
supplemental retirement program for short service executives; and (z) without
regard to any amendments to any of such plans, which amendments are adopted on
or after the date of a change in control of the Company (as defined in Section
VI hereof), to the extent any such amendments adversely affect in any manner the
computation of benefits thereunder or are otherwise adverse to the Executive.
(3) Unless the Executive is terminated for Cause, the Company shall
maintain in full force and effect, for the Executive's continued benefit
throughout the Contract Term, all active
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and retired employee Benefit Plans in which he was entitled to participate
immediately prior to the Date of Termination (except as specified in paragraphs
(2) (right of Company to make non-discriminatory changes in plans) and (4) (this
Agreement in lieu of other plans as to severance and vacation) of Section III.E.
of this Agreement), provided that continued participation is possible under the
general terms and provisions of such plans and programs. In the event that
participation in any such plan or program is barred, the Company shall arrange
to provide him with benefits substantially similar to those which he is entitled
to receive under such Benefit Plans. Unless the Executive is terminated for
Cause, if prior to the expiration of the Contract Term the Executive attains
Normal Retirement Age (or earlier retirement age should he so elect) as defined
in the Pension Plan in effect on the Date of Termination hereunder, he shall
have the right at any time prior to the expiration of the Contract Term to so
retire and the Company shall thereafter maintain in full force and effect, for
the Executive's continued benefit, all retired employee Benefit Plans applicable
to him, as in effect immediately prior to the Date of Termination (except as
specified in paragraphs (2) (right of Company to make non-discriminatory changes
in plans) and (4) (this Agreement in lieu of other plans as to severance and
vacation) of Section III.E. of this Agreement). If the termination of the
Executive's employment occurs on or after a change in control of the Company (as
defined in Section VI hereof), (a) the Company's obligation to maintain Benefit
Plans pursuant to this Section IV.F.(3) shall be determined, on a plan-by-plan
basis, based on the terms of the applicable Benefit Plan as in effect (i)
immediately prior to such change in control of the Company or (ii) immediately
prior to the Date of Termination, whichever is more favorable to the Executive,
and (b) the Executive shall be treated as having remained in employment
throughout the
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remainder of the Contract Term for purposes of determining his rights under any
such Benefit Plans applicable to retired employees.
(4) Upon termination of employment for any reason other than
pursuant to Sections IV.B. (Cause), IV.C. (Disability) or IV.D. (Retirement), or
by reason of the Executive's death, the Company will provide to the Executive,
at the cost and expense of the Company, the services of an outplacement firm to
be mutually agreed upon between the Company and the Executive.
G. Compensation Upon Disability
During any period that the Executive fails to perform his duties hereunder
as a result of incapacity due to physical or mental illness, he shall continue
to receive his full Base Salary and incentive compensation at the rate then in
effect until this Agreement is terminated pursuant to Section IV.C. hereof.
Thereafter, his benefits shall be determined in accordance with the Company's
Pension Plan, excess benefits plan, supplemental retirement program for short
service executives and disability insurance plans in which the Executive
participates, or a substitute plan then in effect; provided, however, that if
the Executive's employment is terminated pursuant to Section IV.C. hereof
following a change in control of the Company (as defined in Section VI hereof),
the Company shall pay to the Executive (a) in a cash lump sum on or before the
fifth (5th) day following the Date of Termination, the amounts described in
Sections IV.F(1)(a) and (d) hereof, and (b) during each month commencing with
the month in which occurs the Date of Termination and through and including the
month in which occurs the expiration of the Contract Term (for this purpose the
Contract Term shall be determined as of the Date of Termination, but without
regard to the Executive's termination for Disability), an aggregate amount in
cash equal to
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the excess (but not less than zero) of (i) one-twenty-fourth of the aggregate
amount determined under Sections IV.F.(1)(b) and (c) hereof over (ii) the
aggregate amount received by the Executive during such month under the Company's
long-term disability plans.
H. Compensation Upon Death
In the event this Agreement terminates by reason of the Executive's death
following a change in control of the Company (as defined in Section VI hereof),
the Company shall pay to the Executive's legal representatives or estate or as
may be directed by the legal representatives of his estate, as the case may be,
in a lump sum payable on or before the fifth (5th) day following the Executive's
death, an amount in cash equal to the amounts determined under Sections
IV.F.(1)(a), (b), (c) and (d) hereof (and for the purpose of determining such
amounts payable under Sections IV.F.(1)(b) and (c), the Contract Term shall be
determined as of the date of the Executive's death, but without regard to such
death).
I. Restrictions on Competition.
(1) The Executive will not, at any time during the Restricted
Period (as defined in Section IV.I.(2) below), accept
employment with, own an interest in, form a partnership or
joint venture with, consult with or otherwise assist any
person or enterprise that manufactures or sells products
("Competitive Products") similar to, or competitive with, the
products manufactured or sold by the Company on the Date of
Termination.
(2) The "Restricted Period" means:
(a) 24 months after the Date of Termination; and
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(b) an additional 12 months thereafter (the "Additional
Period") if:
(i) the Company has not terminated the Executive's
employment in accordance with Section IV.C.
(Disability);
(ii) the Company elects to impose the Additional Period
by providing to the Executive written notice of
such election not later than two months after the
termination of the Executive's employment; and
(iii) the Company pays the Executive, in twelve (12)
monthly installments during the Additional Period,
an aggregate amount equal to the Executive's Base
Salary for the calendar year in which the
Executive's employment terminated; and
(c) in addition to the time period(s) set forth in (a) and,
if applicable, (b) above, the remaining period of time,
if any, until the Executive is 60 years old if:
(i) this Agreement has terminated by reason of the
Executive's Retirement before the Normal
Retirement Age;
(ii) the Executive is an officer of the Company;
(iii) the Executive has elected to receive his or her
early retirement benefit on the basis of the
increased "Post-1995 Factors" set forth in Section
4 of the Company's Excess
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Benefits Plan, as such provision may be amended
from time to time.
(3) Section IV.I.(1) above will not apply if the relevant person
or enterprise acquires a business or product line that
manufactures or sells Competitive Products after the
commencement of the Executive's employment or other
relationship with such person or enterprise and the Executive
does not participate in any way in the business of the
Competitive Products for 24 months after the termination of
the Executive's employment and, at the request of the Company,
the Executive and the relevant person or enterprise certify to
the Company in writing that the Executive has and will comply
with the restrictions of this Section IV.I.(3).
(4) Nothing in this Section IV.I. eliminates or affects any right
to payments or benefits that the Executive otherwise has under
other provisions of this Article IV; and nothing in this
Section IV.I. gives the Executive the right to any payment or
benefit under other provisions of this Article IV that he or
she does not otherwise have.
J. Mitigation
The Executive shall not be required to mitigate the amount of any payment
or benefit provided for in this Agreement by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for herein be
reduced by any compensation earned by the
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Executive as the result of employment by another employer after the Date of
Termination, or otherwise.
V. Certain Tax Matters
A. Additional Payments
(1) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined (as hereafter provided) that any payment or
distribution to or for the Executive's benefit, 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 agreement or
Performance Share Plan Participant agreement), or similar right (a "Payment"),
would be subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code of 1986 (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, are hereafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment or payments (a "Gross-Up Payment") 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 Payments.
(2) Subject to the provisions of Section V.A.(5), all determinations
required to be made under this Section V.A., including whether an Excise Tax is
payable by the Executive, the amount of such Excise Tax, whether a Gross-Up
Payment is required, and the amount of such
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Gross-Up Payment, shall be made by a nationally-recognized legal or accounting
firm (the "Firm") selected by the Executive in the Executive's sole discretion.
The Executive agrees to direct the Firm to submit its determination and detailed
supporting calculations to both the Executive and the Company as promptly as
practicable. If the Firm determines that any Excise Tax is payable by the
Executive and that a Gross-Up Payment is required, the Company shall pay the
Executive the required Gross-Up Payment within ten business days after receipt
of such determination and calculations. If the Firm determines that no Excise
Tax is payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Executive with an opinion that the Executive has
substantial authority not to report any Excise Tax on the Executive's federal
income tax return. Any determination by the Firm as to the amount of the
Gross-Up Payment shall be binding upon the Executive and the Company. As a
result of the uncertainty in the application of Section 4999 of the Internal
Revenue Code of 1986 (or any successor provision thereto) at the time of the
initial determination by the Firm hereunder, it is possible that Gross-Up
Payments which will not have been made by the Company should have been made (an
"Underpayment"). In the event that the Company exhausts its remedies pursuant to
Section V.A.(5) hereof and the Executive thereafter is required to make a
payment of any Excise Tax, the Executive may direct the Firm to determine the
amount of the Underpayment (if any) that has occurred and to submit its
determination and detailed supporting calculations to both the Executive and the
Company as promptly as possible. Any such Underpayment shall be promptly paid by
the Company to the Executive, or for the Executive's benefit, within ten
business days after receipt of such determination and calculations.
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(3) The Executive and the Company shall each provide the 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 Firm,
and otherwise cooperate with the Firm in connection with the preparation and
issuance of the determination contemplated by Section V.A.(2) hereof.
(4) The fees and expenses of the Firm for its services in connection
with the determinations and calculations contemplated by Section V.A.(2) 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 ten business days after receipt from the Executive of a
statement therefor and reasonable evidence of the Executive's payment thereof.
(5) The Executive agrees to 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 ten (10) business days after the
Executive actually receives notice of such claim. The Executive agrees to
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 agrees not to pay such claim prior to the earlier of
(a) the expiration of the 30-calendar-day period following the date on which the
Executive gives such notice to the Company and (b) the date that any payment
with respect to such claim is due. If the Company notifies the Executive in
writing at least
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five business days prior to the expiration of such period that it desires to
contest such claim, the Executive agrees to:
(a) provide the Company with any written records or documents in the
Executive's possession relating to such claim reasonably requested by the
Company;
(b) 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;
(c) cooperate with the Company in good faith in order effectively to
contest such claim; and
(d) 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 the Executive harmless, on an after-tax
basis, from 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 V.A.(5), the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this Section V.A.(5) 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 the
Executive's 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
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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 Executive's taxable year 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.
(6) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section V.A.(5) hereof, the Executive receives any refund
with respect to such claim, the Executive agrees (subject to the Company's
complying with the requirements of Section V.A.(5) hereof) to 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 Executive's
receipt of an amount advanced by the Company pursuant to Section V.A.(5) hereof,
a determination is made that the Executive is not 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 of refund prior to the expiration of thirty
(30) calendar days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment required to be
paid pursuant to this Section V.A.
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VI. Security
To secure payment of the benefits provided for in this Agreement,
the Company agrees forthwith to establish an irrevocable escrow account (the
"Escrow Account") at National City Bank (the "Escrow Agent"), Cleveland, Ohio,
or, in the event that National City Bank shall resign, any other financial
institution satisfactory to the Company and the Executive (or the Executive's
executor or other personal representative) or appointed by a court of competent
jurisdiction and to keep on deposit in the Escrow Account such amount, if any,
as shall at all times be at least equal to the required security hereinafter
provided for. The maximum amount of required security to be kept on deposit at
any time shall be (A) the sum of $657,800 (the "Maximum Amount") or (B) if there
has been determination with the Executive's written consent or by a final
arbitral award rendered in accordance with this Agreement that a specific lesser
amount fully secures the Company's obligations under this Agreement, then such
specific lesser amount or, in the case that the Company has fully performed its
obligations under this Agreement, nothing. Subject to the provisions hereof, the
Maximum Amount of required security shall be kept on deposit at all times after
(i) the expiration of five days following the occurrence of a "potential change
in control of the Company" or (ii) a "change in control of the Company" (as such
terms are hereinafter defined), whichever occurs earlier. For purposes of this
Agreement, a "change in control of the Company" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(1) Any "person" (as that term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the
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Company representing twenty-five percent (25%) or more of the combined voting
power of the Company's then outstanding voting securities; or
(2) During any period of two consecutive years, individuals who at
the beginning of such period constituted the Board of Directors of the Company
and any new director (other than a director designated by a person who has
entered into an agreement or arrangement with the Company to effect a
transaction described in clause (1) or (3) of this sentence) whose appointment,
election, or nomination for election by the Company's shareholders, was approved
by a vote of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose appointment,
election or nomination for election was previously so approved, cease for any
reason to constitute a majority of the Board of Directors of the Company; or
(3) There is consummated a merger or consolidation of the Company or
a subsidiary thereof with or into any other corporation, other than a merger or
consolidation which would result in the holders of the voting securities of the
Company outstanding immediately prior thereto holding securities which represent
immediately after such merger or consolidation more than fifty (50%) of the
combined voting power of the voting securities of either the Company or the
other entity which survives such merger or consolidation or the parent of the
entity which survives such merger or consolidation; or
(4) There is consummated a sale or disposition by the Company of all
or substantially all the Company's assets.
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For purposes of this Agreement, a "potential change in control of the Company"
shall be deemed to have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied:
(a) any person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing twenty
percent (20%) or more of the combined voting power of the
Company's then outstanding voting securities; or
(b) the Company enters into an agreement, the consummation of
which would result in the occurrence of a change in control of
the Company; or
(c) any person publicly announces an intention to take or to
consider taking actions which, if consummated, would
constitute or result in a change in control of the Company; or
(d) any person commences a solicitation (as defined in Rule 14a-1
of the General Rules and Regulations under the Exchange Act)
of proxies or consents which has the purpose of effecting or
would (if successful) result in a change in control of the
Company; or
(e) a tender or exchange offer for voting securities of the
Company, made by a person (other than the Company, any
subsidiary thereof, any employee benefit plan of the Company
or any person organized, appointed or established by the
Company for or pursuant to the terms of any such plan), is
first published or sent or given (within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the
Exchange Act).
Until the Maximum Amount of required security is required to be kept on
deposit, the Company shall only be obliged to maintain on deposit in the Escrow
Account an amount (the "Required Security") at least equal to sixty percent
(60%) of the Maximum Amount of required security; provided, however, that if a
potential change in control of the
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Company shall occur prior to a change in control of the Company and if a change
in control of the Company does not occur within twelve months after the most
recent occurrence of a potential change in control of the Company, the Escrow
Agent shall be entitled, upon receipt of a written request by the Company, to
return to the Company any amounts in excess of the Required Security (or reduce
the amount of any letter of credit to an amount equal to the Required Security).
Except as provided in the immediately preceding sentence and in the penultimate
paragraph of this Section VI, amounts deposited in the Escrow Account shall be
paid out by the Escrow Agent only (a) to the Company, to the extent that the
amount on deposit exceeds the maximum amount of required security as specified
in joint written instructions from the Executive and the Company to the Escrow
Agent or in a final arbitral award rendered pursuant to Section VII hereof, or
(b) to the Executive, (i) if prior to a change in control of the Company, in
amounts specified in joint written instructions from the Executive and the
Company or in a final arbitral award rendered pursuant to Section VII hereof or
(ii) if after a change in control of the Company in such amounts as the
Executive shall certify to the Escrow Agent as amounts that the Company is in
default in paying the Executive under this Agreement.
The Company shall have the right, at any time and from time to time, to
instruct the Escrow Agent to invest all or any or any part of the funds in the
Escrow Account in time deposits or certificates of deposit with, or repurchase
or other obligations of, National City Bank, in its individual corporate
capacity, or any of its domestic or foreign branches, or any other "bank" (as
determined by the Company), or obligations issued or guaranteed by the United
States or any of its agencies or instrumentalities, provided that no such
investment shall be for a period in excess of ninety (90) days. The Escrow Agent
shall have no liability whatsoever for following the
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instructions of the Company regarding any such investment, or for any loss in
value of the Escrow Account as a consequence of any such investment or the
liquidation thereof.
The Company may meet its obligation to keep amounts on deposit in the
Escrow Account through (a) deposits of assets; (b) one or more letters of credit
deposited in escrow; or (c) any combination of the foregoing. The Company shall
have right, at any time and from time to time, to substitute one form of
permitted deposit in the Escrow Account for another form of permitted deposit in
the Escrow Account.
Intending that the Escrow Agent and its successors and assigns shall have
the right to rely hereon, the Executive consents to the agreement pertaining to
the Escrow Account to be maintained pursuant to this Section VI (the "Escrow
Agreement") substantially in the form attached hereto as Exhibit A, and consents
to the amendment and restatement, pursuant to the Escrow Agreement, of all prior
escrow agreements which have been made between the Company and National City
Bank (in any capacity) and of which the Executive is a beneficiary. The
Executive further consents to amendments, modifications, restatements and
clarifications of the Escrow Agreement from time to time, so long as, after
giving effect to each such amendment, modification, restatement or
clarification, the then aggregate amount (whether in the form of cash,
investments which the Company has instructed the Escrow Agent to make as
hereinbefore provided (the amount of which shall be determined, in each case, at
the time of the investment), amounts available to be drawn by the Escrow Agent
under one or more letters of credit, or any combination of the foregoing)
credited to the Escrow Account by the Escrow Agent would not be less than the
required security provided
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for in this Section VI. The Escrow Agent and its successors and assigns shall
have the right to rely upon such consent of the Executive.
VII. Arbitration
Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Cleveland, Ohio in
accordance with the rules of the American Arbitration Association then in
effect; provided that all arbitration expenses shall be borne by the Company.
Judgment may be entered on the arbitrators' award in any court having
jurisdiction; provided, however, that the Executive shall be entitled to seek
specific performance of his right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
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VIII. Miscellaneous
A. Successors, Binding Agreement
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation 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, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain such agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle the Executive
to compensation from the Company in the same amount and on the same terms as
would apply if the Executive terminated his employment for Good Reason, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in
this Agreement, "Company" shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid that executes and delivers
the agreement provided for in this section or which otherwise becomes bound by
all the terms and provisions of this Agreement by operation of law. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die while any
amount payable hereunder remains unpaid, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee, or other designee or, if there be no such
designee, to his estate.
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B. Notice
Notices and all other communications provided for in this Agreement shall
be in writing and shall be deemed to have been duly given when delivered by
United States registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Company shall be directed to the
attention of the Secretary of the Company, or to such other address as either
party may have furnished to the other in writing in accordance herewith.
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C. Waiver and Amendment; Governing Law
No provisions of this Agreement may be modified, waived or discharged
unless such modification, waiver or discharge is agreed to in writing signed by
the Executive and such officer as may be specifically designated by the Board
(which shall in any event include the Company's Chief Executive Officer). No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreement or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not set forth expressly in this Agreement, and this Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof. Without limiting the generality of the foregoing, this Agreement
supersedes and replaces in its entirety any prior agreement relating to the
subject matter hereof (other than agreements between the Executive and the
Company which constitute Benefit Plans). The validity, interpretation,
construction and performance of this Agreement shall be governed by the laws of
the State of Ohio.
D. Release and Reaffirmation
In connection with any termination of the Executive's employment prior to
a change in control of the Company (as defined in Section VI hereof), the
Company may, as a condition to the payment by the Company to the Executive of
any post-employment benefits under this Agreement, condition such payment upon
the execution and delivery by the Executive to the Company of:
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(1) A release, in form reasonably acceptable to the Company,
releasing the Company from any further obligations to the Executive, except for
obligations under Benefit Plans which remain in favor of the Executive and any
other remaining obligations under the specific terms of this Agreement or any
other written agreement in effect between the Company and the Executive; and
(2) A reaffirmation by the Executive of his obligations under this
Agreement and any other agreement theretofore in effect between the Executive
and the Company relating to confidentiality, restrictions on competition or
intellectual property rights.
This Section IX.D. shall not apply in connection with any termination of
the Executive's employment on or after the date on which a change in control of
the Company (as defined in Section VI hereof) shall have occurred.
E. Validity
The invalidity or unenforceability of any one or more provisions of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
F. Certain Obligations of the Company
All obligations of the Company to make payments and provide benefits under
this Agreement shall survive the expiration of the Contract Term.
G. 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 instrument.
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FERRO CORPORATION
BY:/s/ Xxxxxx X. Xxxxxx
-------------------------------------------
/s/ Xxxx X. Xxx
-------------------------------------------
Xxxx X. Xxx
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