EXHIBIT 10.3
EXECUTIVE SEVERANCE AGREEMENT
Agreement made effective March 9, 1995, by and between NL INDUSTRIES,
INC., a New Jersey corporation (hereinafter called the "Company"), and Xxxxxxxx
X. Xxxxxx (hereinafter called the "Executive").
Recitals
A. The Company considers it in the best interests of the Company and
its stockholders that its key management personnel be encouraged to
remain with the Company and to continue to devote their efforts to
the Company's business.
B. Executive is a key executive of the Company.
C. The Company recognizes that Executive's contribution to the growth
and success of the Company has been substantial.
NOW, THEREFORE, to assure the Company that it will have the continued
services of Executive and the availability of Executive's advice and counsel and
to induce Executive to remain in the employ of the Company, and for other good
and valuable consideration, the Company and Executive agree as follows:
1. Termination.
a. General. This Agreement is not an employment contract nor does
it in any way alter the status of Executive as an at-will
employee of the Company serving at the pleasure of the
Company. Executive's employment with the Company may be
terminated without notice (except as required by Section 2
hereof) at any time, for any reason (i) by the Company's Chief
Executive Officer or (ii) by Executive.
b. Termination by the Company. Executive shall be entitled to the
severance benefits set forth in Sections 3 and 4 upon
termination of Executive's employment by the Company unless
such termination is for cause (as defined below). Executive's
termination of employment with the Company by virtue of death,
disability (as defined below), or retirement (as defined
below) shall not be considered as a termination of Executive
by the Company. For purposes of this Agreement, "cause" shall
mean (i) Executive's conviction of any criminal violation
involving dishonesty, fraud or breach of trust or any felony
or (ii) Executive's willful engagement in gross misconduct in
the performance of his duties that materially and adversely
affects the financial condition of the Company. The Executive
shall be deemed to have a "disability" if, by reason of
physical or mental incapacity, Executive becomes unable to
perform his normal duties for more than 180 days in the
aggregate (excluding infrequent and temporary absence due to
ordinary transitory illness) during any 12-month period.
Executive shall be deemed to have "retired" upon Executive
1
reaching the age of 65; provided that Executive is no longer
employed by the Company.
c. Termination by the Employee. Executive shall not be entitled
to the severance benefits set forth in Sections 3 and 4 of
this Agreement upon termination of Executive's employment with
the Company by Executive unless such termination is for good
reason. For purposes of this Agreement, "good reason" shall
mean the occurrence of any one of the following events without
Executive's consent:
(i) the assignment of Executive to any duties substantially
inconsistent with his position, duties, responsibilities
or status with the Company immediately prior to such
assignment, or a substantial reduction of the duties or
responsibilities, as compared with the duties or
responsibilities immediately prior to such reduction;
(ii) a reduction by the Company in the amount of Executive's
annual base salary as in effect as of the date of this
Agreement or as the same may be increased from time to
time, except for across-the-board salary reductions
similarly affecting all executives of the Company;
(iii) the Company repudiates this Agreement or fails to obtain
a satisfactory agreement from any successor to assume
and agree to perform this Agreement, as contemplated by
Section 9.a. hereof; or
(iv) the Company modifies either the proportion of
Executive's annual bonus that is based upon the
Company's financial performance for the preceding year
or the percentage of Executive's annual bonus
attributable to the performance levels set forth by the
Company's Employee Incentive Bonus Plan, except for
across-the-board modifications similarly affecting all
executives of the Company.
2. Notice of Certain Terminations. In the event that either (i) the
Company shall terminate Executive for cause or (ii) Executive shall
resign for good reason, then any such termination shall be
communicated by written notice to the other party hereto. Any such
notice shall specify (a) the effective date of termination, which
shall not be more than 30 days after the date the notice is
delivered (the "Termination Date"); and (b) in reasonable detail the
facts and circumstances underlying a determination that the
termination is for cause or for good reason, as the case may be. If
within 15 days after any notice is given, the party receiving such
notice notifies the other party that a good faith dispute exists
concerning the characterization of the termination, the Termination
Date shall be the date on which such dispute is finally resolved
either by written agreement of the parties or by a final judicial
2
determination. Notwithstanding the pendency of any such dispute, the
Company shall continue Executive and his dependents as participants
in all medical, dental and any other health insurance and similar
benefit plans of the Company in which he or they were participating
when the notice giving rise to the dispute was given, until the
dispute is finally resolved. Benefits provided under this Section 2
are in addition to all other amounts due under this Agreement and
shall not be offset against, or reduce any other amounts due under,
this Agreement.
3. Termination Benefits. Subject to the conditions set forth in Section
1 and Section 6.b. hereof, the Company shall make the following
payments (subject to any applicable payroll or other taxes required
to be withheld) to Executive within 15 days of the Termination Date.
a. Base Salary and Bonus. The greater of (i) two times
Executive's effective annual base salary at the Termination
Date plus two times Executive's level "B" target bonus under
the Company's Employee Incentive Bonus Plan as in effect at
the Termination Date, it being understood that such level
shall in any event be a minimum of 100% of Executive's
effective annual base salary (the "Level B Target Bonus"), or
(ii) two times Executive's effective annual base salary plus
Executive's actual bonus for the two calendar year period
immediately prior to the Termination Date.
b. Accrued Amounts. (i) Accrued but unpaid salary and bonus
through the Termination Date and (ii) unpaid salary with
respect to any vacation days accrued but not taken as of the
Termination Date. For purposes of this Agreement only, bonus
payments shall accrue and be payable to Executive in an amount
equal to the pro rata portion of the Level B Target Bonus
calculated on a per diem basis.
4. Other Benefits. Subject to the conditions set forth in Sections 1
and 6.b. hereof, the following benefits (subject to any applicable
payroll or other taxes required to be withheld) shall be paid or
provided to Executive within 15 days of the Termination Date.
a. Insurance Benefits. Medical, dental and any other health
insurance, life insurance, accidental death and dismemberment
insurance and disability protection no less favorable to
Executive and his dependents covered thereby (including with
respect to any costs borne by Executive) than the greater of
the coverage provided on the date of execution of this
Agreement or the coverage provided by Company immediately
prior to the Termination Date for the period beginning on the
Termination Date and ending on the first to occur of (i) the
date of Executive's employment (including self-employment) in
a position providing substantially the same or greater
benefits as the Executive's assignment with the Company on the
3
Termination Date or (ii) the second anniversary of the
Termination Date.
b. Stock Awards. The Company shall pay to Executive the following
amounts in cash, or in the Company's common stock (valued at
the Fair Market Value, as defined below, on the day before the
Termination Date), or in any combination of cash and the
Company's common stock as determined by the Company in its
discretion.
(i) In respect of each option to purchase the Company's
common stock and any related stock appreciation right
("SAR") granted to Executive under the 1985 Long Term
Performance Incentive Plan of NL Industries, Inc., the
1989 Long Term Performance Incentive Plan of NL
Industries, Inc. or any predecessor or successor plan
(collectively, the "Performance Plan") that is
outstanding (and regardless of whether then vested) on
the day before the Termination Date (and that has not
been exercised) an amount equal to the excess, if any,
of the Fair Market Value per share of the Company's
common stock on the day before the Termination Date over
the exercise price, multiplied by the total number of
shares of the Company's common stock subject to such
option. Such payment shall be in consideration of a
cancellation of any rights which Executive may have in
such stock options and SARs.
(ii) In respect of each SAR unrelated to any options to
purchase common stock awarded to Executive under the
Performance Plan that is outstanding (and regardless of
whether then vested) on the day before the Termination
Date, an amount equal to an amount by which the Fair
Market Value on the day before the Termination Date of
each share of the Company's common stock subject to the
SAR exceeds the Fair Market Value of each such share on
the date the SAR was awarded, multiplied by the number
of shares of the Company's common stock subject to such
SAR. Such payment shall be in consideration of a
cancellation of any rights that Executive may have in
said SARs.
(iii) In respect of each restricted stock grant to Executive
under the Performance Plan outstanding (and regardless
of whether then vested) on the day before the
Termination Date (regardless of the performance of the
Company's common stock since the grant date), an amount
equal to the Fair Market Value of each share of the
Company's common stock subject to the restricted stock
grant, multiplied by the number of shares of the
Company's common stock subject to such stock grant. Such
payment shall be in consideration of a cancellation
4
of any rights which Executive may have in said stock
grants.
For purposes of this Section 4, "Fair Market Value" shall mean
the average of the highest and lowest sales prices of the
Company's common stock as reported on the consolidated tape of
the New York Stock Exchange on any relevant date for
valuation, or, if there be no such sale, the average of the
highest and lowest sales prices of each common stock as so
reported on the nearest preceding date upon which such sales
took place. In the event the shares of the Company's common
stock are no longer listed on the New York Stock Exchange, the
"Fair Market Value" of such shares shall be the average of the
representative bid and asked prices quoted in the NASDAQ
System as of 4:OO p.m., New York time, on the last trading day
prior to the Termination Date, or, if on any day such security
is not quoted in the NASDAQ System, the average of the highest
bid and lowest asked prices in the domestic over-the-counter
market as last reported prior to the Termination Date by the
National Quotation Bureau, Incorporated, or any similar
successor organization. If at any time the Company's Common
Stock is not listed on any domestic security exchange or
quoted in the NASDAQ System or the domestic over-the-counter
market, "Fair Market Value" shall be determined in good faith
by the Company's Board of Directors in its discretion.
c. Savings Plan Benefits. The Company shall pay to Executive an
amount in cash equal to the unvested portion of the Company's
contributions to Executive's account under the Company's
Savings Plan for its employees or other plans "qualified"
underss.401(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), to which the Company makes contributions
to employee accounts in effect as of the Termination Date (the
"Savings Plan"), plus an amount in cash equal to two times an
amount determined by multiplying the greater of Section 3.a(i)
and 3.a(ii) of this Agreement by the Company's additional
annual retirement contribution percentage determined by the
Company pursuant to the Savings Plan as in effect on the date
of execution of this Agreement or the Termination Date,
whichever is greater.
In addition, Executive shall be paid in cash an amount
equal to the Company's matching contributions determined
pursuant to the Savings Plan as in effect on the date of
execution of this Agreement or the Termination Date whichever
is greater which would have accrued to the benefit of
Executive had he continued his participation in, and elected
to make the maximum contributions under, the Savings Plan for
the period of 24 months from the Termination Date or until
December 31 of the year in which Executive would reach age 65,
whichever is the shorter period. The benefits received by
5
Executive pursuant to this Section 4.c. are in addition to
those then having vested prior to the Termination Date in
accordance with the terms of the Savings Plan. Awards in
shares of common stock of the Company or any predecessor or
successor corporation shall be valued for purposes of this
section 4.c. at their Fair Market Value, as defined above.
d. Supplemental Retirement Plans. The Company shall pay to
Executive an amount in cash equal to the vested and unvested
portions of the Company's contributions to the Executive's
account (and all accretions thereto in lieu of interest) under
the Company's Supplemental Retirement Plan, in effect as of
the Termination Date.
5. Retirement Plan. Following retirement and attainment of ages
specified in the Retirement Plan of NL Industries, Inc. (the "NL
Pension Plan"), Executive shall be entitled to all pension benefits
which are available to him under the NL Pension Plan in effect on
the Termination Date.
6. Benefits Valuation and Limitation.
a. Promptly following any Termination Date, and as of that date,
the Company will notify Executive of the itemized and
aggregate cash value of the payments and benefits, as
determined under Section 280G of the Code, received or to be
received by Executive in connection with the termination of
his employment (whether payable pursuant to the terms of this
Agreement or otherwise). At the same time, the Company shall
advise Executive of the portion of such payments or benefits
which constitute parachute payments within the meaning of the
Code and which may subject Executive to the payment of excise
taxes pursuant to Section 4999 and the expected amount of such
taxes (such payments or benefits being hereinafter referred to
as "Parachute Payments").
b. Notwithstanding the provisions of Sections 3 and 4 hereof, if
all or any portion of the payments or benefits provided under
Sections 3 or 4 either alone or together with other payments
or benefits which Executive has received or is then entitled
to receive from the Company and any of its subsidiaries would
constitute Parachute Payments, such payments or benefits
provided to Executive under Sections 3 and 4 shall be reduced
to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code;
but only if, by reason of such reduction, Executive's net
after-tax benefit shall exceed the net after-tax benefit if
such reduction were not made. "Net after-tax benefit" for
purposes of this Section 6.b. shall mean the sum of (i) the
total amount payable to Executive under Sections 3 and 4
hereof, plus (ii) all other payments and benefits which
Executive has received or is then entitled to receive from the
6
Company and any of its subsidiaries that would constitute a
Parachute Payment, less (iii) the amount of federal income
taxes payable with respect to the payment and benefits
described in (i) and (ii) above calculated at the maximum
marginal income tax rate for each year in which such payments
and benefits shall be paid to Executive (based upon the rate
in effect for such year as set forth in the Code at the
Termination Date), less (iv) the amount of excise taxes
imposed with respect to the payments and benefits described in
(i) and (ii) above by Section 4999 of the Code.
For purposes of this Section 6.b., Executive's base
amount, the present value of the Parachute Payments, the
amount of the excise tax and all other appropriate matters
shall be determined by the Company's independent auditors in
accordance with the principles of Section 280G of the Code and
based upon the advice of tax counsel selected by the Company,
which tax counsel shall be reasonably satisfactory to
Executive.
7. Mitigation. Executive is not required to seek other employment or
otherwise mitigate the amount of any payments to be made by the
Company pursuant to this Agreement. Except as otherwise provided in
Section 4.a. of this Agreement, the amount of any payments or other
benefits provided for in this Agreement shall not be reduced by any
compensation earned by Executive as the result of employment by
another employer after the Termination Date, or otherwise.
8. Continuing Obligations. Executive hereby agrees that all documents,
records, techniques, business secrets and other information which
have come and will come into his possession from time to time during
his employment by the Company shall be deemed to be confidential and
proprietary to the Company, and Executive further agrees to retain
in confidence any confidential information known to him concerning
the Company and its subsidiaries and their respective businesses so
long as such information is not publicly disclosed.
9. Successors.
a. The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business and/or assets of the
Company, by Agreement in form and substance reasonably
satisfactory to Executive to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no
such succession had taken place. For purposes of this
Agreement, any determination as to whether the Company has
engaged in a transaction involving all or substantially all of
the business and/or assets of the Company shall be made by the
Board of Directors in its discretion, which determination
shall be final and binding on the parties.
7
For purposes of this Agreement, "Company" shall mean NL
Industries, Inc. and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this
Agreement or which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law or
otherwise.
b. This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives,
executors, administrators, successors, heirs, distributees,
devisees and legatees. If Executive should die while any
amounts are payable to him hereunder, all such amounts, unless
otherwise provided herein, shall be paid in accordance with
the terms of this Agreement to Executive's devises, legatee or
other designee or, if there be no such designee, to
Executive's estate.
10. Notices. For the purposes of this Agreement, notices and all other
communications provided for herein shall be in writing and shall be
deemed to have been duly given when actually delivered or mailed by
United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If to Executive:
Xx. Xxxxxxxx X. Xxxxxx
If to the Company:
NL Industries, Inc.
00000 Xxxxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
ATTENTION: General Counsel
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
11. Governing Law. THE VALIDITY, INTERPRETATION, CONSTRUCTION AND
PERFORMANCE OF THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
LAWS, AND NOT THE CONFLICTS LAWS, OF THE STATE OF TEXAS.
12. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge
is agreed to in writing signed by Executive and a duly authorized
officer of the Company. 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
8
provisions or conditions at the same or 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 set forth expressly in this Agreement.
13. 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.
14. Assignability. This Agreement is personal in nature and neither of
the parties hereto shall, without the written consent of the other,
assign or transfer this Agreement or any rights or obligations
hereunder, as provided in Section 9. Without limiting the foregoing,
Executive's right to receive payments hereunder shall not be
assignable or transferable, whether by pledge, creation of a
security interest or otherwise, other than a transfer by his will or
trust or the laws of descent or distribution, and in the event of
any attempted assignment or transfer contrary to this paragraph the
Company shall have no liability to pay any amount so attempted to be
assigned or transferred.
15. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through December 31 of 1995; provided,
however, that beginning January 1, 1996 and each January 1
thereafter, the term of this Agreement shall automatically be
extended for one additional year unless the Company and Executive
have mutually agreed in writing to terminate this Agreement.
16. Enforcement Costs. In the event that either party files an action
against the other in any court to collect, enforce, protect or
preserve its rights under this Agreement, the prevailing party in
such action shall be entitled to receive reimbursement from such
other party of all reasonable costs and expenses, including
attorneys' fees, which such prevailing party incurred in prosecuting
or defending such action, as the case may be.
17. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original but all of which
taken together will constitute one and the same instrument.
18. Unsecured Obligation. All rights of Executive and Executive's spouse
or other beneficiaries under this Agreement shall at all times be
entirely unfunded and no provision shall at any time be made with
respect to segregating assets of the Company or payment of any
amounts due hereunder. Neither Executive nor his spouse or other
beneficiary shall have any interest in or rights against any
specific assets of the Company, and Executive and his spouse or
other beneficiary shall have only the rights of a general unsecured
creditor of the Company.
* * * * *
9
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered on this ___ day of March, 1996.
NL INDUSTRIES, INC.
By: /s/ J. Xxxxxx Xxxxxx
Name: J. Xxxxxx Xxxxxx
Its: President and CEO
/s/Xxxxxxxx X. Xxxxxx
10
