EXHIBIT 10.14
HYDRIL CHANGE IN CONTROL AGREEMENT
HYDRIL COMPANY
0000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
January 15, 2002
[Name]
Hydril Company
0000 Xxxxx Xxx Xxxxxxx Xxxxxxx Xxxx
Xxxxxxx, Xxxxx 00000
Dear [Name]:
Hydril Company (the "Corporation") considers it essential to
the best interests of its stockholders to xxxxxx the continuous employment of
key management personnel. In connection with this, the Corporation's Board of
Directors (the "Board") recognizes that, as is the case with many corporations,
the possibility of a change in control of the Corporation may exist and that
such possibility, and that such uncertainty and questions that it may raise
among management, could result in the departure or distraction of management
personnel to the detriment of the Corporation and its stockholders.
The Board previously had decided to reinforce and encourage
the continued attention and dedication of members of the Corporation's
management, including yourself, to their assigned duties without distraction
arising from the possibility of a change in control of the Corporation and had
entered into a letter agreement with you dated January 1, 1999, concerning
certain benefits to be paid to you upon severance from employment with the
Company following a change of control (the "Prior Agreement").
The Company has now determined to offer to enter into a new
letter agreement (the "Agreement") with you which, among other things, will have
a longer term than the Prior Agreement.
In order to induce you to remain in its employ, the
Corporation hereby agrees that after this Agreement has been fully executed, you
shall receive the severance benefits set forth in this Agreement in the event
your employment with the Corporation or one or more of its subsidiaries is
terminated under the circumstances described below subsequent to a "Change of
Control" (as defined in Section 2). This Agreement supersedes the Prior
Agreement which no longer has any force or effect.
1. Term of Agreement. This Agreement shall commence on January
15, 2002 and shall continue in effect through the earlier of (i) December 31,
2004 or (ii) the end of the calendar month in which your 65th birthday occurs.
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January 15, 2002
2. Change in Control. No benefits shall be payable hereunder
unless there has been a Change in Control. For purposes of this Agreement, a
Change in Control shall be conclusively deemed to have occurred if (and only if)
any of the following events shall have occurred: (a) after the date hereof any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act),
other than a person who is a director of the Corporation on the date hereof or
any person controlled by such a director, becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 35% or more of the combined voting
power of the Corporation's then outstanding voting securities without prior
approval of a least two-thirds of the members of the Board of Directors of the
Corporation in office immediately prior to such person's attaining such
percentage interest; (b) the Corporation is a party to a merger, consolidation,
sale of assets or other reorganization, or a proxy contest, as a consequence of
which members of the Board of Directors of the Corporation in office immediately
prior to such transaction or event thereafter constitute less than a majority of
the members of the board of directors or comparable governing body of the entity
that is the survivor of such transaction or event or, in the case of a sale of
assets, the entity that is the successor to the business of the Corporation; or
(c) during any period of two consecutive years, individuals who at the beginning
of such period constituted the Board of Directors of the Corporation (including
for this purpose any new member whose election or nomination for election by the
Corporation's stockholders was approved by a vote of at least two-thirds of the
members then still in office who were members at the beginning of such period)
cease for any reason to constitute at least a majority of the Board of Directors
of the Corporation.
3. Termination Following Change in Control.
(i) General. If any of the events described in Section 2
constituting a Change in Control shall have occurred, you shall be entitled to
the benefits provided in Section 4(iii) upon the subsequent termination of your
employment during the term of this Agreement if such termination is (a) by the
Corporation without Cause or (b) by you for Good Reason.
(ii) Cause. Termination by the Corporation of your employment
for "Cause" shall mean termination (a) upon your willful and continued failure
to substantially perform your duties with the Corporation or any such actual or
anticipated failure after your issuance of a Notice of Termination (as defined
in Section 3(iv)) for Good Reason (as defined in Section 3(iii)), after a
written demand for substantial performance is delivered to you by the Board,
which demand specifically identifies the manner in which the Board believes that
you have not substantially performed your duties, (b) upon your willful
participation in conduct which is demonstrably and materially injurious to the
Corporation, monetarily or otherwise, or (c) upon there being substantial
evidence that you are guilty of a crime classified as a felony (or the
equivalent thereof) under applicable law, or that you have been convicted of
such a crime. For purposes of this Section 3(ii), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith. In addition, "Cause" shall exist if as a result of your
incapacity due to physical or mental illness, you shall have been absent from
the
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January 15, 2002
full-time performance of your duties with the Corporation for six (6)
consecutive months, and within thirty (30) days after written notice of
termination is given you shall not have returned to the full-time performance of
your duties (hereinafter, "Disability"). Notwithstanding the foregoing, you
shall not be deemed terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board), finding that in the
Board's good faith opinion you were guilty of conduct set forth above in this
Section 3(ii) and specifying the particulars thereof in reasonable detail.
(iii) Good Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean, without your express written consent, the occurrence after a Change in
Control of any of the following circumstances unless, in the case of subsections
(a), (e), (f) or (g), such circumstances are fully corrected prior to the Date
of Termination (as defined in Section 3(v)) specified in the Notice of
Termination (as defined in Section 3(iv)) given in respect thereof:
(a) the assignment to you of any duties inconsistent with the
position in the Corporation or any subsidiary of the Corporation that
you held immediately prior to the Change in Control, or a significant
adverse alteration in the nature or status of your responsibilities or
the conditions of your employment from those in effect immediately
prior to such Change in Control;
(b) the reduction of your annual base salary as in effect on
the date hereof or as the same may be increased from time to time;
(c) the relocation of the offices at which you are principally
employed immediately prior to the date of the Change in Control to a
location more than 25 miles from such location or your relocation to
anywhere other than such prior office except for required travel on the
Corporation's business to an extent substantially consistent with your
present business travel obligations;
(d) failure to pay to you any portion of your current
compensation or to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the Corporation
within seven (7) days of the date such compensation is due;
(e) failure to continue in effect any material compensation or
benefit plan in which you participate immediately prior to the Change
in Control, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such
plan, or failure to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount
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January 15, 2002
of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change in Control;
(f) failure to obtain a satisfactory agreement from any
successor to assume and agree to perform this Agreement, as
contemplated in Section 5; or
(g) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the
requirements of Section 3(iv) hereof (and, if applicable, the
requirements of Section 3(ii) hereof), which purported termination
shall not be effective for purposes of this Agreement.
Your right to terminate your employment pursuant to this Section 3(iii) shall
not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder.
(iv) Notice of Termination. Any purported termination of your
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 6. "Notice of Termination" shall mean a notice that shall indicate the
specific termination provision in this Agreement relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean
(a) if your employment is terminated due to your death, the date of your death;
(b) if your employment is terminated for Disability thirty (30) days after
Notice of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30)-day period), and
(c) if your employment is terminated pursuant to Section 3(ii) or Section 3(iii)
or for any other reason (other than death or Disability), the date specified in
the Notice of Termination (which, in the case of a termination for Cause shall
not be less than thirty (30) days from the date such Notice of Termination is
given, and in the case of a termination for Good Reason shall not be less than
fifteen (15) nor more than sixty (60) days from the date such Notice of
Termination is given). Notwithstanding anything to the contrary contained in
this Section 3(v), if within fifteen (15) days after any Notice of Termination
is given, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, then the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, or as set forth in Section 10;
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
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January 15, 2002
4. Compensation Upon Termination or During Disability.
Following a Change in Control, you shall be entitled to the benefits described
below during a period of disability, or upon termination of your employment, as
the case may be, provided that such period or termination occurs during the term
of this Agreement. The benefits to which you are entitled, subject to the terms
and conditions of this Agreement, are:
(i) During any period during which you fail to perform your
full-time duties with the Corporation as a result of incapacity due to physical
or mental illness, you shall continue to receive your base salary at the rate in
effect at the commencement of any such period, together with all compensation
payable to you under the Corporation's disability plan or program or other
similar plan during such period, until this Agreement is terminated by the
Corporation pursuant to Section 3(ii) hereof or by you. Thereafter, or in the
event your employment is terminated by reason of your death, your benefits shall
be determined under the Corporation's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs.
(ii) If your employment shall be terminated by the Corporation
for Cause or by you other than for Good Reason, the Corporation shall pay you
your full base salary, when due, through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Corporation at the
time such payments are due, and the Corporation shall have no further
obligations to you under this Agreement.
(iii) If your employment by the Corporation shall be
terminated by you for Good Reason or by the Corporation other than for Cause
(including Disability), then you shall be entitled to the benefits provided
below:
(a) the Corporation shall pay to you your full base salary,
when due, through the Date of Termination at the rate in effect at the
time Notice of Termination is given, at the time specified in Section
4(v), plus all other amounts to which you are entitled under any
compensation plan of the Corporation at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as
severance pay to you, at the time specified in Section 4(v), a lump sum
severance payment (together with the payments provided in Sections
4(iii)(c) and (d) below, the "Severance Payments") equal to 200% of
your annual salary as in effect as of the Date of Termination or
immediately prior to the Change in Control, whichever is greater and
without regard to whether you have been employed by the Corporation or
any of its subsidiaries for at least 12 consecutive months, and 200% of
the average of the annual bonuses awarded to you pursuant to the
Corporation's bonus plan(s) for executive officers, or any successor
bonus plan(s) thereto, with respect to the three fiscal years preceding
the Date of Termination; provided
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January 15, 2002
that if you shall not have been continuously employed by the
Corporation or any of its subsidiaries for the preceding three full
fiscal years, such average annual bonuses shall be determined based on
the aggregate of all bonuses paid to you with respect to any of such
three fiscal years and the actual period of your employment through the
end of the preceding fiscal year (stated in years, including a fraction
thereof); and provided further that if no bonuses shall have been paid
to you with respect to the preceding fiscal year, such bonuses (for
purposes of computing both the average annual bonuses and the aggregate
amount of Severance Payments) shall be the greater of (x) the bonus
award to you for such fiscal year, if any, theretofore approved by the
Corporation's Board of Directors or a duly constituted committee
thereof, (y) your target bonus for such fiscal year, stated as a
percentage of your base annual salary, theretofore approved by the
Corporation's Board of Directors or a duly constituted committee
thereof, or (z) your current annual salary multiplied by the highest
percentage that your bonuses represented in relation to your base
annual salary with respect to either of the first two of the three
preceding fiscal years.
(c) the Corporation shall pay to you all legal fees and
expenses incurred by you as a result of such termination (including all
such fees and expenses, if any, incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or
benefit provided by this Agreement (as set forth in Section 10 of this
Agreement); and
(d) for a twenty-four (24) month period after such
termination, the Corporation shall arrange to provide you with life,
disability, accident and group health insurance benefits substantially
similar to those that you were receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to
this Section 4(iii)(d) shall be reduced to the extent comparable
benefits are actually received by you during the twenty-four (24) month
period following your termination, and any such benefits actually
received by you shall be reported to the Corporation.
(iv) The payments provided for in Section 4(iii)(a) shall be
made not later than the fifth day following the Date of Termination. The
payments provided for in Sections 4(iii)(b), (c) and (d) shall be made not later
than the thirtieth day following the Date of Termination; provided, however,
that if the amounts of such payments cannot be finally determined on or before
such day, the Corporation shall pay to you on such day an estimate, as
determined in good faith by the Corporation, of the minimum amount of such
payments and shall pay the remainder of such payments (together with interest at
the rate provided in section 1274(b)(2)(B) of the Internal Revenue Code of 1986,
as amended (the "Code"), as soon as the amount thereof can be determined but in
no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Corporation to you, payable on the fifth day
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January 15, 2002
after demand by the Corporation (together with interest at the rate provided in
section 1274(b)(2)(B) of the Code).
(v) You shall not be required to mitigate the amount of any payment provided for
in this Section 4 by seeking other employment or otherwise nor, except as
provided in Section 4(iii)(d), shall the amount of any payment or benefit
provided for in this Section 4 be reduced by any compensation earned by you as
the result of employment by another employer or self-employment, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
5. Successors, Binding Agreement.
(i) The Corporation shall 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 Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle you to terminate your employment and
to receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. Where the context requires,
"Corporation" shall mean the Corporation as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(ii) This Agreement shall inure to the benefit of and be
enforceable by you and your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder had you
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there is no such designee, to your estate.
6. Notice. For the purpose of this Agreement, 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 or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notices to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
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January 15, 2002
7. Miscellaneous. No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Texas without regard to its conflicts of law
principles. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law. The obligations of the Corporation under
Section 4 shall survive the expiration of the term of this Agreement. The
section headings contained in this Agreement are for convenience only, and shall
not affect the interpretation of this Agreement.
8. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
10. Arbitration, Dispute Resolution.
(i) Arbitration Procedure. Any disagreement, dispute,
controversy or claim arising out of or relating to this Agreement or the
interpretation of this Agreement or any arrangements relating to this Agreement
or contemplated in this Agreement or the breach, termination or invalidity
thereof shall be settled by arbitration in accordance with the Commercial
Arbitration Rules (the "Arbitration Rules") of the American Arbitration
Association (the "AAA") (except as otherwise provided in this Agreement) in
Houston, Texas. The arbitral tribunal shall consist of one arbitrator. In making
any decision, the arbitrator shall apply and follow the substantive law of Texas
without reference to the conflicts of law provisions thereof. The parties to the
arbitration jointly shall directly appoint such arbitrator within thirty (30)
days of initiation of arbitration. If the parties shall fail to appoint such
arbitrator as provided above, such arbitrator shall be appointed by the AAA as
provided in the Arbitration Rules. You and the Corporation agree that the
arbitral award may be enforced against the parties to the arbitration proceeding
or their assets wherever they may be found and that a judgment upon the arbitral
award may be entered in any court having jurisdiction thereof. The Corporation
shall pay all fees and expenses of the Arbitrator regardless of the result and
shall provide all witnesses and
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evidence reasonably required by you to present your case. The Corporation shall
pay to you all reasonable arbitration expenses and legal fees incurred by you as
a result of a termination of your employment in seeking to obtain or enforce any
right or benefit provided by this Agreement (whether or not you are successful
in obtaining or enforcing such right or benefit). Such payments shall be made
within five (5) days after the your request for payment accompanied with such
evidence of fees and expenses incurred as the Corporation reasonably may
require.
(ii) Compensation During Dispute. Your compensation during any
disagreement, dispute, controversy or claim arising out of or relating to this
Agreement or the interpretation of this Agreement shall be as follows:
(a) If a purported termination by you for Good Reason occurs
or is deemed to occur following a Change in Control and during the term
of this Agreement, and such termination is disputed in accordance with
Sections 3(v) and 10(i) of this Agreement, the Corporation shall
continue to pay you the full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to,
salary) and continue you as a participant in all compensation, benefit
and insurance plans in which you were participating when the notice
giving rise to the dispute was given, until the dispute is finally
resolved in accordance with Section 10(i). Amounts paid under this
Section 10(ii)(a) are in addition to all other amounts due under this
Agreement and shall not be offset against or reduce any other amounts
due under this Agreement. You agree to remain in the employ of the
Corporation during the resolution of the dispute and to continue to
provide services unless your employment is terminated earlier by death,
Disability or retirement, or by action of the Corporation. If the
dispute is resolved by a determination that you did not have Good
Reason, this Agreement, in accordance with its terms, shall continue to
apply to the circumstances of the your employment by the Corporation
and any termination thereof.
(b) If there is a termination by the Corporation followed by a
dispute as to whether you are entitled to the payments and other
benefits provided under this Agreement, then, during the period of that
dispute the Corporation shall pay you fifty percent (50%) of the amount
specified in Sections 4(iii)(a) and 4(iii)(b) hereof, and the
Corporation shall provide you with the other benefits provided in
Section 4(iii) of this Agreement, if, but only if, you agree in writing
that if the dispute is resolved against you, you shall promptly refund
to the Corporation all payments you receive under Sections 4(iii)(a)
and 4(iii)(b) of this Agreement plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly. If the dispute is
resolved in your favor, promptly after resolution of the dispute the
Corporation shall pay you the sum that was withheld during the period
of the dispute plus interest at the rate provided in Section 1274(d) of
the Code, compounded quarterly.
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January 15, 2002
11. Confidential Information and Non-Solicitation.
(i) For a period of two (2) years after a termination of your
employment with the Company with respect to which you receive Severance Payments
under Section 4 of this Agreement, you shall not, except as may be required by
applicable law, disclose to others or use, whether directly or indirectly, any
Confidential Information regarding the Company. "Confidential Information" shall
mean information about the Company, its subsidiaries and affiliates, and their
respective clients and customers that is not available to the general public and
that was learned by you in the course of your employment by the Company,
including (without limitation) any patterns, proprietary knowledge, trade
secrets, data, formulae, information, and client and customer lists and all
papers, resumes, records (including computer records) and the documents
containing such Confidential Information. You acknowledge that such Confidential
Information is specialized, unique in nature and of great value to the Company,
and that such information gives the Company a competitive advantage in
conducting its business. Upon the termination of your employment for any reason
whatsoever, you shall promptly deliver to the Company all documents, computer
tapes and disks (and all copies thereof) containing any Confidential
Information.
(ii) You recognize that you possess confidential information
about other employees of the Company relating to their education, experience,
skills, abilities, compensation and benefits, and interpersonal relationships
with customers of the Company. You recognizes that the information you possess
about these other employees is not generally known, is of substantial value to
the Company in developing its business and in securing and retaining customers,
and has been acquired by you because of your business position with the Company.
For a period of two (2) years after a termination of your employment with the
Company with respect to which you receive Severance Payments under Section 4 of
this Agreement, you shall not, directly or indirectly, solicit, recruit or hire
any employee of the Company for the purpose of being employed by you or by any
other person on whose behalf you are acting as an agent, representative or
employee and that you will not convey any such confidential information or trade
secrets about other employees of the Company to any business, individual,
partner, firm, corporation, or other entity.
(iii) You agree that the Company will or would suffer
irreparable injury if you were to violate any of the covenants set forth in this
Section 11 and that the Company would by reason of such violation be entitled to
injunctive relief in a court of appropriate jurisdiction, and you further
consent and stipulate to the entry of such injunctive relief in such a court
prohibiting you from violating any of such covenants.
(iv) If it is determined by a court of competent jurisdiction
in any state that any restriction in this Section 11 is excessive in duration or
scope or is unreasonable or unenforceable under the laws of that state, it is
the intention of the parties that such restriction may be modified or amended by
the court to render it enforceable to the maximum extent permitted by the law of
that state.
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12. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein,
including the Prior Agreement, is hereby terminated and cancelled.
13. No Rights of Employment. No provision of this Agreement
shall confer to any right upon you to continue employment with the Company or
any of its affiliates or subsidiaries.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter, which shall then constitute our agreement on this subject.
Sincerely,
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[Name]
[Title]
Agreed to this day of , 2002
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By:
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[Name]
