Exhibit 10.02
Praxair, Inc.
Severance Compensation Agreement
February 28, 1997
NAME
ADDRESS
Dear Mr. :
The Board of Directors (the "Board") of Praxair, Inc. ("Praxair")
recognizes that the possibility of a Change in Control of Praxair exists,
and the uncertainty and questions which it may raise among management may
result in the departure or distraction of management personnel to the
detriment of Praxair or its majority-owned subsidiaries incorporated in the
United States (hereinafter to be referred to collectively as the
"Company").
The Board of Praxair has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including yourself, to their assigned
duties without distraction in the face of potentially disturbing
circumstances arising from a possible Change in Control of Praxair.
In order to induce you to remain in the employ of the Company and in
consideration of your continued service to the Company, Praxair agrees that
you shall receive the severance benefits set forth in this Severance
Compensation Agreement ("Agreement") in the event your employment with the
Company is terminated subsequent to a Change in Control under the
circumstances described below.
1. DEFINITIONS.
a. "CHANGE IN CONTROL" of Praxair means the occurrence of any
one of the following events:
(i) individuals who, on January 1, 1997, constitute the Board
(the "Incumbent Directors") cease for any reason to
constitute at least a majority of the Board, provided that
any person becoming a director subsequent to January 1,
1997, whose election or nomination for election was
approved by a vote of at least two-thirds of the Incumbent
Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Company in which
such person is named as a nominee for director, without
objection to such nomination) shall be an Incumbent
Director; PROVIDED, HOWEVER, that no individual elected or
nominated as a director of the Company initially as a
result of an actual or threatened election contest with
respect to directors or any other actual or threatened
solicitation of proxies [or consents] by or on behalf of
any person other than the Board shall be deemed an
Incumbent Director;
(ii) any "person" (as such term is defined in Section 3(a)(9)
of the Securities Exchange Act of 1934 (the "Exchange
Act") and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then
outstanding securities eligible to vote for the election
of the Board (the "Company Voting Securities"); PROVIDED,
HOWEVER, that the event described in this paragraph (ii)
shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or
any Subsidiary, (B) by any employee benefit plan sponsored
or maintained by the Company or Subsidiary, (C) by any
underwriter temporarily holding securities pursuant to an
offering of such securities, or (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph
(iii));
(iii) the consummation of a merger, consolidation, statutory
share exchange or similar form of corporate transaction
involving the Company or any of its Subsidiaries that
requires the approval of the Company's stockholders,
whether for such transaction or the issuance of securities
in the transaction (a "Business Combination"), unless
immediately following such Business Combination: (A) more
than 50% of the total voting power of (x) the corporation
resulting from such Business Combination (the "Surviving
Corporation"), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial
ownership of 100% of the voting securities eligible to
elect directors of the Surviving Corporation (the "Parent
Corporation"), is represented by Company Voting Securities
that were outstanding immediately prior to such Business
Combination (or, if applicable, shares into which such
Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the
holders thereof is in substantially the same proportion as
the voting power of such Company Voting Securities among
the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee
benefit plan sponsored or maintained by the Surviving
Corporation or the Parent Corporation), is or becomes the
beneficial owner, directly or indirectly, of 20% or more
of the total voting power of the outstanding voting
securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) and (C) at least a majority of the
members of the board of directors of the Parent
Corporation (or, if there is no Parent Corporation, the
Surviving Corporation) were Incumbent Directors at the
time of the Board's approval of the execution of the
initial agreement providing for such Business Combination
(any Business Combination which satisfies all of the
criteria specified in (A), (B) and (C) above shall be
deemed to be a "Non-Qualifying Transaction"); or
(iv) The stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or a sale or
disposition of all or substantially all of the Company's
assets.
Notwithstanding the foregoing, a Change in Control of the
Company shall not be deemed to occur solely because any
person acquires beneficial ownership of more than 20% of
the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company
which reduces the number of Company Voting Securities
outstanding; PROVIDED, THAT if after such acquisition by
the Company such person becomes the beneficial owner of
additional Company Voting Securities that increases the
percentage of outstanding Company Voting Securities
beneficially owned by such person, a Change in Control of
the Company shall then occur.
b. "DATE OF TERMINATION" shall mean
(i) in case employment is terminated for Total 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
(ii) in all other cases, the date specified in the Notice of
Termination (which shall not be less than thirty (30) nor
more than sixty (60) days, respectively, from the date
such Notice of Termination is given).
c. "TOTAL DISABILITY" shall mean total physical or mental
disability rendering you unable to perform the duties of your employment
for a continuous period of six (6) months. Any question as to the
existence of your Total Disability upon which you and the Company cannot
agree shall be determined by a qualified physician not employed by the
Company and selected by you (or, if you are unable to make such selection,
it shall be made by any adult member of your immediate family), and
approved by the Company. The determination of such physician made in
writing to the Company and to you shall be final and conclusive for all
purposes of this Agreement.
d. "GOOD REASON FOR RESIGNATION" shall mean, without your
express written consent, any of the following:
(i) a change in your status or position with the Company which
in your reasonable judgment does not represent a promotion
from your status or position immediately prior to the
Change in Control, or the assignment to you of any duties
or responsibilities or diminution of duties or
responsibilities which in your reasonable judgment are
inconsistent with your status or position with the Company
in effect immediately prior to the Change in Control, it
being understood that any of the foregoing in connection
with termination of your employment for Cause, Retirement,
or Total Disability shall not constitute Good Reason for
Resignation;
(ii) a reduction by the Company in the annual rate of your base
salary as in effect immediately prior to the date of a
Change in Control or as the same may be increased from
time to time thereafter, or the Company's failure to
increase the annual rate of your base salary for a
calendar year in an amount at least equal to the
percentage increase in base salary for all domestic
employees of the Company with Severance Compensation
Agreements in the preceding calendar year. Within three
(3) days after your request, the Company shall notify you
of the average percentage increase in base salary for all
such employees of the Company in the calendar year
preceding your request;
(iii) the Company's requiring you to be based outside of a
fifteen (15) mile radius from where your office is located
immediately prior to a Change in Control except for
required travel on the Company's business to an extent
substantially consistent with your business travel
obligations immediately prior to a Change in Control;
(iv) the failure by the Company to continue in effect any
compensation plan in which you participate as in effect
immediately prior to the Change in Control, including but
not limited to the Retirement Program Plan for Employees
of Praxair, Inc. and its Participating Subsidiary
Companies and any of the Incentive Compensation Plans,
compensation deferral plans, or any substitute plans
adopted prior to the Change in Control, unless an
arrangement satisfactory to you (embodied in an ongoing
substitute or alternative plan) has been made with respect
to such plan, or the failure by the Company to continue
your participation therein on at least as favorable a
basis, both in terms of the amount of benefits provided
and the level of your participation relative to other
participants, as existed immediately prior to the Change
in Control;
(v) the failure by the Company to continue to provide you with
benefits at least as favorable as those enjoyed by you
(and your dependents, if applicable) under any of the
Company's pre-retirement and post-retirement life
insurance, medical, health and accident, and disability
plans or any other plan, program or policy of the Company
intended to benefit employees in which you were
participating immediately prior to the Change in Control,
the taking of any action by the Company which would
directly or indirectly materially reduce any of such
benefits or deprive you of any material fringe benefit
enjoyed by you immediately prior to the Change in Control,
or the failure by the Company to provide you with the
number of annual paid vacation days to which you were
annually entitled immediately prior to the Change in
Control;
(vi) the failure of the Company to obtain a satisfactory
agreement from any Successor (as defined in Paragraph 4a
hereof) to assume and agree to perform this Agreement, as
contemplated in Paragraph 4a hereof;
(vii) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying
the requirements hereof; for purposes of this Agreement,
no such purported termination shall be effective for any
purpose except to constitute a Good Reason for
Resignation.
e. "INCENTIVE COMPENSATION AWARD" shall mean payment or
payments under Incentive Compensation Plans.
f. "INCENTIVE COMPENSATION PLANS" shall mean any variable
compensation or incentive compensation plans maintained by the Company,
including, but not limited to: (i) 1992 Praxair, Inc. Long Term Incentive
Plan, (ii) 1992 Praxair, Inc. Variable Compensation Plan, (iii) Praxair,
Inc. Profit Sharing Plan, (iv) 1996 Praxair, Inc. Senior Executive
Performance Award Plan and (v) 1996 Praxair, Inc. Performance Incentive
Plan.
g. "NOTICE OF TERMINATION" shall mean a written notice as
provided in Paragraph 9 hereof.
h. "RETIREMENT" shall mean (1) voluntary retirement before
your mandatory retirement age, if any, with an immediate,
nonactuarially-reduced pension under the Company's Retirement Program
(termination of your employment by you before your mandatory retirement
age, if any, with Good Reason for Resignation shall not be deemed a
Retirement for purposes of this Agreement even though you are eligible for
and elect to receive an immediate, nonactuarially-reduced pension under
the Company's Retirement Program) or (2) termination in accordance with any
retirement arrangement other than under the Company's Retirement Program,
which is established with your consent with respect to you or (3) mandatory
retirement as set forth under the policy of the Company as it existed prior
to the Change in Control or as agreed to by you following a Change in
Control.
i. "RETIREMENT PROGRAM" shall mean the Retirement Program
Plan for Employees of Praxair, Inc. and its Participating Subsidiary
Companies plus any excess or supplemental pension plans maintained by the
Company.
j. "TERMINATION FOR CAUSE" shall mean termination of your
employment upon your willfully engaging in conduct demonstrably and
materially injurious to the Company, monetarily or otherwise, provided that
there shall have been delivered to you a copy of a resolution duly adopted
by the unanimous affirmative vote of the entire membership of the Board of
the Company at a meeting of the Board of the Company called and held for
such purpose (after reasonable notice to you and an opportunity for you,
together with your counsel, to be heard before the Board of the Company),
finding that in the good faith opinion of the Board of the Company you were
guilty of the conduct set forth and specifying the particulars thereof in
detail.
For purposes of this Paragraph 1j, 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 and without reasonable belief that your action or omission was
in the best interest of the Company. Any act or failure to act based upon
authority given pursuant to a resolution duly adopted by the Board 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 you in good faith
and in the best interests of the Company.
2. COMPENSATION UPON TERMINATION OR WHILE DISABLED. Following a
Change in Control of Praxair you shall be entitled to the following
benefits:
a. TERMINATION OTHER THAN FOR CAUSE, RETIREMENT, DEATH OR
TOTAL DISABILITY; TERMINATION BY YOUR RESIGNATION WITH GOOD REASON FOR
RESIGNATION. If your employment by the Company shall be terminated
subsequent to the Change in Control and during the term of this Agreement
(a) by the Company other than for Cause, Retirement, Death or Disability or
(b) by you for Good Reason for Resignation, then you shall be entitled to
the benefits provided below, without regard to any contrary provision of
any plan:
(i) ACCRUED SALARY. The Company shall pay you, not later than
the fifth day following the Date of Termination, your full
base salary and vacation pay accrued through the Date of
Termination at the rate in effect at the time the Notice
of Termination is given (or at the rate in effect
immediately prior to a Change in Control, if such amounts
were higher).
(ii) ACCRUED INCENTIVE COMPENSATION. The Company shall pay
you, not later than thirty (30) days following your Date
of Termination, the amount of your Accrued Incentive
Compensation. If the Date of Termination is after the end
of a Variable Compensation Year, but before Incentive
Compensation for said Variable Compensation Year has been
paid, the Company shall pay you as Incentive Compensation
for that Variable Compensation Year the greatest of: (a)
an amount that bears the same ratio to your total base
salary in said Variable Compensation Year as the Incentive
Compensation paid to you during the immediately prior
Variable Compensation Year bears to your base salary for
said prior Variable Compensation Year, (b) an amount that
bears the same ratio to your base salary for such Variable
Compensation Year as the Incentive Compensation paid to
you during the three (3) immediately prior Variable
Compensation Years bears to your base salary for said
three (3) prior years, (c) the amount of your target
variable compensation payment for such Variable
Compensation Year, or (d) the average amount of Incentive
Compensation, as a percentage of base compensation, paid
to other executives of the Company at the same grade level
as yourself.
In addition, if the Date of Termination is other than the
first day of a Variable Compensation Year, the Company
shall pay you, as Incentive Compensation for the Variable
Compensation Year in which the Date of Termination occurs,
the greatest of: (a) an amount that bears the same ratio
to your total base salary earned (up to the Date of
Termination) in said Variable Compensation Year as the
Incentive Compensation paid to you during the immediately
prior Variable Compensation Year bears to your base salary
for said prior Variable Compensation Year, (b) an amount
that bears the same ratio to your total base salary earned
(up to the Date of Termination) for such Variable
Compensation Year as the Incentive Compensation paid to
you during the three (3) Variable Compensation Years
immediately prior to such Variable Compensation Year bears
to your base salary for said three (3) prior years, or (c)
the amount of your target variable compensation payment
for such Variable Compensation Year multiplied by a
fraction, the numerator of which is the total number of
days which have elapsed in the current Variable
Compensation Year to the Date of Termination, and the
denominator of which is three hundred sixty-five (365).
Such payment shall be made to you not later than thirty
(30) days after the Date of Termination.
If there is more than one Incentive Compensation Program,
your accrued Incentive Compensation under each Program
shall be determined individually for that Program.
For the purpose of determining the amount of your Accrued
Incentive Compensation under this Paragraph 2a(ii), you
will be deemed to have been paid the full amount of all
prior variable and incentive compensation, whether or not
such award was includible in your gross income for Federal
Income tax purposes.
For the purpose of this Paragraph 2a(ii), "Incentive
Compensation Program" means any of the Incentive
Compensation Plans defined in Paragraph 1f and any other
plan or program for the payment of incentive compensation,
variable compensation, bonus, benefits or awards for which
you were, or your position was, eligible to participate;
"Incentive Compensation" means any compensation, variable
compensation, bonus, benefit or award paid or payable
under an Incentive Compensation Program; and "Variable
Compensation Year" means a calendar or fiscal plan year of
an Incentive Compensation Program.
(iii) INSURANCE COVERAGE. The Company shall arrange to provide
you (and your dependents, if applicable) with life,
disability, accident and health insurance benefits
substantially equivalent to those which you are receiving
or entitled to receive immediately prior to the Change in
Control of the Company. Such insurance benefits shall be
provided to you for the longer of (x) thirty six (36)
months after such Date of Termination or (y) the period
during which such insurance benefits would have been
provided to you, as a terminated employee, under the
applicable life insurance, medical, health and accident
and disability insurance plans of the Company in effect
immediately prior to the Change in Control of the Company
(except that after a period of thirty six (36) months,
such insurance benefits shall be provided to you on the
same financial terms and conditions as provided for under
the respective plans).
Should it be determined that any of the medical benefits
to be provided to you under this subsection (iii) could be
included in your gross income for federal, state or local
tax purposes, then the following shall apply:
(a) If you are retirement eligible on your Date of
Termination, then you shall participate in the Company's
medical benefit plans as if you retired from the Company
on your Date of Termination, except that the Company shall
provide such medical coverage at no cost to you for three
(3) years following your Date of Termination and
thereafter, you shall participate therein on the same
terms as other retired employees;
(b) If you are not eligible for retirement upon your Date
of Termination, you will no longer continue to participate
in the Company's medical benefit plans and (i) the Company
shall provide you with a cash payment in an amount equal
to the amount required by you to pay for coverage under
COBRA for the first eighteen (18) months following your
loss of medical coverage, and thereafter, (ii) the Company
shall, for the subsequent eighteen (18) months, purchase
for you, at its cost, a policy of medical insurance
providing benefits substantially similar to the benefits
you would have received under the Company's medical
benefit plans.
(iv) RETIREMENT BENEFITS. The Company shall pay you, at the
time you are entitled to be paid a retirement pension
under the Retirement Program, a retirement pension equal
to the greater of (x) an amount computed in accordance
with the terms of the Retirement Program in effect
immediately prior to the Change in Control of Praxair and
as if those terms were in effect on the Date of
Termination, or (y) an amount computed in accordance with
the terms of the Retirement Program in effect immediately
prior to the Date of Termination, in either case less the
amount of retirement pension actually to be paid to you
under the Retirement Program. In computing the amounts of
your retirement pension under clauses (x) and (y) of this
Paragraph 2a(iv), three years shall be added to your
actual age and to your actual Company Service Credit under
the Retirement Program so that your retirement pension
under clauses (x) and (y) will be the amount it would have
been if you had been three years older than you actually
were, and had three years more Company Service Credit than
you actually had, on the Date of Termination.
If for any reason, the benefits under this subparagraph
(iv) cannot be paid under the tax-qualified portion of the
Retirement Program, the Company shall provide such
benefits to you through the purchase, and delivery to you,
of a non-qualified annuity from an insurance company, or
you may elect to receive a lump sum payment for the
benefits under this subparagraph (iv), calculated under
such one of the following options as would produce the
highest lump sum payment: (a) calculated under the same
factors (interest rate and mortality) as lump sum payments
were made under the Company's Supplemental Retirement
Income Plan and Equalization Benefit Plan in effect
immediately prior to a Change in Control, (b) calculated
under the same factors (interest rate and mortality) as
lump sum payments are made under the Company's
Supplemental Retirement Income Plan and Equalization
Benefit Plan, or other similar plans, as in effect on the
Date of Termination, or (c) calculated under the same
factors (interest rate and mortality) as lump sum payments
would have been calculated under the Company's
Supplemental Retirement Income Plan and Equalization
Benefit Plan on the Date of Termination, if such factors
were determined using the same methodology as such plans
used prior to the Change in Control.
(v) OUTPLACEMENT COUNSELING. The Company shall make available
to you, at the Company's expense, outplacement counseling.
You may select the organization that will provide the
outplacement counseling, however, the Company's obligation
to provide you benefits under this subsection (v) shall be
limited to $35,000.
(vi) FINANCIAL COUNSELING. The Company shall, within 30 days
of the Date of Termination, make available to you three
individual financial counseling sessions, of at least two
hours each and at times and locations that are convenient
to you, with a nationally recognized financial counseling
firm. The financial counseling firm may also provide you
with tax counseling and tax preparation services. You may
select the organization that will provide the financial
and tax counseling, however, the Company's obligation to
provide you benefits under this subsection (vi) shall be
limited to $10,000. At the financial counseling sessions,
the financial counseling firm shall provide you with
detailed financial advice that is tailored to your
particular personal and financial situation. The Company
shall specify to you the information regarding your
personal and financial situation that you must provide to
the financial counseling firm in order for the firm to
provide the counseling services required by this Section
2(a)(vi). The Company shall take all reasonable and
appropriate measures to assure that the financial
counseling firm preserves the confidentiality of all
information conveyed by you to the counseling firm.
(vii) SEVERANCE PAYMENT. The Company shall pay as severance pay
to you, not later than the fifth day following the Date of
Termination, a lump sum severance payment (the "Severance
Payment") equal to three (3) times the sum of the
following:
(a) the greater of your annual base compensation which was
payable to you by the Company immediately prior to the
Date of Termination and your annual base compensation
which was payable to you by the Company immediately prior
to a Change in Control, whether or not such annual base
compensation was includible in your gross income for
Federal income tax purposes; plus
(b) the greater of: (y) the amount of your most recent
Incentive Compensation Award received prior to the Date of
Termination, or, if higher, the amount of your most recent
Incentive Compensation Awards received prior to the Change
in Control, whether or not such bonus or award was
includible in your gross income for Federal Income tax
purposes, or (z) an amount that bears the same ratio to
your annual base salary in effect immediately prior to the
Date of Termination, or, if higher, your annual base
salary in effect immediately prior to the Change in
Control, as the Incentive Compensation paid to you during
the three (3) immediately prior Incentive Compensation
Years bears to your base salary for said three (3) prior
years; plus
(c) the greater of the value, as determined by the Company
at the time of the grant, attributable to any stock
options awarded to you by the Company at the most recent
date of grant of stock options prior to the Date of
Termination and the value, as determined by the Company at
the time of grant, attributable to any stock options
awarded to you by the Company at the most recent date of
grant of stock options prior to a Change in Control. In
determining such value, the number of stock options
awarded to you shall be multiplied by the value ascribed
to a stock option by the Company using the Black-Scholes
method or other similar methodology. If at the time of
either of such grants it is specified in writing that the
grant covers a period of more than one year, then the
value of such grant as determined above shall be
annualized by dividing such value by the number of years
(or part thereof) the grant is specified to cover; plus
(d) the greater of the value, as determined by the Company
at the time of the grant, attributable to the grant to you
by the Company of performance or restricted stock of the
Company at the most recent date of grant prior to the Date
of Termination and the value, as determined by the Company
at the time of grant, attributable to the grant to you by
the Company of performance or restricted stock of the
Company at the most recent date of grant prior to a Change
in Control. If at the time of either of such grants it is
specified in writing that the grant covers a period of
more than one year, then the value of such grant as
determined above shall be annualized by dividing such
value by the number of years (or part thereof) the grant
is specified to cover. In determining such annualized
value, the number of shares of performance or restricted
stock awarded to you shall be multiplied by the closing
price of the common stock of the Company on the New York
Stock Exchange-Composite Transactions on the date of
grant.
The Severance Payment shall not be reduced to the extent
the Company could not properly deduct amounts paid
pursuant to Paragraph 2a(i) through 2a(vii) hereof or
otherwise pursuant to section 280G of the Code.
(viii) PAYMENT OF TAXES.
(a) For purposes of this subparagraph (viii), the
following terms shall have the following meanings:
(I) PAYMENT shall mean any payment or
distribution (or acceleration of benefits) by
the Company to or for your benefit (whether
paid or payable or distributed or
distributable (or accelerated) pursuant to
the terms of this Agreement or otherwise, but
determined without regard to any additional
payments required under this subsection
(viii)). In addition, Payment shall mean the
amount of income deemed to be received by you
as a result of the acceleration of the
exercisability of any of your options to
purchase stock of the Company or the
acceleration of the lapse of any restrictions
on performance stock or restricted stock of
the Company held by you.
(II) EXCISE TAX shall mean the excise tax imposed
by Section 4999 of the Code, or any interest
or penalties incurred by you with respect to
such excise tax.
(III) INCOME TAX shall mean all taxes other than
the Excise Tax (including any interest or
penalties imposed with respect to such taxes)
including, without limitation, any income and
employment taxes imposed by any federal
(including (i) FICA and medicare taxes, and
(ii) the loss of any federal deductions or
exemptions which would have been available to
you but for receipt of the Payment), state,
local, commonwealth or foreign government.
(b) In the event it shall be determined that a Payment
would be subject to an Excise Tax, then you shall
be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after
payment by you of Income Tax and Excise Tax
imposed upon the Gross-Up Payment, you retain an
amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(c) All determinations required to be made under this
subsection (viii), 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 the public accounting firm that is
retained by the Company as of the date immediately
prior to the Change in Control (the "Accounting
Firm") which shall provide detailed supporting
calculations both to the Company and to you within
fifteen (15) business days of the receipt of
notice from you that there has been a Payment, or
such earlier time as is requested by the Company
(collectively, the "Determination"). In the event
that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group
affecting the Change in Control, you may appoint
another nationally recognized public 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 subsection (viii),
shall be paid by the Company to you within ten
(10) days of your receipt of the Payment. If the
Accounting Firm determines that no Excise Tax is
payable by you, you may request the Accounting
Firm to furnish you with a written opinion that
failure to report the Excise Tax on your
applicable federal income tax return would not
result in the imposition of a negligence or
similar penalty. The Determination by the
Accounting Firm shall be binding upon the Company
and you. As a result of the uncertainty in the
application of Section 4999 of the Code at the
time of the Determination, 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 (viii)(d) and you thereafter are required
to make payment of any Excise Tax or Income 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 your benefit.
(d) You 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 or the
Underpayment. Such notification shall be given as
soon as practicable but no later than ten (10)
business days after you are 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. You shall not pay
such claim prior to the expiration of the 30-day
period following the date on which you give 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 you in writing prior to the expiration of
such period that it desires to contest such claim,
you shall:
(1) give the Company any information reasonably
requested by the Company relating to such
claim,
(2) 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,
(3) cooperate with the Company in good faith in
order effectively to contest such claim, and
(4) permit the Company to participate in any
proceeding 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 you harmless, on an
after-tax basis, for any Excise Tax or Income
Tax imposed as a result of such
representation and payment of costs and
expenses. Without limitation on the
foregoing provisions of this Section
(viii)(d), the Company shall control all
proceedings taken in connection with such
contest 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
and may, at its sole option, either direct
you to pay the tax claimed and xxx for a
refund or contest the claim in any
permissible manner, and you agree 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 further, that if the
Company directs you to pay such claim and xxx
for a refund, the Company shall advance the
amount of such payment to you on an
interest-free basis and shall indemnify and
hold you harmless, on an after-tax basis,
from any Excise Tax or Income Tax imposed
with respect to such advance or with respect
to any imputed income with respect to such
advance; and provided further, that any
extension of the statute of limitations
relating to payment of taxes for your taxable
year 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 you 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.
(e) If, after the receipt by you of an amount advanced
by the Company pursuant to Section (viii)(d), you
become entitled to receive, and receive, any
refund with respect to such claim, you shall
(subject to the Company's complying with the
requirements of Section (viii)(d)) 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 you of an amount advanced by the Company
pursuant to Section (viii)(d), a determination is
made that you shall not be entitled to any refund
with respect to such claims and the Company does
not notify you in writing of its intent to contest
such denial of refund prior to the expiration of
thirty (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 be offset, to the extent thereof,
the amount of the Gross-Up Payment required to be
paid.
(ix) NO DUTY TO MITIGATE. You shall not be required to
mitigate the amount of any payment provided for in this
Paragraph 2 by seeking other employment or otherwise, nor
shall the amount of any payment or benefit as provided for
be reduced by any compensation earned by you as the result
of employment by another employer or by retirement
benefits after the Date of Termination, or otherwise
except as specifically provided herein. However,
notwithstanding the foregoing, should you become
reemployed in a job which (a) offers medical plan benefits
which are equal to or greater than the medical plan
benefits provided to you under subsection 2(a)(iii), and
(b) such medical plan benefits are offered to you at no
cost, you shall no longer be eligible to receive medical
plan benefits under this Agreement.
b. PAYMENTS WHILE DISABLED. During any period prior to the
Date of Termination and during the term of this Agreement that you are
unable to perform your full-time duties with the Company, whether as a
result of your Total Disability or as a result of a physical or mental
disability that is not total or is not permanent and therefore is not a
Total Disability, you shall continue to receive your base salary at the
rate in effect at the commencement of any such period, together with all
other compensation and benefits that are payable or provided under the
Company's benefit plans, including its disability plans. After the Date of
Termination, your benefits shall be determined in accordance with the
Company's Retirement Program, insurance and other applicable programs. The
compensation and benefits, other than salary, payable or provided pursuant
to this Paragraph 2b shall be the greater of (x) the amounts computed under
the Retirement Program, disability benefit plans, insurance and other
applicable programs in effect immediately prior to a Change in Control of
Praxair and (y) the amounts computed under the Retirement Program,
disability benefit plans, insurance and other applicable programs in effect
at the time the compensation and benefits are paid.
c. PAYMENTS IF TERMINATED FOR CAUSE, OR BY YOU EXCEPT WITH
GOOD REASON. If your employment shall be terminated by the Company for
Cause or by you other than with Good Reason for Resignation, the Company
shall pay you your full base salary and accrued vacation pay then in effect
through the Date of Termination, at the rate in effect at the time Notice
of Termination is given plus any benefits or awards which have been earned
or become payable but which have not yet been paid to you. You shall
receive any payment due under this subsection c. on your Date of
Termination. Thereafter the Company shall have no further obligation to
you under this Agreement.
d. AFTER RETIREMENT OR DEATH. If your employment shall be
terminated by your Retirement, or by reason of your death, your benefits
shall be determined in accordance with the Company's retirement and
insurance programs then in effect.
3. TERM OF AGREEMENT. This Agreement shall commence on the date
hereof and shall continue in effect through December 31, 1998; provided,
however, that commencing on January 1, 1999 and each January 1 thereafter,
the term of this Agreement shall automatically be extended for one
additional year unless, not later than September 30 of the preceding year,
the Company or you shall have given notice that it or you do not wish to
extend this Agreement. Notwithstanding any such notice by the Company or
you not to extend the Agreement, if a Change in Control shall have
occurred:
(a) during the original or extended term of this Agreement or,
(b) after this Agreement has been terminated, but within twelve
months after such notice to terminate the Agreement is given by
the Company,
the attempted termination of the Agreement shall be deemed ineffective and
this Agreement shall continue in effect. In any event, the term of this
Agreement shall expire on the second (2nd) anniversary of the date of the
Change in Control. This Agreement shall terminate if your employment is
terminated by you or the Company prior to a Change in Control.
4. SUCCESSORS; BINDING AGREEMENT.
a. SUCCESSORS OF THE COMPANY. The Company will require any
Successor to all or substantially all of the business and/or assets of the
Company to expressly assume and agree, by an agreement in form and
substance satisfactory to you, 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
assent at least five business days prior to the time a person becomes a
Successor (or where the Company does not have at least five business days
advance notice that a person may become a Successor, within three business
days after having notice that such person may become or has become a
Successor) shall constitute Good Reason for Resignation by you and, if a
Change in Control of the Company has occurred or thereafter occurs, shall
entitle you immediately to the benefits provided in Paragraph 2a hereof
upon delivery by you of a Notice of Termination which the Company, by
executing this Agreement, hereby assents to. For purposes of this
Agreement, "Successor" shall mean any person that purchases all or
substantially all of the assets of the Company or the Surviving Corporation
(and Parent Corporation, if applicable) or obtains or succeeds to, or has
the practical ability to control (either immediately or with the passage of
time), the Company's business directly, by merger or consolidation, or
indirectly, by purchase of voting securities of the Company or by
acquisition of rights to vote voting securities of the Company or
otherwise, including but not limited to any person or group that acquires
the beneficial ownership or voting rights described in Paragraph 1a(ii).
b. YOUR SUCCESSOR. This Agreement shall inure to the benefit
of and be enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devises and legatees. If
you should die following your Date of Termination while any amount would
still be payable to you hereunder if you had 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.
5. COVENANT NOT TO COMPETE. In consideration for this Agreement,
you agree that at all times within a three (3) year period following your
Date of Termination, that you will not, as a principal, agent, employee,
employer, consultant, stockholder (other than an owner of less than 5% of
the stock of a publicly traded company), investor, director or co-partner
of any person, firm, corporation or business entity other than the Company,
or in any individual representative capacity whatsoever, directly or
indirectly, without the express prior written consent of the Company:
(a) engage or participate in any business whose products or
services are competitive with the business of the Company as it existed
prior to a Change in Control;
(b) aid or counsel any other person, firm, corporation or
business entity to do any of the above;
(c) approach, solicit business from, or otherwise do business
or deal with any person, partnership, firm, corporation or other entity
that at the time of your Date of Termination is a present client of the
Company or which has been a client of the Company during your employment by
the Company in connection with any product or service competitive to any
provided by the Company as described in section 5(a) above.
6. RELATIONSHIP TO OTHER AGREEMENTS. To the extent that any
provision of any other agreement between the Company and you shall limit,
qualify or be inconsistent with any provision of this Agreement, then for
purposes of this Agreement, while the same shall remain in force, the
provision of this Agreement shall control and such provision of such other
agreement shall be deemed to have been superseded, and to be of no force or
effect, as if such other agreement had been formally amended to the extent
necessary to accomplish such purpose.
7. NATURE OF PAYMENTS. All payments to you under this Agreement
shall be considered either payments in consideration of your continued
service to the Company or severance payments in consideration of your past
service to the Company.
8. VALIDITY. 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 will constitute one and the same instrument.
10. NOTICE. Any purported termination of this Agreement by the
Company or by you following a Change in Control shall be communicated to
the other party by a Notice of Termination. A Notice of Termination 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. For the purpose of this Agreement, notices and all
other communications provided for in the Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed 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 Board of Praxair with a copy to the Secretary of
Praxair 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.
11. FEES AND EXPENSES. Praxair shall pay all legal fees and related
expenses incurred by you as a result of your termination following a Change
in Control or by you in seeking to obtain or enforce any right or benefit
provided by this Agreement (including all fees and expenses, if any,
incurred in contesting or disputing any such termination or incurred by you
in seeking advice in connection therewith).
12. SURVIVAL. The respective obligations of, and benefits afforded
to, the Company and you as provided in Paragraphs 2, 4, 5, 6, 10 and 11 of
this Agreement shall survive termination of this Agreement.
13. 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.
14. GOVERNING LAW. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Connecticut.
15. AMENDMENT. No amendment to this Agreement shall be effective
unless in writing and signed by both you and the Company.
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter
which will then constitute our agreement on this subject.
Sincerely,
PRAXAIR, INC.
By:
Title:
Agreed to this day
of , 1997
-1-
