EXHIBIT 10(k)
AMENDED AND RESTATED EMPLOYMENT CONTINUATION AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT CONTINUATION AGREEMENT (this
"Agreement"), is made and entered into on this 7th day of February, 1996, by TRW
INC., an Ohio corporation (the "Company"), and _________________ (the
"Executive").
WITNESSETH:
WHEREAS, the Executive presently is the ____________________ of the Company
and has made and is expected to continue to make major contributions to the
profitability, growth and financial strength of the Company;
WHEREAS, the Company recognizes that, as is the case with many publicly-
held companies, the possibility of a Change in Control (as that term is
hereafter defined) exists;
WHEREAS, the Company wishes to assure itself of both present and future
continuity of management in the event of any Change in Control;
WHEREAS, the Company wishes to ensure that certain of its executives are
not practically disabled from discharging their duties upon a Change in Control;
WHEREAS, the Company and the Executive are parties to an Employment
Continuation Agreement (the "Prior Agreement") providing certain benefits in the
event of a Change in Control and the Company and the Executive desire to amend
and restate the Prior Agreement; and
WHEREAS, although effective and binding as of the date hereof, this
Agreement shall become operative only upon the occurrence of a Change in
Control;
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Operation of the Agreement.
(a) This Agreement shall be effective and binding immediately upon
its execution, but anything in this Agreement to the contrary notwithstanding,
this Agreement shall not be operative unless and until there shall have occurred
a Change in Control. For purposes of this Agreement, a "Change in Control"
shall have occurred if at any time during the Term (as that word is hereafter
defined) any of the following events shall occur:
(i) The Company is merged or consolidated or reorganized
into or with another corporation or other legal person and as a result of
such merger, consolidation or reorganization less than 51% of the combined
voting power of the then-outstanding securities of such corporation or
person immediately after such transaction is held in the aggregate by the
holders of then-outstanding securities entitled to vote generally in the
election of Directors ("Voting Stock") of the Company immediately prior to
such transaction;
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(ii) The Company sells or otherwise transfers all or
substantially all of its assets to any other corporation or other legal
person if less than 51% of the combined voting power of the then-
outstanding Voting Stock of such corporation or person immediately after
such sale or transfer is held in the aggregate by the holders of Voting
Stock of the Company immediately prior to such sale or transfer;
(iii) There is a report filed on Schedule 13D or Schedule
14D-1 (or any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"),
disclosing that any person (as the term "person" is used in Section
13(d)(3) or Section 14(d)(2) of the Exchange Act) has become the beneficial
owner (as the term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange Act) of
securities representing 20% or more of the then-outstanding Voting Stock of
the Company;
(iv) The Company shall file a report or proxy statement with
the Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Item 1 of Form 8-K thereunder or Item 6(e) of
Schedule 14A thereunder (or any successor schedule, form or report or item
therein) that a change in control of the Company has or may have occurred
or will or may occur in the future pursuant to any then-existing contract
or transaction; or
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(v) During any period of two consecutive years, individuals
who at the beginning of any such period constitute the Directors of
the Company cease for any reason to constitute at least a majority
thereof unless the election, or the nomination for election by the
Company's shareholders, of each Director of the Company first elected
during such period was approved by a vote of at least two-thirds of
the Directors of the Company then still in office who were Directors
of the Company at the beginning of any such period.
Notwithstanding the foregoing provisions of Section 1(a)(iii) and 1(a)(iv)
hereof, a Change in Control shall not be deemed to have occurred for purposes of
this Agreement solely because (A) the Company, (B) an entity in which the
Company directly or indirectly beneficially owns more than 50% of the voting
securities or (C) any Company-sponsored employee stock ownership plan or any
other employee benefit plan of the Company, or any entity holding shares of
Voting Stock for or pursuant to the terms of any such plan, either files or
becomes obligated to file a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Item 1 of Form 8-K or Item 6(e) of Schedule 14A
(or any successor schedule, form or report or item therein) under the Exchange
Act, disclosing beneficial ownership by it of shares of Voting Stock of the
Company, whether in excess of 20% or otherwise, or because the Company reports
that a change in control of the Company has or may have occurred or will or may
occur in the future by reason of such beneficial ownership by the entities
described in clauses (A), (B) and (C) of this paragraph.
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(b) Upon the occurrence of a Change in Control at any time during
the Term, this Agreement shall become immediately operative.
(c) The period during which this Agreement shall be in effect (the
"Term") shall commence as of the date hereof and shall expire as of the later of
(i) the close of business on June 1, 2001 or (ii) the expiration of the Period
of Employment (as that term is hereafter defined); provided, however, that
(i) commencing on June 1, 1997 and each June 1 thereafter, the Term of this
Agreement shall automatically be extended for an additional year unless, not
later than January 1 of each such year, the Company or the Executive shall have
given notice that it or he, as the case may be, does not wish to have the Term
extended, and (ii) subject to Section 14 hereof, if, prior to a Change in
Control, the Executive ceases for any reason to be an elected officer or
assistant officer of the Company, thereupon the Term shall be deemed to have
expired and this Agreement shall immediately terminate and have no further
effect.
2. Employment; Period of Employment.
(a) Subject to the terms and conditions of this Agreement, upon the
occurrence of a Change in Control, the Company shall continue the Executive in
its employ and the Executive shall remain in the employ of the Company for the
period set forth in Section 2(b) below (the "Period of Employment"), with the
duties and responsibilities set forth in Schedule A hereto and any additional
duties and responsibilities that he may have immediately prior to the Change in
Control or to which the Company and the Executive may hereafter mutually agree
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in writing. So long as the Executive remains in the employ of the Company, the
Executive shall devote substantially all of his time during normal business
hours (subject to vacations, sick leave and other absences in accordance with
the policies of the Company as in effect for executives immediately prior to the
Change in Control) to the business and affairs of the Company, but nothing in
this Agreement shall preclude the Executive from devoting reasonable periods of
time during normal business hours to (i) serving as a director, trustee or
member of or participant in any organization or business so long as such
activity would not constitute Competitive Activity (as that term is hereafter
defined), (ii) engaging in charitable and community activities or (iii) managing
his personal affairs.
(b) The Period of Employment shall commence on the date of the
occurrence of a Change in Control and, subject only to the provisions of Section
4 hereof, shall continue until the earlier of (i) the Executive's death;
(ii) the Executive's attainment of age 65; or (iii) the expiration of the third
anniversary of the occurrence of the Change in Control.
3. Compensation During Period of Employment.
(a) Upon the occurrence of a Change in Control, the Executive shall
receive during the Period of Employment (i) annual base salary at a rate not
less than the Executive's annual fixed or base compensation as in effect
immediately prior to a Change in Control or such higher rate as may be
determined from time to time by the Company, payable monthly or otherwise as in
effect immediately prior to a Change in Control ("Base Pay") and (ii) an annual
amount equal to not
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less than the highest annual aggregate bonuses or incentive payments of
compensation in addition to the amounts referred to in clause (i) above made or
to be made (regardless of when, or in what form, such compensation is paid) for
services rendered in any calendar year during the three calendar years
immediately preceding the year in which a Change in Control occurred pursuant to
any bonus, incentive, profit-sharing or similar policy, plan, program or
arrangement of the Company or any successor thereto ("Incentive Pay"); provided,
however, that nothing herein shall preclude a change in the mix of Base Pay and
Incentive Pay by an increase in the relative amount of Base Pay, provided that
the aggregate compensation received by the Executive in any one year is not
reduced and provided, further, that in no event shall any increase in the
Executive's aggregate compensation or any portion thereof in any way diminish
any other obligation of the Company under this Agreement. For the purposes of
this Agreement, any compensation the Executive elected to defer under any
policy, plan, program or arrangement shall be included in the determination of
Base Pay and/or Incentive Pay, as applicable.
(b) For his service pursuant to Section 2(a) hereof, during the
Period of Employment the Executive shall be a full participant in any and all
employee retirement income and welfare benefit policies, plans, programs or
arrangements in which executives of the Company participate immediately prior to
the Change in Control or during the Period of Employment, including without
limitation the TRW Salaried Pension Plan ("Retirement Plan"), the TRW
Nonqualified Supplementary Retirement Income Plan ("SRIP"), the TRW Benefits
Equalization Plan
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("BEP"), the TRW Employee Stock Ownership and Stock Savings Plan ("ESOSSP"),
the TRW Long-Term Disability Benefits Plan (the "Disability Plan"), the TRW
Deferred Compensation Plan (the "DCP") and any executive automobile, stock
option, stock purchase, stock appreciation, performance improvement, long-term
incentive, medical or health, life insurance, vacation, disability, salary
continuation and any other retirement income or welfare benefit policy,
plan, program or arrangement or any equivalent successor policy, plan, program
or arrangement that may now exist or be adopted hereafter by the Company or any
successor thereto providing benefits and other perquisites at least as great as
are payable thereunder prior to a Change in Control (collectively, "Employee
Benefits"). If and to the extent that any such Employee Benefits shall not or
cannot be paid or provided under any policy, plan, program or arrangement of the
Company as a result of the amendment or termination thereof, the Company shall
itself pay or provide therefor. Nothing in this Agreement shall preclude
improvement of reward opportunities in any Employee Benefits, provided that no
such improvement shall in any way diminish any other obligation of the Company
under this Agreement.
4. Termination Following a Change in Control.
(a) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Company during the Period of Employment only
upon the occurrence thereafter of one or more of the following events:
(i) If the Executive shall become permanently disabled and
begins actually to receive disability benefits pursuant
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to the Disability Plan or any successor plan adopted prior to a Change in
Control; or
(ii) For "Cause", which for purposes of this Agreement shall
mean that, prior to any termination pursuant to Section 4(b) hereof, the
Executive shall have committed:
(A) an act of fraud, embezzlement or theft in
connection with his duties or in the course of his employment with the
Company;
(B) intentional wrongful damage to the property of the
Company;
(C) intentional wrongful disclosure of secret
processes or confidential information of the Company; or
(D) intentional wrongful engagement in any Competitive
Activity (as that term is hereafter defined) while the Executive
remains in the employ of the Company;
and any such act shall be determined by the Directors of the Company as
hereafter provided to have been materially harmful to the Company. For
purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be deemed for "Cause" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that his
action or omission was in the best interest of the Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters of the Direc-
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tors then in office at a meeting of the Directors called and held for such
purpose (after reasonable notice to the Executive and an opportunity for
the Executive, together with his counsel, to be heard before the
Directors), finding that, in the good faith opinion of the Directors, the
Executive had committed an act set forth above in this Section 4(a)(ii) and
specifying the particulars thereof in detail. Nothing herein shall limit
the right of the Executive or his beneficiaries to contest the validity or
propriety of any such determination.
(b) In the event of the occurrence of a Change in Control, this
Agreement may be terminated by the Executive with the right to receive benefits
under Section 5 hereof and, if applicable, Section 6 hereof, only upon the
occurrence thereafter of one or more of the following events:
(i) Any termination by the Company of the employment of the
Executive during the Period of Employment, unless (x) Cause for termination
shall exist or (y) as a result of the death of the Executive or (z) by
reason of the Executive's disability and the actual receipt of disability
benefits as provided in Section 4(a)(i) hereof; or
(ii) Termination by the Executive of his employment with the
Company during the Period of Employment and upon the occurrence of any of
the following events:
(A) Failure to elect, reelect or otherwise maintain
the Executive in the office or position in the Company which the
Executive held immediately prior to a
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Change in Control, or the removal of the Executive as a Director of
the Company (or any successor thereof) if the Executive shall have
been a Director of the Company immediately prior to the Change in
Control;
(B) A significant adverse change in the nature or
scope of the authorities, powers, functions, responsibilities or
duties in respect of the Company which the Executive had immediately
prior to the Change in Control, a reduction in the aggregate of the
Executive's Base Pay and Incentive Pay received from the Company, or
the termination of the Executive's rights to Employee Benefits to
which he was entitled immediately prior to the Change in Control or a
reduction in scope or value thereof without the prior written consent
of the Executive, any of which is not remedied within 10 calendar days
after receipt by the Company of written notice from the Executive of
such change, reduction or termination, as the case may be;
(C) A determination by the Executive (which
determination will be conclusive and binding upon the parties hereto
provided it has been made in good faith and in all events will be
presumed to have been made in good faith unless otherwise shown by the
Company by clear and convincing evidence) that a change in
circumstances has occurred significantly affecting his position,
including without limitation a change in the scope of the business or
other activities for which he was responsible or a substantial
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reduction in any of the resources available to carry out any of the
authorities, powers, functions, responsibilities or duties that he had
immediately prior to the Change in Control, has been rendered
substantially unable to carry out, has been substantially hindered in
the performance of or has suffered a substantial reduction in any of
such authorities, powers, functions, responsibilities or duties, which
situation is not remedied within 10 calendar days after receipt by the
Company of written notice from the Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or transfer of all or a
significant portion of its business and/or assets unless the successor
or successors (by liquidation, merger, consolidation, reorganization
or otherwise) to which all or a significant portion of its business
and/or assets have been transferred (directly or by operation of law)
shall have assumed all duties and obligations of the Company under
this Agreement pursuant to Section 8 hereof;
(E) The relocation of the Company's principal
executive offices or the requirement by the Company that the Executive
change his principal location of work to any location which is in
excess of 35 miles from his principal location immediately prior to
the Change in Control or travel away from his office in the course of
discharging his responsibilities or duties hereunder more than 20
consecutive cal-
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endar days or an aggregate of more than 30 calendar days in any
consecutive 90 calendar-day period without in either case his prior
written consent; or
(F) Without limiting the generality or effect of the
foregoing, any material breach of this Agreement by the Company.
The Executive's continued employment shall constitute consent to, and a waiver
of rights with respect to, any event described in this Section 4(b)(ii) unless
the Executive terminates his employment with the Company within 120 days after
the Executive has actual knowledge of the occurrence of an event described in
this Section 4(b)(ii) that is not remedied as provided herein. The parties
agree that any consent to or waiver of any such event shall not be deemed to
constitute a consent to or waiver of any other circumstance constituting an
event described in this Section 4(b)(ii).
(c) Notwithstanding anything contained in this Agreement to the
contrary, in the event of a Change in Control, the Executive may terminate
employment with the Company for any reason, or without reason, during the 60-day
period immediately following the first anniversary of the first occurrence of a
Change in Control, with the right to severance compensation as provided in
Section 5 hereof and, if applicable, Section 6 hereof.
(d) A termination by the Company pursuant to Section 4(a) hereof or
by the Executive pursuant to Section 4(b) or Section 4(c) hereof shall not
affect any rights which the Executive may have pursuant to any other agreement,
policy, plan, program or
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arrangement of the Company providing Employee Benefits, which rights shall be
governed by the terms thereof; provided, however, that if the Executive shall
have received or shall be receiving benefits under Section 5 hereof and, if
applicable, Section 6 hereof, the Executive shall not be entitled to receive
benefits under any other policy, plan, program or arrangement of the Company
providing severance compensation to which the Executive would otherwise be
entitled. If this Agreement or the employment of the Executive is terminated
under circumstances in which the Executive is not entitled to any payments under
Sections 3 or 5 hereof, the Executive shall have no further obligation or
liability to the Company hereunder with respect to his prior or any future
employment by the Company.
(e) The Company shall provide the Executive with timely notice of
any of the events referred to in Section 4(b)(ii)(D) hereof so that a
determination can be made as to the assumption of duties and obligations by any
successor or successors.
5. Severance Compensation.
(a) If, following the occurrence of a Change in Control, the
Company shall terminate the Executive's employment other than pursuant to
Section 4(a) hereof, or if the Executive shall terminate his employment pursuant
to Section 4(b) or Section 4(c) hereof:
(i) The Company shall pay or cause to be paid to the
Executive, within five business days after the effective date of any such
termination (the "Termination Date"), in lieu of any further payments to
the Executive for the portion of the Period of Employment subsequent to the
Termination Date, but without
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affecting the rights of the Executive referred to in Section 5(b) hereof
and the Executive's rights at law or in equity (other than rights to
damages for termination of his employment or this Agreement), a lump sum
severance payment (the "Severance Payment") equal to the present value
(using a discount rate equal to the applicable interest rate promulgated by
the Internal Revenue Service "IRS" under Section 417(e)(3) of the Code for
the third month preceding the month in which the Termination Date occurs,
and if the IRS ceases to promulgate such interest rates, the last such
interest rate so promulgated) of the sum of (A) the aggregate Base Pay (at
the highest rate in effect at any time during the Period of Employment or
immediately prior to the Change in Control) which the Executive would have
received pursuant to this Agreement for (x) each remaining year or fraction
thereof during the Period of Employment or (y) two years, whichever is the
longer period, had his employment with the Company continued for the longer
of such periods; plus (B) the aggregate Incentive Pay (based upon the
highest annual aggregate Incentive Pay that the Executive received with
respect to any calendar year during the three calendar years immediately
preceding the calendar year in which the Change in Control occurred or the
Incentive Pay that the Executive received with respect to the calendar year
preceding the calendar year in which the Termination Date occurs, whichever
is the larger amount) which the Executive would have received pursuant to
this Agreement with respect to (x) each remaining year or fraction thereof
during the Period of Employ-
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ment or (y) two years, whichever is the longer period, had his employment
with the Company continued for the longer of such periods; plus (C) the
cash value of all Employee Benefits, other than stock option, stock
purchase, stock appreciation or similar compensatory benefits (based upon
the highest annual aggregate rate that the Executive received Employee
Benefits with respect to any calendar year during the three calendar years
immediately preceding the calendar year in which the Change in Control
occurred or the Employee Benefits that the Executive received with respect
to the calendar year preceding the calendar year in which the Termination
Date occurs, whichever is the larger amount), which the Executive would
have received pursuant to this Agreement with respect to (x) each remaining
year or fraction thereof during the Period of Employment or (y) two years,
whichever is the longer period, had his employment with the Company
continued for the longer of such periods, other than Employee Benefits
providing Base Pay, Incentive Pay and the Employee Benefits to be provided
pursuant to Sections 5(a)(ii) and 5(a)(iv) hereof;
(ii) The Company shall pay or cause to be paid to the Executive,
within five business days after the Termination Date, a lump sum payment equal
to the sum of the following:
(A) The present value of the benefit that would be payable to the
Executive from the SRIP and the Defined Benefit Portion of the BEP (as such
term is used therein), commencing at the earliest time permissible under
the SRIP and the BEP, assuming,
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solely for the purposes of the SRIP and the BEP (but not for purposes of
the Retirement Plan), that (I) the SRIP and the BEP contained no vesting
requirements, (II) the Executive was credited with additional service with
the Company equal to the remaining Period of Employment or two years,
whichever is the longer period, (III) the Executive's age was increased an
amount equal to the remaining Period of Employment or two years, whichever
is the longer period, and (IV) the Executive's final average compensation
was determined by including the compensation that would have been paid to
the Executive for a period equal to the remaining Period of Employment or
two years, whichever is the longer period, had his employment with the
Company continued for the longer of such periods, if the Executive's annual
compensation for such period was the sum of the amounts described in
Sections 5(a)(i)(A) and 5(a)(i)(B), such present value to be determined
using the applicable mortality table promulgated by the IRS under
Section 417(e)(3) of the Code in effect on the Termination Date and the
applicable interest rate promulgated by the IRS under Section 417(e)(3) of
the Code for the third month preceding the month in which the Termination
Date occurs, and if the IRS ceases to promulgate such interest rates, the
last such interest rate so promulgated. The Executive hereby waives, in
consideration of, and subject to receipt of, the payment contemplated by
this Section 5(ii)(A), any payments under the provisions of the SRIP and
the Defined Benefit Portion of the BEP.
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(B) The amount credited to the Executive's Account (as such term is
defined in the BEP) under the defined contribution portion of the BEP. The
Executive hereby waives, in consideration of, and subject to receipt of,
the payment contemplated by this Section 5(ii)(B), any payments under the
provisions of the defined contribution portion of the BEP.
(C) The amount of TRW Matching Contributions (as such term is
defined in the ESOSSP) that would have been contributed to the ESOSSP on
behalf of the Executive for the remaining Period of Employment or two
years, whichever is the longer period, had his employment with the Company
continued for the longer of such periods, if (I) the Executive's employment
had not been terminated, (II) the Executive had received Base Pay and
Incentive Pay during such period at the rates or in the amounts described
in Section 5(a)(i) hereof, (III) the ESOSSP did not contain provisions
implementing the requirements of Sections 401(a)(4), 401(a)(17), 401(k),
401(m), 402(g), and 415 of the Code or any other provisions of the Code
limiting the amount of contributions that may be made to the ESOSSP by or
on behalf of the Executive and (IV) the Executive had elected to contribute
the maximum amount of Before-Tax Contributions (as such term is defined in
the ESOSSP) permitted to be contributed to the ESOSSP for such period.
(D) The amounts (including interest through the Termination Date)
credited to the Executive's Account (as such term is defined in the DCP).
The Executive acknowledges that the Execu-
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tive's receipt of the payment contemplated by this Section 5(ii)(D) shall
discharge the Company's obligations to the Executive under the DCP.
The Executive and the Company acknowledge that references in this Section
5(a)(ii) to the Retirement Plan, the ESOSSP, the BEP, the SRIP and the DCP shall
be deemed to be references to such plans as amended or restated from time to
time and to any similar plan of the Company that supplements or supersedes any
such plans; provided that any amendment following a Change in Control that
reduces benefits under the Retirement Plan, the ESOSSP, the BEP, the SRIP or the
DCP (or any similar plan of the Company that supplements or supersedes any of
such plans) in any way (including without limitation by reducing the rate of
benefit accruals or contribution levels under any of such plans, or by changing
the basis upon which actuarial equivalents are determined under any such plans)
shall be disregarded for purposes of this Section 5(a)(ii). In addition, the
Executive and the Company acknowledge that references in this Section 5 to any
Section of the Code shall be deemed to be references to such Section as amended
from time to time or to any successor thereto.
(iii) The Company shall pay all legal fees and expenses incurred by
the Executive as a result of such termination (including without limitation all
such fees and expenses, if any, incurred in seeking to obtain or enforce any
right or benefit provided by this Agreement in accordance with Section 17
hereof); and
(iv) The Company shall arrange to provide to the Executive, for the
remainder of the Period of Employment or two years,
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whichever is the longer period, with Employee Benefits that are welfare benefits
(and not stock option, stock purchase, stock appreciation or similar
compensatory benefits) which the Executive was receiving or entitled to receive
during the Period of Employment. If and to the extent that any such Employee
Benefits shall not or cannot be paid or provided under any policy, plan, program
or arrangement of the Company (i) solely due to the fact that the Executive is
no longer an officer or employee of the Company or did not continue as an
officer or employee of the Company during the remainder of the Period of
Employment or (ii) as a result of the amendment or termination of any such
Employee Benefit, the Company shall itself pay or provide for the payment of
such Employee Benefits to the Executive, his dependents and beneficiaries.
Without otherwise limiting the purposes or effect of Section 7 hereof, Employee
Benefits payable to the Executive (including his dependents and beneficiaries)
pursuant to this Section 5(a)(iii) by reason of any "welfare benefit plan" of
the Company (as the term "welfare benefit plan" is defined in Section 3(1) of
the Employee Retirement Income Security Act of 1974, as amended) shall be
reduced to the extent comparable welfare benefits are actually received by the
Executive (including his dependents and beneficiaries) from another employer
during such period, and any such benefits actually received by the Executive
shall be reported by the Executive to the Company.
(b) Any Incentive Pay that is payable to the Executive with respect
to a period that is less than a full calendar year (a "partial calendar year")
shall be prorated by multiplying (i) the Incentive Pay that would have been
payable to the Executive with respect to the
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entire calendar year had the Executive's employment with the Company continued
until the end of such year by (ii) a fraction, the numerator of which equals the
number of days in the partial calendar year and the denominator of which equals
365.
(c) There shall be no right of set-off or counterclaim in respect
of any claim, debt or obligation against any payment to or benefit for the
Executive provided for in this Agreement.
(d) Without limiting the rights of the Executive at law or in
equity, if the Company fails to make any payment or provide any benefit required
to be made or provided hereunder on a timely basis, the Company will pay
interest on the amount or value thereof at an annualized rate of interest equal
to the so-called composite "prime rate" as quoted from time to time during the
relevant period in the Northeast Edition of THE WALL STREET JOURNAL, plus three
percent. Such interest will be payable as it accrues on demand. Any change in
such prime rate will be effective on and as of the date of such change.
(e) In the event a Change in Control occurs, the Company shall
deposit in trust, pursuant to certain trust agreements to which the Company
shall be a party, cash or other property in such an amount as necessary to
assure the payment of the amounts due to the Executive under this Agreement.
Any failure by the Company to satisfy any of its obligations under this
Section 5(e) shall not limit the rights of the Executive hereunder.
Notwithstanding the foregoing, the Executive shall have the status of a general
unsecured creditor of the Company and shall have no right to, or security
interest in, any assets of the Company.
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6. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that this Agreement shall become operative and it shall be determined
(as hereafter provided) that any payment or distribution by the Company to or
for the benefit of the Executive, whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise (a
"Payment"), would be subject to the excise tax imposed by Section 4999 (or any
successor thereto) of the Code, or any interest or penalties with respect to
such excise tax (such excise tax, together with any such interest and penalties,
are hereafter collectively referred to as the "Excise Tax"), then the Executive
shall be entitled to receive an additional payment or payments (collectively, a
"Gross-Up Payment"); provided, however, that no Gross-Up Payment shall be made
with respect to the Excise Tax, if any, attributable to (i) any incentive stock
option, as defined by Section 422 of the Code ("ISO") granted prior to the
execution of this Agreement, or (ii) any stock appreciation or similar right,
whether or not limited, granted in tandem with any ISO described in clause (i).
The Gross-Up Payment shall be in an amount such that, after payment by the
Executive of all taxes (including any interest or penalties imposed with respect
to such taxes), including any 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 Payment.
(b) Subject to the provisions of Section 6(e) hereof, all
determinations required to be made under this Section 6, including whether an
Excise Tax is payable by the Executive and the amount of
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such Excise Tax and whether a Gross-Up Payment is required and the amount of
such Gross-Up Payment, shall be made by a nationally recognized firm of
certified public accountants (the "Accounting Firm") selected by the Executive
in his sole discretion. The Executive shall direct the Accounting Firm to
submit its determination and detailed supporting calculations to both the
Company and the Executive within 15 calendar days after the Termination Date, if
applicable, or such earlier time or times as may be requested by the Company or
the Executive. If the Accounting Firm determines that any Excise Tax is payable
by the Executive, the Company shall pay the required Gross-Up Payment to the
Executive within five business days after receipt of the aforesaid determination
and calculations. If the Accounting Firm determines that no Excise Tax is
payable by the Executive, it shall, at the same time as it makes such
determination, furnish the Executive with an opinion that he has substantial
authority not to report any Excise Tax on his federal income tax return. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment to
be paid by the Company within such 15 calendar-day period shall be binding upon
the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 (or any successor thereto) of the Code at the time
of the initial determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the Company should have
been made ("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 6(e) thereof and the Executive thereafter is required to make a payment
of any Excise Tax,
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the Executive shall direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination and detailed
supporting calculations to both the Company and the Executive as promptly as
possible. Any such Underpayment shall be promptly paid by the Company to or for
the benefit of the Executive within three calendar days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each cooperate with the
Accounting Firm in connection with the preparation and issuance of the
determination provided for in Section 6(b) hereof. Such cooperation shall
include without limitation providing the Accounting Firm access to and copies of
any books, records and documents in the possession of the Company or the
Executive, as the case may be, that are reasonably requested by the Accounting
Firm.
(d) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations provided for in Section
6(b) hereof shall be paid by the Executive. The Company shall reimburse the
Executive for his payment of such costs and expenses within five business days
after receipt from the Executive of a statement therefor and evidence of his
payment thereof.
(e) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of a Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than 10 business days after the Executive receives
notice of such claim and shall apprise the Company of the nature of such claim
and the date on which
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such claim is requested to be paid. The Executive shall not pay such claim
prior to the earlier of (i) the expiration of the 30 calendar-day period
following the date on which it gives such notice to the Company or (ii) 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:
(i) give the Company any information reasonably requested by
the Company relating to such claim;
(ii) 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;
(iii) cooperate with the Company in good faith in order
effectively to contest such claim; and
(iv) permit the Company to participate in any proceedings
relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 6(e), the Company shall control all proceedings taken in
connection with such contest
-25-
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conference with the taxing authority in
respect of such claim (but the Executive may participate therein at his own cost
and expense) 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 the tax claimed and xxx for a refund, the
Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which the contested amount
is claimed to be due is limited solely to such contested amount. Furthermore,
the Company's control of such 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.
(f) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(e) hereof, the Execu-
-26-
tive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6(e)
hereof) promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after any taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 6(e) hereof, 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 or refund
prior to the expiration of 30 calendar days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.
7. No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult, and may be impossible, for the Executive to find reasonably
comparable employment following the Termination Date. In addition, the Company
acknowledges that its severance pay plans and policies applicable in general to
its salaried employees do not provide for mitigation, offset or reduction of any
severance payment received thereunder. Accordingly, the parties hereto
expressly agree that the payment of the severance compensation by the Company to
the Executive in accordance with the terms of this Agreement shall be liquidated
damages and that the Executive shall not be required to mitigate the amount of
any payment provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other benefits from any
source whatsoever create any miti-
-27-
gation, offset, reduction or any other obligation on the part of the Executive
hereunder or otherwise, except as expressly provided in Section 5(a)(iv) hereof.
8. Successors and Binding Agreement.
(a) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or otherwise) to
all or substantially all of the business and/or assets of the Company, by
agreement in form and substance satisfactory to the Executive, expressly to
assume and agree to perform this Agreement and each of the Company's obligations
hereunder. This Agreement shall be binding upon and inure to the benefit of the
Company and any successor of or to the Company, including without limitation any
persons acquiring directly or indirectly all or substantially all of the
business and/or assets of the Company whether by purchase, merger,
consolidation, reorganization or otherwise (and such successor shall thereafter
be deemed the "Company" for the purposes of this Agreement), but shall not
otherwise be assignable or delegable by the Company.
(b) This Agreement shall insure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of the parties
hereto shall, without the consent of the other, assign, transfer or delegate
this Agreement or any rights or obligations hereunder except as expressly
provided in Section 8(a) hereof. Without limiting the generality of the
foregoing, the Executive's right to receive payments hereunder shall not be
assignable or transferable, whether by
-28-
pledge, creation of a security interest or otherwise, other than by a transfer
by his will or by the laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this Section 8(c), the Company
shall have no liability to pay to the purported assignee or transferee any
amount so attempted to be assigned or transferred.
(d) The Company and the Executive recognize that each party will
have no adequate remedy at law for any material breach by the other of any of
the agreements contained herein and, in the event of any such breach, the
Company and the Executive hereby agree and consent that the other shall be
entitled to a decree of specific performance, mandamus or other appropriate
remedy to enforce performance of this Agreement.
9. Notice. For all purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or five business days after having been mailed by United
States registered or certified mail, return receipt requested, postage prepaid,
addressed to the Company (to the attention of the Secretary of the Company) at
its principal executive office and to the Executive at his principal residence,
or to such other address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
10. Governing Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of
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the State of Ohio, without giving effect to the principles of conflict of laws
of such State.
11. 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 the Executive and the Company. No waiver by either party
hereto at any time of any breach by the other party hereto 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, expressed or implied with respect to the subject matter
hereof have been made by either party which are not set forth expressly in this
Agreement.
12. 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.
13. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same agreement.
14. Employment Rights. Nothing expressed or implied in this Agreement
shall create any right or duty on the part of the Company or the Executive to
have the Executive continue as an officer or assistant officer of the Company or
to remain in the employment of the Company prior to any Change in Control;
provided, however, that any termination of employment of the Executive or
removal of the Executive as an
-30-
elected officer or assistant officer of the Company following the commencement
of any discussion with or communication from a third person that ultimately
results in a Change in Control shall be deemed to be a termination or removal of
the Executive after a Change in Control for purposes of this Agreement.
15. Withholding of Taxes. The Company may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
16. Competitive Activity. For purposes of this Agreement, the term
"Competitive Activity" shall mean the Executive's participation, without the
written consent of an officer of the Company, in the management of any business
enterprise if such enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or service competitive
with any product or service of the Company amounted to 25% of such enterprise's
net sales for its most recently completed fiscal year and if the Company's net
sales of said product or service amounted to 25% of the Company's net sales for
its most recently completed fiscal year. "Competitive Activity" shall not
include (i) the mere ownership of securities in any enterprise and exercise of
rights appurtenant thereto or (ii) participation in management of any enterprise
or business operation thereof other than in connection with the competitive
operation of such enterprise.
17. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement by litigation or
-31-
other legal action because the cost and expense thereof would substantially
detract from the benefits intended to be extended to the Executive hereunder.
Accordingly, if it should appear to the Executive that the Company has failed to
comply with any of its obligations under this Agreement or in the event that the
Company or any other person takes any action to declare the Agreement void or
unenforceable or institutes any litigation designed to deny, or to recover from
the Executive the benefits intended to be provided to the Executive hereunder,
the Company irrevocably authorizes the Executive from time to time to retain
counsel of his choice, at the expense of the Company as hereafter provided, to
represent the Executive in connection with the initiation or defense of any
litigation or other legal action relating thereto, whether by or against the
Company or any Director, officer, shareholder or other person affiliated with
the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and any such counsel, the
Company irrevocably consents to the Executive's entering into an attorney-client
relationship with such counsel, and in that connection the Company and the
Executive agree that a confidential relationship shall exist between the
Executive and such counsel. The Company shall pay or cause to be paid and be
solely responsible for any and all attorneys' and related fees and expenses
incurred by the Executive (i) as a result of the Company's failure to perform
this Agreement or any provision hereof or (ii) as a result of the Company or any
person contesting the validity or enforceability of this Agreement or any
provision hereof as aforesaid.
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18. Prior Agreement. This Agreement amends and restates in its entirety
the Employment Continuation Agreement, dated _____________, 19__ between the
Company and the Executive.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the date first set forth above.
TRW INC.
By _____________________________
Xxxxxxx X. Xxxxx
Chairman of the Compensation
and Stock Option Committee of
the Directors of TRW Inc.
__________________________________
Executive
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