Exhibit 10.17
AGREEMENT
THIS AGREEMENT made this lst day of February 1999 by and between LYDALL,
INC. its subsidiaries (the "Company") and Xxxxxxxxxxx X. Xxxxxxxxxxx (the
"Executive").
W I T N E S S E T H :
RECITALS.
Executive is employed by the Company as President and Chief Executive
Officer. The Company and Executive have agreed that if Executive should cease to
be President and Chief Executive Officer of Lydall, Inc. under the circumstances
set forth in this Agreement his employment will be continued in another capacity
for a specified period;
NOW, THEREFORE, the Company and Executive, in consideration of the mutual
promises set forth below, agree as follows:
1. EXECUTIVE TO SERVE AS PRESIDENT AND CHIEF EXECUTIVE OFFICER OF LYDALL,
INC. The Executive shall act as President and Chief Executive Officer, subject
to the direction of the Board of Directors.
2. DEFINITIONS. The phrase "Change of Control," as used in this Agreement,
shall mean i) an acquisition of the Company by means of a merger or
consolidation or purchase of substantially all of its assets if and when
incident thereto (a) the composition of the Board of Directors of the Company
(the "Board") or its successor changes so that a majority of the Board is not
comprised of individuals who were members of the board immediately prior to such
merger, consolidation or purchase of
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assets or (b) the stockholders of the Company acquire a right to receive, in
exchange for or upon surrender of a majority of their stock, cash or other
securities or a combination of the two; and/or ii) the acquisition by a person
(as that term is hereafter defined) of the voting rights with respect to 25
percent or more of the outstanding Common Stock of the Company if such person
was not an officer or director of the Company on the date of this Agreement;
and/or iii) the election or appointment to the Board of any director or
directors whose appointment or election or nomination for election was not
approved by a vote of at least a majority of the directors then still in office
who were either directors on the date hereof or whose election, appointment or
nomination for election was previously so approved.
The word "person," as used in the preceding sentence, shall mean an
individual, corporation, trust, or other legal or commercial entity and include
two or more persons acting as a partnership, limited partnership, syndicate or
other group for the purpose of acquiring, holding or disposing of securities of
the Company.
The word "cause", as used in this Agreement, shall mean (i) conviction of a
crime involving moral turpitude, or (ii) material and unexcused breach by
Executive of his obligations under this Agreement, which results in material
harm to the Company and which is not cured within the period set forth below;
PROVIDED, HOWEVER, that a termination shall not be for "cause" hereunder unless
such conviction or breach is detailed in a
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written notice of intent to terminate by the Board, providing for sixty (60)
days from receipt by Executive to cure the breach prior to termination of
Executive; except that such notice would not be required if, in the Board of
Directors' discretion, the Company would be immediately harmed.
The phrase "Fringe Benefits," as used in this Agreement, shall mean the
benefits listed on Exhibit A hereto.
3. TERMINATION AFTER CHANGE OF CONTROL. If a Change of Control occurs after
the date of this Agreement and subsequent to such Change of Control (a)
Executive shall resign as President and Chief Executive Officer of the Company
within one year from the time such Change of Control occurs or (b) another shall
be appointed or elected President or Chief Executive Officer by the Board in
place of Executive at any time prior to June 1, 2018, Executive's normal
retirement date (such resignation or replacement of Executive being hereinafter
referred to as a "Termination"), Executive shall continue to be an employee of
the Company and be compensated and receive benefits in accordance with this
Agreement; provided, however, that if Executive's resignation shall be requested
by the Board for cause or Executive is replaced for cause, such resignation or
replacement shall not be deemed a Termination for the purpose of this Agreement
and shall not entitle Executive to continue to be an employee of the Company and
be compensated and receive the benefits provided for in this Agreement.
4. TERMINATION PRIOR TO CHANGE OF CONTROL. If prior to a
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Change of Control (a) the Executive shall resign as President and Chief
Executive Officer of the Company at the request of the Board or because the
duties and responsibilities of the President and Chief Executive Officer have
been significantly modified by the Board without his consent or (b) another is
appointed President or Chief Executive Officer in place of the Executive (such
resignation or replacement of the Executive being hereinafter referred to a
"Termination"), the Executive shall continue to be an employee of the Company
and be compensated and receive benefits in accordance with this Agreement;
provided, however, that if Executive's resignation shall be requested by the
Board for Cause or if Executive is replaced for Cause, such resignation or
replacement shall not be deemed a Termination for the purpose of this Agreement
and shall not entitle Executive to continue to be an employee of the Company and
be compensated and receive the benefits provided for in this Agreement.
5. TERMINATION FOR CAUSE. If Executive's employment is terminated for cause
prior to the beginning of the Employment Period, (either prior or subsequent to
a Change of Control), earned but unpaid Base Salary will be paid on a prorated
basis for the year in which the termination occurs, plus accrued vacation
benefits, but all other Company obligations shall cease as of the date of
termination for cause, unless otherwise provided in separate agreements.
6. EMPLOYMENT PERIOD. In the event of a Termination pursuant to paragraph 3
above, Executive shall continue to be an employee of the Company for a period of
three years from the date of such Termination, and in the event of a Termination
pursuant
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to Paragraph 4 above, Executive shall continue to be an employee of the Company
for a period of two years from the date of such Termination, such three year
period or two year period, as the case may be, being hereinafter referred to as
the "Employment Period"; provided, however, that (a) Executive may end the
Employment Period at any time in his absolute discretion and the Employment
Period may be ended by the Company at any time for cause, (b) the Employment
Period shall not extend beyond June 1, 2018, Executive's normal retirement date,
and (c) the Employment Period shall terminate if and when the Executive becomes
employed on substantially a full time basis by another entity or as a partner or
sole proprietor [and with Executive's full recognition of his responsibilities
under Paragraph 11 below] (but such termination of the Employment Period under
clause (a), (b) or (c) above shall not preclude the Executive from being paid
for his obligation not to compete as provided in Paragraphs 11 and 12 below).
7. TITLE AND DUTIES. During the Employment Period, the Executive shall
perform such duties and undertake such responsibilities as are assigned to him
from time to time by the Board; provided, however, that such duties and
responsibilities shall be commensurate with his status as a senior executive of
the Company and bear a reasonable relationship to the business of the Company.
8. COMPENSATION. The Company shall pay to Executive during the Employment
Period an annual salary (the "Annual Salary") equal to one-third (1/3rd) of the
aggregate of the base salary and bonuses paid to him during the period
commencing three
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(3) years prior to the date of Termination and ending on the date of
Termination. Payment shall be made twice monthly and be appropriately prorated
during the first and last month of the Employment Period. In addition, during
the Employment Period Executive shall receive (a) the same Fringe Benefits that
he would have been entitled to receive if he had continued to be President and
Chief Executive Officer during such period, (b) reimbursement for reasonable
expenses incurred by him in the performance of his duties (c) in lieu of an
office and secretarial help, an allowance of $1500 monthly and (d) the use of an
automobile on substantially the same basis as prior to his termination. If the
Employment Period shall end, pursuant to Paragraph 6 above, prior to the end of
the three year term provided for in Paragraph 3 above or the two year term
provided for in Paragraph 4 above, as the case may be, the Annual Salary (but,
except to the extent provided in Paragraph 10 below, not fringe benefits and
perquisites) shall continue to be payable until the end of the non-compete
period provided for in Paragraph 11 below and shall be deemed payment for
Executive's obligation not to compete as provided in said Paragraph 11, and such
Annual Salary for the remainder of the non-compete period shall be paid to the
Executive in a lump sum cash payment within ten days after the end of the
Employment Period.
9. TAX GROSS-UP. Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution made, or benefit provided, by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms
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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 Internal Revenue Code of 1986, as
amended and then in effect (the 'Code') (or any similar excise tax) 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 Federal, state, local or
other taxes (including any interest or penalties imposed with respect to any
such taxes), including, without limitation, any such 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. An Executive may receive
Gross-Up Payments under this Section 9 whether or not the Executive actually
receives other payments or benefits under the Agreement.
(i) Subject to the provisions of paragraph (ii) of this Section 9, 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 PricewaterhouseCoopers (the "Accounting Firm") which shall provide detailed
supporting calculations both to the Company and the Executive within 20 calendar
days of the receipt
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of written 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 of Control, the Executive shall have the right by written
notice to the Company to 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 and shall be paid by the
Company upon demand of the Executive as incurred or billed by the Accounting
Firm. 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. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with an
unqualified written opinion in form and substance satisfactory to the Executive
that failure to report the Excise Tax on the Executive's applicable federal
income tax return would not result in the imposition of a negligence or similar
penalty. 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 described in paragraph (ii) of this Section 9 and the
Executive thereafter is
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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 paid by the Company to or for the benefit of the Executive
within five days of the receipt of the Accounting Firm's determination. All
determinations made by the Accounting Firm in connection with any Gross-Up
Payment or Underpayment shall be final and binding upon the Company and the
Executive.
(ii) The Executive shall notify the Company in writing of any claim
asserted in writing by the Internal Revenue Service to the Executive 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 not later than 60
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 at the Company's expense:
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
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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 as
incurred 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 any Federal,
state, local or other income or other 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,
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 the Executive
to pay the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
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,
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from any Excise Tax or Federal, state, local or other income or other 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.
(iii) If, after the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph (ii) of this Section 9, 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 paragraph (ii) of
this Section 9 promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto) upon
receipt thereof. If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (ii) of this Section 9, 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
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be required to be repaid and the amount of such advance shall be offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
10. MEDICAL INSURANCE COVERAGE. Executive and his beneficiaries shall
continue to participate in all life, health, disability and other welfare plans
or programs existing at the time of a Change of Control in which they were
participating at such time (or substantially similar plans or programs), to the
extent that such continued participation is possible under the general terms and
conditions of such plans and programs throughout the Employment Period.
Company and Executive will continue to pay the same relative portion of the
cost of each such plan or program as each were paying at the time of the Change
of Control. Further, in the event that Executive's or his beneficiaries'
continued participation in any group plan or program is not permitted, then in
lieu thereof, Company shall acquire individual insurance policies providing
substantially similar coverage for Executive and his beneficiaries, and Company
and Executive will pay the same relative portion of the cost of such comparable
coverage plans or programs or in the event that Company cannot acquire
individual insurance policies providing substantially similiar coverage, the
Company will self-insure the Executive and his beneficiaries, and the Executive
in the case of self insurance will pay the COBRA rate then applicable to the
Company's group plan. For purposes of COBRA, a qualifying event is not deemed to
occur until the Employment Period, as defined in paragraph 6, has expired.
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11. NON-COMPETE. During the Employment Period Executive will not compete
directly or indirectly with the Company or be directly or indirectly interested
in any business competing with the business being conducted by the Company.
Ownership of less than 1 percent of the issued and outstanding capital stock of
any corporation the stock of which is listed upon a national exchange or
regularly quoted by the National Association of Security Dealers Automated
Quotation (NASDAQ) shall not be deemed to create a material conflict of interest
as contemplated hereunder. For the purpose of this Paragraph 11, the Employment
Period shall be deemed to extend three years from Termination if such
Termination occurred pursuant to Paragraph 3 above or two years from Termination
if such Termination occurred pursuant to Paragraph 4 above, notwithstanding any
prior ending of the Employment Period pursuant to Paragraph 6 above.
12. TRADE SECRETS. Executive shall regard and preserve as confidential and
not use, communicate or disclose to any person, orally, in writing or by a
publication, any secret or confidential information of the Company, regardless
of where or when or how acquired by the Company, or of others which the Company
is obligated to maintain in confidence. This obligation shall exist during the
Employment Period and after the termination of the Employment Period until such
information becomes a matter of public knowledge through no act of Executive. At
the termination of employment by the Company, Executive agrees to return to
employer all documents, writings, drawings and other property of the Company
within his custody and control.
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13. INDEMNIFICATION. The parties agree to execute a separate
Indemnification Agreement in the form attached as Exhibit B.
14. ARBITRATION. The Company and Executive undertake to execute this
Agreement in good faith. Any controversy or claim arising out of or relating to
this Agreement other benefit plans or arrangements with the Company or breach of
this Agreement, shall receive prompt attention by the other party and both
parties agree to make good faith efforts to resolve any controversy or claim in
an amicable way.
If the Company and Executive fail to settle the controversy or claim in an
amicable way, they agree to submit the matter to be settled by arbitration in
accordance with the Arbitration Rules of the American Arbitration Association.
This Agreement, its execution, interpretation and performance shall be governed
by the laws of the State of Connecticut of the United States of America. The
arbitration will be held in Hartford, Connecticut, or such other place as may be
agreed at the time by the parties. The award of this arbitration shall be final
and binding both for the Company and Executive and may be entered in any court
with jurisdiction.
15. LITIGATION EXPENSES. In the event of any action, suit, proceeding,
arbitration or claim between or by or against the Company and/or the Executive
with respect to this Agreement, other benefit plans or arrangements between the
parties, and the assertion or enforcement of his rights hereunder, the Company
shall promptly pay or reimburse the Executive upon such Executive's written
demand therefore, for eighty (80) percent of
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his costs and expenses (including costs and fees of witnesses, evidence and
attorney fees and expenses) relating to or arising out of (directly or
indirectly) such action, suit, proceeding, arbitration or claim, on a monthly
basis, as such costs and expenses are incurred in investigating, prosecuting,
defending or preparing to prosecute or defend, regardless of the outcome
thereof. In no event shall the Executive be required to reimburse the Company
for any of the costs and expenses relating to any such action, suit, proceeding,
arbitration or claim. The obligation of the Company under this Section 15 shall
survive the termination for any reason of this Agreement. This Section 15 cannot
be amended or modified to affect the rights of the Executive without the prior
written consent of such Executive which specifically refers to this Section 15.
16. RABBI TRUST. Within sixty (60) days of the date of this Agreement, the
Company shall enter into a trust agreement (the "Trust Agreement") with a third
party institutional trustee, substantially in the form set forth in Rev. Proc.
92-64, 1992-2 C.B. 422, to assist it in meeting its obligations to the Executive
under the Company's Supplemental Executive Retirement Plan (the "SERP"). The
trust established pursuant to the Trust Agreement (the "Trust") shall be
irrevocable. The Trust Agreement shall provide that upon a Change of Control the
Company shall, no later than 30 days following the Change of Control, make an
irrevocable contribution of cash or cash equivalents to the Trust in an amount
sufficient to pay each SERP participant or beneficiary the benefits to which
they would be entitled pursuant to the terms of the SERP, and within 30 days
following the end of
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each calendar year ending after the Change of Control the Company shall
irrevocably contribute any additional cash to the Trust necessary for the
Trustee to pay each SERP participant or beneficiary the benefits payable
pursuant to the terms of the SERP as of the close of the year. The Trust
Agreement shall also provide (i) that all income received by the Trust shall be
accumulated and reinvested, (ii) that the Company will be responsible for the
payment of all fees and expenses related to the Trust, (iii) that after a Change
of Control the Trustee may not be removed by the Company, and (iv) that, if the
Trustee shall resign, any successor Trustee must be an independent institutional
entity, such as a bank trust department or other party that has been granted
corporate trustee powers under state law. The Trust Agreement shall also provide
that the provisions of the Trust described in this Paragraph 16 may not be
amended after a Change of Control.
17. ENTIRE AGREEMENT. This Agreement embodies the whole understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all earlier agreements. There are no inducements, promises, terms,
conditions or obligations made or entered into by either party other than as
contained herein.
18. MODIFICATION. This Agreement may not be changed orally, but only be
means of an agreement in writing signed by the parties hereto.
19. WAIVER. The waiver by any party of a breach of any provision of this
Agreement shall not operate as, or be construed as, a waiver of any subsequent
breach.
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20. APPLICABLE LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Connecticut, without reference to
principles of conflict of laws.
21. SUCCESSORS. 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. This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns. 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.
IN WITNESS WHEREOF, the parties have hereunto set their hands as of the
date first above written.
LYDALL, INC.
By
-------------------------------- -------------------------------------
Xxxxx X. Xxxxxxx, Chairman, Xxxxxxxxxxx X. Xxxxxxxxxxx
Board of Directors President and Chief Executive Officer
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EXHIBIT A - FRINGE BENEFITS
1. Medical Benefits
a. Lydall, Inc. Health Care Payment Plan for Salaried Employees (includes
dental benefits)
b. Lydall, Inc. Health Care Expense Plan
c. Lydall, Inc. Health Care Spending Reimbursement Plan
2. Disability Benefits
a. Lydall, Inc. Short Term Disability Plan
b. Lydall, Inc. Executive Group Long Term Disability Plan
3. Life Insurance
a. Executive Life Insurance Plan
b. Accidental Death and Dismemberment Plan
c. Family Assistance Program
d. Business Travel Accident Plan
4. Retirement Plans
a. Lydall, Inc. Pension Plan No. 1A
b. Lydall, Inc. Profit Sharing Plan No. 1
c. Lydall, Inc. 401(k) Plan
d. Lydall, Inc. Supplemental Executive Retirement Plan
5. Stock Plans
a. Lydall, Inc. Employee Stock Purchase Plan
b. Lydall, Inc. 1992 Stock Incentive Compensation Plan
c. Lydall, Inc. 1982 Stock Incentive Compensation Plan
6. Other
a. Holidays, vacations
b. Lydall, Inc. Dependent Care Assistance Plan
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EXHIBIT B
INDEMNIFICATION AGREEMENT
This Agreement, made and entered into this lst day of February, 1999
("Agreement"), by and between Lydall, Inc., a Delaware corporation ("Company"),
and Xxxxxxxxxxx X. Xxxxxxxxxxx ("Indemnitee"):
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors or in other capacities unless they are
provided with adequate protection through insurance or adequate indemnification
against inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty of
attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
WHEREAS, it is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
WHEREAS, Indemnitee is willing to serve, continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified;
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
Section 1. SERVICES BY INDEMNITEE. Indemnitee agrees to serve (as a
director, officer, employee, agent of the Company) at the request of the
Company, as a director, officer, employee, agent, fiduciary of another
corporation, partnership, joint venture, trust employee benefit plan or other
enterprise. Indemnitee may at any time and for any reason resign from such
position (subject to any other contractual obligation or any obligation imposed
by operation of law), in which event the Company shall have no obligation under
this Agreement to continue
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Indemnitee in such position.
Section 2. INDEMNIFICATION - GENERAL. The Company shall indemnify, and
advance Expenses (as hereinafter defined) to, Indemnitee (a) as provided in this
Agreement and (b) to the fullest extent permitted by applicable law in effect on
the date hereof and as amended from time to time. The rights of Indemnitee
provided under the preceding sentence shall include, but shall not be limited
to, the rights set forth in the other Sections of this Agreement.
Section 3. PROCEEDINGS OTHER THAN PROCEEDINGS BY OR IN THE RIGHT OF THE
COMPANY. Indemnitee shall be entitled to the rights of indemnification provided
in this Section 3 if, by reason of his Corporate Status (as hereinafter
defined), he is, or is threatened to be made, a party to any threatened,
pending, or completed Proceeding (as hereinafter defined), other than a
Proceeding by or in the right of the Company. Pursuant to this Section 3,
Indemnitee shall be indemnified against all expenses, judgements, penalties,
fines, and amounts paid in settlement actually and reasonably incurred by him or
on his behalf in connection with such Proceeding or any claim, issue or matter
therein, if he acted in good faith and in a manner be reasonably believed to be
in or not opposed to the best interests of the Company and, with respect to any
criminal Proceeding, had no reasonable cause to believe his conduct was
unlawful.
Section 4. PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. Indemnitee shall
be entitled to the rights of indemnification provided in this Section 4 if, by
reason of his Corporate Status, he is, or is threatened to be made, a party to
any threatened, pending or completed Proceeding brought by or in the right of
the Company to procure a judgment in its favor. Pursuant to this Section,
Indemnitee shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection with such Proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Company; provided, however, that if applicable law so
provides, no indemnification against such Expenses shall be made in respect of
any claim, issue or matter in such Proceeding as to which Indemnitee shall have
been adjudged to be liable to the Company unless and to the extent that the
Court of Chancery of the State of Delaware, or the court in which such
Proceeding shall have been brought or is pending, shall determine that such
indemnification may be made.
Section 5. INDEMNIFICATION FOR EXPENSES OF A PARTY WHO IS WHOLLY OR PARTLY
SUCCESSFUL. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee is, by reason of his Corporate Status, a party to and is
successful, on the merits or otherwise, in any Proceeding, he shall be
indemnified against
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all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful, on the merits or otherwise, as to one or more but less than
all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
Section 6. INDEMNIFICATION FOR EXPENSES OF A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of his Corporate Status, a witness in any Proceeding to which Indemnitee is not
a party, he shall be indemnified against all Expenses actually and reasonably
incurred by him or on his behalf in connection therewith.
Section 7. ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within ten days after the receipt by the Company of a statement
or statements from Indemnitee requesting such advance or advances from time to
time, whether prior to or after final disposition of such Proceeding. Such
statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.
Section 8. PROCEDURES FOR DETERMINATION OF ENTITLEMENT TO INDEMNIFICATION.
(a) To obtain indemnification under this Agreement, Indemnitee shall submit
to the Company a written request, including therein or therewith such
documentation and information as is reasonably available to Indemnitee and is
reasonably necessary to determine whether and to what extent Indemnitee is
entitled to indemnification. The Secretary of the Company shell, promptly upon
receipt of such a request for indemnification, advise the Board of Directors in
writing that Indemnitee has requested indemnification.
(b) Upon written request by Indemnitee for indemnification pursuant to the
first sentence of Section 8(a) hereof, a determination, if required by
applicable law, with respect to Indemnitee's entitlement thereto shall be made
in the specific case; (i)if a Change in Control (as hereinafter defined) shall
be made in the Independent Counsel (as hereinafter defined) in a
3
written opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the
Board of Directors by a majority vote of a quorum consisting of Disinterested
Directors (as hereinafter defined), or (B) if a quorum of the Board of Directors
consisting of Disinterested Directors is not obtainable or, even if obtainable,
such quorum of Disinterested Directors so directs, by Independent Counsel in a
written opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee or (C) if so directed by the Board of Directors, by the stockholders
of the Company; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to Indemnitee shall be made within ten (10) days after
such determination. Indemnitee shall cooperate with the person, persons or
entity making such determination with respect to Indemnitee's entitlement to
indemnification, including providing to such person, persons or entity upon
reasonable advance request any documentation or information which is not
privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
costs or expenses (including attorneys' fees and disbursements) incurred by
Indemnitee in so cooperating with this person, persons or entity making such
determination shall be borne by the Company (Irrespective of the determination
as to Indemnitee's entitlement to indemnification) and the Company hereby
indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to indemnification is to
be made by Independent Counsel pursuant to Section 8(b) hereof, the Independent
Counsel shall be selected as provided in this Section 8(c). If a Change of
Control shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Company shall give written notice to Indemnitee
advising him of the identity of the Independent Counsel so selected. If a Change
of Control shall have occurred, the Independent Counsel shall be selected by
Indemnitee (unless Indemnitee shall request that such selection be made by the
Board of Directors, in which event the preceding sentence shall apply), and
Indemnitee shall give written notice to the Company advising it of the identity
of the Independent Counsel so selected. In either event, Indemnitee or the
Company, as the case may be, may, within 10 days after such written notice of
selection shall have been given, deliver to the Company or to Indemnitee, as the
case may be, a written objection to such selection; PROVIDED, HOWEVER, that such
objection may be asserted only on the ground that the Independent Counsel so
selected does not meet the requirements of "Independent Counsel" as defined in
Section 17 of this Agreement, and the objection shall set forth with
particularity the factual basis of such assertion. If such written objection is
so made and substantiated, the Independent Counsel so selected may not serve as
Independent Counsel unless and until such objection is
4
withdrawn or a court has determined that such objection is without merit. If,
within 20 days after submission by Indemnitee of a written request for
indemnification pursuant to Section 8(a) hereof, no Independent Counsel shall
have been selected and not objected to, either the Company or Indemnitee may
petition the Court of Chancery of the State of Delaware or other court of
competent jurisdiction for resolution of any objection which shall have been
made the Company or Indemnitee to the other's selection of Independent Counsel
and/or for the appointment as Independent Counsel of a person selected by the
Court of by such other person as the Court shall designate, and the person with
respect to whom all objections are so resolved or the person so appreciated
shall act as Independent Counsel under Section 8(b) hereof. The Company shall
pay any and all reasonable fees and expenses of Independent Counsel incurred by
such Independent Counsel in connection with acting pursuant to Section 8(b)
hereof, and the Company shall pay all reasonable fees and expenses incident to
the procedures of this Section 8(c), regardless of the manner in which such
Independent Counsel was selected or appointed. Upon the due commencement of any
judicial proceeding or arbitration pursuant to Section 10(a)(iii) of this
Agreement, Independent Counsel shall be discharged and relived of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
Section 9. PRESUMPTIONS AND EFFECT OF CERTAIN PROCEEDINGS.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 8(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) The termination of any Proceeding or of any claim, issue or matter
therein, by judgment, order, settlement of conviction, or upon a plea of nolo
contendere or its equivalent, shall not (except as otherwise expressly provided
in this Agreement) of itself adversely affect the right of Indemnitee to
indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
5
Section 10. REMEDIES OF INDEMNITEE.
(a) In the event that (i) a determination is made pursuant to Section
8 of this Agreement that Indemnitee is not entitled to indemnification under
this Agreement, (ii) advancement of Expenses is not timely made pursuant to
Section 7 of this Agreement, (iii) no determination of entitlement to
indemnification shall have been made pursuant to Section 8(b) of this Agreement
within 90 days after receipt by the Company of the request for indemnification,
(iv) payment of indemnification is not made pursuant to Section 5 or 6 of this
Agreement within ten (10) days after receipt by the Company of a written request
therefor, or (v) payment of indemnification is not made within 10 (10) days
after a determination has been made that Indemnitee is entitled to
indemnification, Indemnitee shall be entitled to an adjudication in an
appropriate court of the State of Delaware, or in any other court of competent
jurisdiction, of his entitlement to such indemnification or advancement of
Expenses. Alternatively, Indemnitee, at his option, may seek an award in
arbitration to be conducted by a single arbitrator pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Indemnitee shall
commence such proceeding seeking an adjudication or an award in arbitration
within 180 days following the data on which Indemnitee first has the right to
commence such proceeding pursuant to this Section 10(a); PROVIDED, HOWEVER, that
the foregoing clause shall not apply in respect of a proceeding brought by
Indemnitee to enforce his rights under Section 5 of this Agreement.
(b) In the event that a determination shall have been made pursuant to
Section 8(b) of this Agreement that Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 10 shall be conducted in all respects as a DE NOVO trial, or
arbitration, on the merits and Indemnitee shall not be prejudiced by reason of
that adverse determination. If a Change of Control shall have occurred, in any
judicial proceeding or arbitration commenced pursuant to this Section 10 the
Company shall have the burden of proving that Indemnitee is not entitled to
indemnification or advancement of Expenses, as the case may be.
(c) If a determination shall have been made pursuant to Section 8(b)
of this Agreement that Indemnitee is entitled to indemnification, the Company
shall be bound by such determination in any judicial proceeding or arbitration
commenced pursuant to this Section 10, absent (i) a misstatement by Indemnitee
of a material fact, or an omission of a material fact necessary to make
Indemnitee's statement not materially misleading, in connection with the request
for indemnification, or (ii) a prohibition of such indemnification under
applicable law.
6
(d) In the event that Indemnitee, pursuant to this Section 10, seeks a
judicial adjudication of or an award in arbitration to enforce his rights under,
or to recover damages for breach of, this Agreement, Indemnitee shall be
entitled to recover from the Company, and shall be indemnified by the Company
against, any and all expenses (of the types described in the definition of
Expenses in Section 17 of this Agreement) actually and reasonably incurred by
him in such judicial adjudication or arbitration, but only if he prevails
therein. If it shall be determined in said judicial adjudication or arbitration
that Indemnitee is entitled to receive part but not all of the indemnification
or advancement of expenses sought, the expenses incurred by Indemnitee in
connection with such judicial adjudication or arbitration shall be appropriately
prorated.
Section 11. NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE; SUBROGATION.
(a) The rights of indemnification and to receive advancement of
Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Certificate of Incorporation, the By-Laws, any agreement, a vote of
stockholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or of any provision hereof shall limit or
restrict any right of Indemnitee in his Corporate Status prior to such
amendment, alteration or repeal.
(b) To the extent that the Company maintains an insurance policy or
policies providing liability insurance for directors, officers, employees, or
agents of the Company or of any other corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise which such person serves at the
request of the Company, Indemnitee shall be covered by such policy or policies
in accordance with its or their terms to the maximum extent of the coverage
available for any such director, officer, employee or agent under such policy or
policies.
(c) In the event of any payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of Indemnities, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to make any
payment of amounts otherwise indemnifiable hereunder if and to the extend that
Indemnities has otherwise
7
actually received such payment under any insurance policy, contract, agreement
or otherwise.
Section 12. DURATION OF AGREEMENT. This Agreement shall continue until and
terminate upon the later of: (a)10 years after the date that Indemnities shall
have ceased to serve as a director, officer, employee, or agent of the Company
or of any other corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise which Indemnitee served at the request of the Company;
or (b) the final termination of any Proceeding then pending in respect of which
Indemnitee is granted rights of indemnification or advancement of expenses
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 10
of this Agreement relating thereto. This Agreement shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of
Indemnitee and his heirs, executors and administrators.
Section 13. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any Section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any Section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed to as to give effect to the intent manifested
thereby.
Section 14. EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF
EXPENSES. Notwithstanding any other provision of this Agreement, Indemnitee
shall not be entitled to indemnification or advancement of Expenses under this
Agreement with respect to any Proceeding brought by Indemnitee, or any claim
therein prior to a Change in Control, unless the bringing of such Proceeding or
making of such claim shall have been approved by the Board of Directors.
Section 15. IDENTICAL COUNTERPARTS. This agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute one and the same Agreement.
Only one such counterpart signed by the party against whom enforceability is
sought needs to be produced to evidence the existence of this Agreement.
Section 16. HEADINGS. The headings of the
8
paragraphs of this Agreement re inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
thereof.
Section 17. DEFINITIONS. (a)The phrase "Change of Control," as used in this
Agreement, shall mean i) an acquisition of the Company by means of a merger or
consolidation or purchase of substantially all of its assets if and when
incident thereto (A) the composition of the Board of Directors of the Company
(the "Board") or its successor changes so that a majority of the Board is not
comprised of individuals who were members of the board immediately prior to such
merger, consolidation or purchase of assets or (B) the stockholders of the
Company acquire a right to receive, in exchange for or upon surrender a majority
of their stock, cash or other securities or a combination of the two; and/or ii)
the acquisition by a person (as that term is hereafter defined) of the voting
rights with respect to 25 percent or more of the outstanding Common Stock of the
Company if such person was not an officer of director of the Company on the date
of this Agreement; and/or iii) the election or appointment to the Board of any
director or directors whose appointment or election or nomination for election
was not approved by a vote of at least a majority of the directors then still in
office who were either directors on the date hereof or whose election,
appointment or nomination for election was previously so approved.
(b) "Corporate Status" describes the status of a person who is or was
a director, officer, employee or agent of the Company or of any other
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise which such person is or was serving at the request of the Company.
(c) "Disinterested Director" means a director of the Company who is
not and was not a party to the Proceeding in respect of which indemnification is
sought by Indemnitee.
(d) "Effective Date" means March 10, 1995.
(e) "Expenses" shall include all reasonable attorney's fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and binding costs, telephone charges,
postage, delivery service fees, and all other disbursements or expenses of the
types customarily incurred in connection with prosecuting, defending, preparing
to prosecute or defend, investigating, or being or preparing to be a witness in
a Proceeding.
9
(f) "Independent Counsel" means a law firm, or a member of a law firm,
that is experienced in matters of corporation law and neither presently is, nor
in the past five years has been, retained to represent: (i) the Company or
Indemnitee in any matter material to either such party, or (ii) any other party
to the Proceeding giving rise to a claim for indemnification hereunder.
Notwithstanding the foregoing, the term "Independent Counsel" shall not include
any person who, under the applicable standards of professional conduct then
prevailing, would have a conflict of interest in representing either the Company
or Indemnitee in an action to determine Indemnitee's rights under this
Agreement.
(g) "Proceeding" includes any action, suite, arbitration, alternate
dispute resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative, or investigative, except
one (i) initiated by an Indemnitee pursuant to Section 10 of this Agreement to
enforce his rights under this Agreement or (ii) pending on or before the
Effective Date.
Section 18. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Section 19. NOTICE BY INDEMNITEE. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
Section 20. NOTICES. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid, on the third business day
after the date on which it is so mailed:
(a) If to Indemnitee, to:
Xxxxxxxxxxx X. Xxxxxxxxxxx
0000 Xxxxxxxxxx Xxxxx
Xxxxxxx-Xxxxx, XX 00000
10
(b) If to the Company to:
Xxxx X. Xxxxxxxx
General Counsel and Secretary
Lydall, Inc.
X.X. Xxx 000
Xxx Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000-0000
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
Section 21. GOVERNING LAW. The parties agree that this Agreement shall
be governed by, and construed and enforced in accordance with, the laws of the
State of Delaware.
Section 22. MISCELLANEOUS. Use of the masculine pronoun shall be
deemed to include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first written.
On behalf of the Board of Directors
ATTEST: LYDALL, INC.
By By
-------------------------------- ---------------------------------
Xxxxx X. Xxxxxxx
INDEMNITEE
-----------------------------------
Xxxxxxxxxxx X. Xxxxxxxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
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