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EXHIBIT 10.5
Date
Name
Title
FEDERAL-MOGUL CORPORATION
EMPLOYMENT AGREEMENT
AGREEMENT by and between Federal-Mogul Corporation, a Michigan
corporation (the "Company") and (the "Executive"), dated as of
the day of , 1997.
The Board of Directors of the Company (the "Board"), has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control
(as defined below) of the Company. The Board believes it is imperative to
diminish the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control
and to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of
other corporations. Therefore, in order to accomplish these objectives, the
Board has caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
I. Certain Definitions.
A. The "Effective Date" shall mean the first date during the Change of
Control Period (as defined in Section 1(b)) on which a Change of Control (as
defined in Section 2) occurs. Anything in this Agreement to the contrary
notwithstanding, if a Change of Control occurs and if the Executive's
employment with the Company is terminated prior to the date on which the
Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a
third party who has taken steps reasonably calculated to effect a Change of
Control or (ii) otherwise arose in connection with or anticipation of a
Change of Control, then for all purposes of this Agreement the "Effective
Date" shall mean the date immediately prior to the date of such termination
of employment.
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B. The "Change of Control Period" shall mean the period commencing on
the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date
hereof, and on each annual anniversary of such date (such date and each
annual anniversary thereof shall be hereinafter referred to as the "Renewal
Date"), unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give
notice to the Executive that the Change of Control Period shall not be so
extended.
II. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:
A. The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (i) the then outstanding shares of common stock of
the Company (the "Outstanding Company Common Stock") or (ii) the combined
voting power of the then outstanding voting securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change of
Control: (i) any acquisition directly from the Company, (ii) any acquisition
by the Company, (iii) any acquisition by any employee benefit plan (or
related trust) sponsored or maintained by the Company or any corporation
controlled by the Company or (iv) any acquisition by any corporation
pursuant to a transaction which complies with clauses (i), (ii) and (iii)
of subsection (c) of this Section 2; or
B. Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of
the Board; provided, however, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least a majority of
the directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but excluding,
for this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest with respect
to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than
the Board; or
C. Consummation of a reorganization, merger or consolidation or sale or
other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50%
of, respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or
more subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company
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Common Stock and Outstanding Company Voting Securities, as the case may be,
(ii) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Company
or such corporation resulting from such Business Combination) beneficially
owns, directly or indirectly, 20% or more of, respectively, the then
outstanding shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then outstanding
voting securities of such corporation except to the extent that such
ownership existed prior to the Business Combination and (iii) at least a
majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board
at the time of the execution of the initial agreement, or of the action of
the Board, providing for such Business Combination; or
D. Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
III. Employment Period. The Company hereby agrees to continue the Executive
in its employ, and the Executive hereby agrees to remain in the employ of the
Company subject to the terms and conditions of this Agreement, for the period
commencing on the Effective Date and ending on the third anniversary of such
date (the "Employment Period").
IV. Terms of Employment.
A. Position and Duties.
a. During the Employment Period, (A) the Executive's position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at
any time during the 120-day period immediately preceding the Effective Date
and (B) the Executive's services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any office
or location less than 35 miles from such location.
b. During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive
agrees to devote reasonable attention and time during normal business hours
to the business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or
charitable boards or committees, (B) deliver lectures, fulfill speaking
engagements or teach at educational institutions and (C) manage personal
investments, so long as such activities do not significantly interfere with
the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
It is expressly understood and agreed that to the extent that any such
activities have been conducted by the Executive prior to the Effective Date,
the continued conduct of such activities (or the conduct of activities similar
in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
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B. Compensation.
a. Base Salary. During the Employment Period, the Executive shall
receive an annual base salary ("Annual Base Salary"), which shall be paid at a
monthly rate, at least equal to twelve times the highest monthly base salary
paid or payable, including any base salary which has been earned but deferred,
to the Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective
Date occurs. During the Employment Period, the Annual Base Salary shall be
reviewed no more than 12 months after the last salary increase awarded to the
Executive prior to the Effective Date and thereafter at least annually. Any
increase in Annual Base Salary shall not serve to limit or reduce any other
obligation to the Executive under this Agreement. Annual Base Salary shall
not be reduced after any such increase and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so increased.
As used in this Agreement, the term "affiliated companies" shall include any
company controlled by, controlling or under common control with the Company.
b. Annual Bonus. In addition to Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus under the Company's 1977 Supplemental Compensation Plan, as
amended and restated, or any comparable bonus under any predecessor or
successor plan, for the last three full fiscal years prior to the Effective
Date (annualized in the event that the Executive was not employed by the
Company for the whole of such fiscal year) (the "Recent Annual Bonus").
Each such Annual Bonus shall be paid no later than the end of the third month
of the fiscal year next following the fiscal year for which the Annual Bonus
is awarded, unless the Executive shall elect to defer the receipt of such
Annual Bonus.
c. Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all incentive,
savings and retirement plans, practices, policies and programs applicable
generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to
both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than the most
favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect
at any time during the 120-day period immediately preceding the Effective Date
or if more favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company and its
affiliated companies.
d. Welfare Benefit Plans. During the Employment Period, the
Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit
plans, practices, policies and programs provided by the Company and its
affiliated companies (including, without limitation, medical, prescription,
dental, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with benefits which are less favorable, in the aggregate, than the most
favorable of such plans, practices, policies and programs in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided
generally at any time after the Effective Date to other peer executives of
the Company and its affiliated companies.
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e. Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices
and procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company
and its affiliated companies.
f. Fringe Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of
an automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the
120-day period immediately preceding the Effective Date or, if more favorable
to the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies.
g. Office and Support Staff. During the Employment Period, the
Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any
time during the 120-day period immediately preceding the Effective Date or,
if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.
h. Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies
as in effect for the Executive at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
V. Termination of Employment.
A. Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. If
the Company determines in good faith that the Disability of the Executive has
occurred during the Employment Period (pursuant to the definition of
Disability set forth below), it may give to the Executive written notice in
accordance with Section 12(b) of this Agreement of its intention to terminate
the Executive's employment. In such event, the Executive's employment with
the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), provided that,
within the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive's duties. For purposes of this
Agreement, "Disability" shall mean the absence of the Executive from the
Executive's duties with the Company on a full-time basis for 180 consecutive
business days as a result of incapacity due to mental or physical illness
which is determined to be total and permanent by a physician selected by the
Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
B. Cause. The Company may terminate the Executive's employment during
the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
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(i) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the
Board or Chief Executive Officer believes that the Executive has not
substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct
or gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer or a senior officer of the Company or based upon the advice of counsel
for the Company shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the Company.
The cessation of employment of the Executive shall not be deemed to be for
Cause unless and until there shall have been delivered to the Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice is provided to the
Executive and the Executive is given an opportunity, together with counsel,
to be heard before the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of the conduct described in subparagraph (i)
or (ii) above, and specifying the particulars thereof in detail.
C. Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
a. the assignment to the Executive of any duties inconsistent in
any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
b. any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
c. the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the Effective
Date;
d. any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
e. any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
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For purposes of this Section 5(c), any good faith determination of "Good
Reason" made by the Executive shall be conclusive.
D. Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b)
of this Agreement. For purposes of this Agreement, a "Notice of Termination"
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be
not more than thirty days after the giving of such notice). The failure by
the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.
E. Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination
or any later date specified therein, as the case may be, (ii) if the
Executive's employment is terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Executive of such termination and (iii) if the Executive's
employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of death of the Executive or the Disability
Effective Date, as the case may be.
VI. Obligations of the Company upon Termination.
A. Good Reason; Other Than for Cause, Death or Disability. If, during
the Employment Period, the Company shall terminate the Executive's employment
other than for Cause or Disability or the Executive shall terminate employment
for Good Reason:
a. the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(1) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the product of
(x) the higher of (I) the Recent Annual Bonus and (II) the Annual Bonus paid or
payable, including any bonus or portion thereof which has been earned but
deferred (and annualized for any fiscal year consisting of less than twelve
full months or during which the Executive was employed for less than twelve
full months), for the most recently completed fiscal year during the Employment
Period, if any (such higher amount being referred to as the "Highest Annual
Bonus") and (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator
of which is 365 and (3) any compensation previously deferred by the Executive
(together with any accrued interest or earnings thereon) and any accrued
vacation pay, in each case to the extent not theretofore paid (the sum of the
amounts described in clauses (1), (2), and (3) shall be hereinafter referred
to as the "Accrued Obligations"); and
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(2) the amount equal to the product of (1) three and (2) the
sum of (x) the Executive's Annual Base Salary and (y) the Highest Annual
Bonus; and
(3) an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's qualified defined benefit
retirement plan (the "Retirement Plan") (utilizing actuarial assumptions no
less favorable to the Executive than those in effect under the Company's
Retirement Plan immediately prior to the Effective Date), and any excess or
supplemental retirement plan in which the Executive participates (together,
the "SERP") which the Executive would receive if the Executive's employment
continued for three years after the Date of Termination assuming for this
purpose that all accrued benefits are fully vested, and, assuming that the
Executive's compensation in each of the three years is that required by
Section 4(b)(i) and Section 4(b)(ii), over (b) the actuarial equivalent of
the Executive's actual benefit (paid or payable), if any, under the Retirement
Plan and the SERP as of the Date of Termination;
b. for three years after the Executive's Date of Termination,
or such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs, practices
and policies described in Section 4(b)(iv) of this Agreement if the
Executive's employment had not been terminated or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies and their
families, provided, however, that if the Executive becomes reemployed with
another employer and is eligible to receive medical or other welfare benefits
under another employer provided plan, the medical and other welfare benefits
described herein shall be secondary to those provided under such other plan
during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Executive
for retiree benefits pursuant to such plans, practices, programs and policies,
the Executive shall be considered to have remained employed until three years
after the Date of Termination and to have retired on the last day of such
period;
c. the Company shall, at its sole expense as incurred, provide
the Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion; and
d. to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to receive
under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the "Other Benefits").
B. Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive's legal representatives under
this Agreement, other than for payment of Accrued Obligations and the timely
payment or provision of Other Benefits. Accrued Obligations shall be paid to
the Executive's estate or beneficiary, as applicable, in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall
include, without limitation, and the Executive's estate and/or beneficiaries
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shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and affiliated companies to the estates and
beneficiaries of peer executives of the Company and such affiliated companies
under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
C. Disability. If the Executive's employment is terminated by reason of
the Executive's Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than for payment
of Accrued Obligations and the timely payment or provision of Other Benefits.
Accrued Obligations shall be paid to the Executive in a lump sum in cash
within 30 days of the Date of Termination. With respect to the provision of
Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall
include, and the Executive shall be entitled after the Disability Effective
Date to receive, disability and other benefits at least equal to the most
favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with
such plans, programs, practices and policies relating to disability, if any,
as in effect generally with respect to other peer executives and their
families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive's
family, as in effect at any time thereafter generally with respect to other
peer executives of the Company and its affiliated companies and their
families.
D. Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Employment Period, this Agreement
shall terminate without further obligations to the Executive other than the
obligation to pay to the Executive (x) his Annual Base Salary through the
Date of Termination, (y) the amount of any compensation previously deferred
by the Executive, and (z) Other Benefits, in each case to the extent
theretofore unpaid.
If the Executive voluntarily terminates employment during the Employment
Period, excluding a termination for Good Reason, this Agreement shall
terminate without further obligations to the Executive, other than for
Accrued Obligations and the timely payment or provision of Other Benefits.
In such case, all Accrued Obligations shall be paid to the Executive in a
lump sum in cash within 30 days of the Date of Termination.
VII. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or practice provided by the Company or any of its affiliated companies
and for which the Executive may qualify, nor, subject to Section 12(f), shall
anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of
or any contract or agreement with the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
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VIII. Full Settlement. The Company's obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment
or take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result
of any contest (regardless of the outcome thereof) by the Company, the
Executive or others of the validity or enforceability of, or liability under,
any provision of this Agreement or any guarantee of performance thereof
(including as a result of any contest by the Executive about the amount of any
payment pursuant to this Agreement), plus in each case interest on any delayed
payment at the applicable Federal rate provided for in Section 7872(f)(2)(A)
of the Internal Revenue Code of 1986, as amended (the "Code").
IX. Certain Additional Payments by the Company.
A. Anything in this Agreement to the contrary notwithstanding and except
as set forth below, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties
are incurred by the Executive with respect to such excise tax (such excise
tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (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, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and 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. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account the
Payments and the Gross-Up Payment, would not receive a net after-tax benefit
of at least $50,000 (taking into account both income taxes and any Excise Tax)
as compared to the net after-tax proceeds to the Executive resulting from an
elimination of the Gross-Up Payment and a reduction of the Payments, in the
aggregate, to an amount (the "Reduced Amount") such that the receipt of
Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall
be made to the Executive and the Payments, in the aggregate, shall be reduced
to the Reduced Amount.
B. Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a
Gross-Up Payment is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made by
Ernst & Young or such other certified public accounting firm as may be
designated by the Executive (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within
15 business days of the receipt of notice from the Executive that there has
been a Payment, or such earlier time as is requested by the Company. In the
event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change
11
of Control, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to the Executive within five days of the receipt
of the Accounting Firm's determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments which will not have been
made by the Company should have been made ("Underpayment"), consistent with
the calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of
the Executive.
C. The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of taxes with
respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that it desires to contest
such claim, the Executive shall:
a. give the Company any information reasonably requested by the
Company relating to such claim,
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 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 additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for 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 limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole 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
12
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to
pay such claim 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 or with respect to any imputed income with
respect to such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount. Furthermore, the Company's
control of the contest 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.
D. If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to
the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt by
the Executive of an amount advanced by the Company pursuant to Section 9(c),
a determination is made that the Executive shall not be entitled to any
refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 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.
X. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies, and their respective businesses, which shall have been
obtained by the Executive during the Executive's employment by the Company or
any of its affiliated companies and which shall not be or become public
knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive's employment with the Company, the Executive shall not, without
the prior written consent of the Company or as may otherwise be required by
law or legal process, communicate or divulge any such information, knowledge
or data to anyone other than the Company and those designated by it. In no
event shall an asserted violation of the provisions of this Section 10
constitute a basis for deferring or withholding any amounts otherwise payable
to the Executive under this Agreement.
XI. Successors.
A. This Agreement is personal to the Executive and without the prior
written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
B. This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns.
13
C. 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 to assume expressly 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.
As used in this Agreement, "Company" shall mean the Company 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.
XII. Miscellaneous.
A. This Agreement shall be governed by and construed in accordance with
the laws of the State of Michigan, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the provisions hereof
and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
B. All notices and other communications hereunder shall be in writing
and shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: If to the Company:
Name Attention: General Counsel
Residence address Federal-Mogul Corporation
00000 Xxxxxxxxxxxx Xxxxxxx
Xxxxxxxxxx, XX 00000
or to such other address as either party shall have furnished to the other
in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
C. The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
D. The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required
to be withheld pursuant to any applicable law or regulation.
E. The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert
any right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
F. The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section 1(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which
case the Executive shall have no further rights under this Agreement. From
and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.
14
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the
Company has caused these presents to be executed in its name on its behalf,
all as of the day and year first above written.
Very truly yours,
FEDERAL-MOGUL CORPORATION
Name
Vice President - Human Resources
Executed and effective this
day of , 199 .
Signature
(Typed Name)
