UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
Commission File No. 1-4329
COOPER TIRE & RUBBER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 34-4297750
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
Lima and Western Avenues, Findlay, Ohio 45840
(Address of principal executive offices)
(Zip code)
(419) 423-1321
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
Number of shares of common stock of registrant outstanding
at August 4, 2000: 72,537,869
1
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
COOPER TIRE & RUBBER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollar amounts in thousands except per-share amounts)
June 30,
December 31, 2000
1999 (Unaudited)
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 71,127 $ 24,994
Accounts receivable, less allowances
of $9,319 in 1999 and $13,292 in 2000 545,155 679,162
Inventories at lower of cost (last-in,
first-out) or market:
Finished goods 168,290 224,007
Work in process 25,185 31,551
Raw materials and supplies 80,488 69,266
--------- ---------
273,963 324,824
Prepaid expenses, deferred income taxes and other 55,183 84,978
--------- ---------
Total current assets 945,428 1,113,958
Property, plant and equipment - net 1,227,069 1,289,996
Goodwill, net of accumulated amortization of
$2,550 in 1999 and $10,411 in 2000 433,312 471,500
Intangibles and other assets 151,836 234,193
--------- ---------
$2,757,645 $3,109,647
LIABILITIES AND STOCKHOLDERS' EQUITY ========= =========
Current liabilities:
Notes payable $ 13,148 $ 189,032
Accounts payable 175,686 211,788
Accrued liabilities 188,038 238,425
Income taxes 5,100 18,814
Current portion of debt 13,893 13,866
--------- ---------
Total current liabilities 395,865 671,925
Long-term debt 1,046,463 1,046,150
Postretirement benefits other than pensions 181,267 183,116
Other long-term liabilities 61,409 59,340
Deferred income taxes 97,007 182,726
Stockholders' equity:
Preferred stock, $1 par value; 5,000,000 shares
authorized; none issued - -
Common stock, $1 par value; 300,000,000 shares
authorized; (83,799,352 in 1999) 83,821,219
shares issued 83,799 83,821
Capital in excess of par value 3,538 3,747
Retained earnings 1,049,599 1,100,864
Cumulative other comprehensive income (6,053) (26,155)
--------- ---------
1,130,883 1,162,277
Less: (7,989,600 in 1999) 11,211,400 common
shares in treasury at cost (155,249) (195,887)
--------- ---------
Total stockholders' equity 975,634 966,390
--------- ---------
$2,757,645 $3,109,647
<FN> ========= =========
See accompanying notes.
2
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
(Dollar amounts in thousands except per-share amounts)
1999 2000
-------- --------
Net sales $495,352 $886,652
Cost of products sold 398,016 741,373
------- -------
Gross profit 97,336 145,279
Amortization of goodwill - 4,471
Selling, general and administrative 33,796 57,622
------- -------
Operating profit 63,540 83,186
Interest expense 3,596 25,376
Other - net 347 (362)
------- -------
Income before income taxes 59,597 58,172
Provision for income taxes 21,641 22,697
------- -------
Net income 37,956 35,475
Other comprehensive loss:
Currency translation adjustment (1,426) (16,160)
------- -------
Comprehensive income $ 36,530 $ 19,315
======= =======
Basic and diluted earnings per share $.50 $.48
=== ===
Weighted average number of
shares outstanding (000's) 75,913 73,678
====== ======
Dividends per share $.105 $.105
==== ====
<FN>
See accompanying notes.
3
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
(Dollar amounts in thousands except per-share amounts)
1999 2000
-------- ----------
Net sales $963,239 $1,808,917
Cost of products sold 780,509 1,528,957
------- ---------
Gross profit 182,730 279,960
Amortization of goodwill - 8,683
Selling, general and administrative 65,888 115,886
------- ---------
Operating profit 116,842 155,391
Interest expense 7,499 49,298
Other - net 122 (3,721)
------- ---------
Income before income taxes 109,221 109,814
Provision for income taxes 39,874 42,837
------- ---------
Net income 69,347 66,977
Other comprehensive loss:
Currency translation adjustment (3,978) (20,101)
------- ---------
Comprehensive income $ 65,369 $ 46,876
======= =========
Basic and diluted earnings per share $.91 $.90
=== ===
Weighted average number of
shares outstanding (000's) 75,895 74,703
====== ======
Dividends per share $.21 $.21
==== ====
<FN>
See accompanying notes.
4
COOPER TIRE & RUBBER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1999 AND 2000
(UNAUDITED)
(Dollar amounts in thousands)
1999 2000
-------- --------
Operating activities:
Net income $ 69,347 $ 66,977
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 52,427 85,473
Amortization of goodwill and
other intangibles 843 10,042
Deferred income taxes 227 4,315
Changes in operating assets
and liabilities:
Accounts receivable (53,678) (109,710)
Inventories and prepaid expenses (23,295) (60,477)
Accounts payable and
accrued liabilities 28,005 35,970
Other liabilities (5,530) 10,494
------- -------
Net cash provided by
operating activities 68,346 43,084
Investing activities:
Property, plant and equipment (70,539) (100,224)
Acquisition of business - (222,756)
Proceeds from the sale of businesses - 110,663
------- -------
Net cash used in investing
activities (70,539) (212,317)
Financing activities:
Issuance of debt 30,849 310,152
Payment on debt (29,957) (137,315)
Purchase of treasury shares - (37,525)
Payment of dividends (15,926) (15,711)
Issuance of common shares 593 230
------- -------
Net cash provided by (used in)
financing activities (14,441) 119,831
Effects of exchange rate changes on cash 2,496 3,269
------- -------
Changes in cash and cash equivalents (14,138) (46,133)
Cash and cash equivalents at
beginning of period 41,966 71,127
------- -------
Cash and cash equivalents at
end of period $ 27,828 $ 24,994
======= =======
Cash payments for interest $ 8,385 $ 47,807
======= =======
Cash payments for income taxes $ 42,116 $ 44,606
======= =======
<FN>
See accompanying notes.
5
COOPER TIRE & RUBBER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements at June 30, 2000 and for the
three-month and six-month periods ended June 30, 1999 and 2000 are
unaudited and include all adjustments, consisting only of normal recurring
accruals, which the Company considers necessary for a fair presentation of
financial position and operating results. The unaudited consolidated
financial statements have been prepared in accordance with Article 10 of
Regulation S-X and, therefore, do not contain all information and
footnotes normally contained in annual financial statements; accordingly,
they should be read in conjunction with the Financial Statements and notes
thereto appearing in the Annual Report on Form 10-K of the Company for the
year ended December 31, 1999.
2. The results of operations for the three-month and six-month periods ended
June 30, 2000 are not necessarily indicative of those to be expected for
the year ending December 31, 2000.
3. Information on the Company's operating segments is as follows:
Three months ended Six months ended
June 30 June 30
1999 2000 1999 2000
-------- -------- -------- ----------
Net sales:
Tire $368,410 $410,420 $720,472 $ 855,764
Automotive 126,942 484,925 242,767 969,604
Eliminations - (8,693) - (16,451)
------- ------- ------- ---------
Net sales $495,352 $886,652 $963,239 $1,808,917
======= ======= ======= =========
Segment profit:
Tire $ 46,123 $ 42,104 $ 83,320 $ 87,213
Automotive 17,417 41,082 33,522 68,178
------- ------- ------- ---------
63,540 83,186 116,842 155,391
Interest expense (3,596) (25,376) (7,499) (49,298)
Other - net (347) 362 (122) 3,721
------- ------- ------- ---------
Income before income
taxes $ 59,597 $ 58,172 $109,221 $ 109,814
======= ======= ======= =========
4. In June 1998 the Financial Accounting Standards Board (FASB) issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The FASB has since issued SFAS No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of
FASB Statement No. 133." This pronouncement amended SFAS No. 133 to defer
its effective date to years beginning after June 15, 2000. The Company is
currently evaluating the effect of the provisions of this Statement on
its accounting and reporting policies, but does not anticipate adoption of
this Statement will have a material effect on the Company's consolidated
financial position or results of operations.
In September 1999, the Emerging Issues Task Force reached a consensus on
Issue 99-5, "Accounting for Pre-Production Costs Related to Long-Term
Supply Arrangements." This issue addresses the accounting treatment for
pre-production costs incurred by original equipment manufacturers (OEM)
suppliers to perform certain services related to the design and
development of the parts they will supply the OEM as well as the design
<continued>
6
and development costs to build molds, dies and other tools that will be
used in producing the parts. This consensus had no material effect on the
Company's consolidated financial position or results of operations.
In December 1999 the SEC released Staff Accounting Bulletin (SAB) No. 101,
"Revenue Recognition in Financial Statements." The bulletin provides the
staff's views in applying generally accepted accounting principles to
selected revenue recognition issues. The SEC has since issued SAB No.
101A and SAB No. 101B which delay the implementation date of SAB No. 101.
Implementation is currently delayed until no later than the fourth quarter
of fiscal years beginning after December 15, 1999. The Company is
currently evaluating the effect this bulletin may have on its financial
position or results of operations.
5. On April 28, 2000, the Company sold the Winnsboro, South Carolina
automotive plastic trim production facility. On June 30, 2000 the Company
completed the sale of its Holm Industries, Inc. ("Holm") subsidiary. Holm
was the largest business unit of the Plastics Division within the
Automotive Group. The proceeds from the sales of these businesses
approximated $110 million and were primarily used to reduce commercial
paper borrowings.
The Company is continuing its efforts to sell the remaining extruded
plastic trim operations of the Plastics Division. Net assets of $16.0
million related to these operations have been reclassified to Prepaid
expenses, deferred income taxes and other on the June 30, 2000
consolidated balance sheet. Results of the remaining operations are
immaterial to the consolidated financial position and results of
operations.
6. The Company completed its acquisition of Siebe Automotive ("Siebe"), the
automotive fluid handling division of Invensys plc, on January 28, 2000
for consideration of $244.5 million, less a $28 million post-closing
purchase price adjustment. Additional transaction costs of $5.8 million
were incurred to complete the acquisition. The Company financed the
acquisition by issuing commercial paper.
Siebe manufactures automotive fluid handling systems, components, modules
and sub-systems for sale to the world's automotive original equipment
manufacturers and large Tier 1 suppliers. The purchase includes the
operating assets of Siebe Automotive, with 16 operating locations
extending across North and South America, Europe and Australia.
The Company's consolidated financial results and financial position
subsequent to the date of the acquisition reflect Siebe operations. The
purchase price has been preliminarily allocated to assets and liabilities
acquired. The acquisition does not meet the SEC thresholds for a
significant acquisition and therefore no pro forma financial information
is presented.
7. As reported in the Company's Annual Report on Form 10-K for the year ended
December 31, 1999, the Company has an accrual recorded for employee
separation and other exit costs relating to a plan for the reorganization
and closing of certain manufacturing facilities in Europe. As of June 30,
2000, the plan is substantially complete. The plan estimated a workforce
reduction of approximately 460 people, of whom 39 still remain at June 30,
2000.
In May 2000, the Company announced the closure of its automotive sealing
plant in Kittaning, PA. An accrual of $3 million for employee separation
and related exit costs was recorded. The closure of this facility was
under consideration at the time of the purchase of The Standard Products
Company. Therefore, the charge resulted in an increase to the goodwill
recorded in conjunction with the purchase. The estimated workforce
<continued>
7
reduction is approximately 160 people of whom 61 have been removed from
the workforce as of June 30, 2000. The closure is expected to be
completed in September 2000.
The following summarizes the activity in the accrual accounts since
December 31, 1999:
Accrual Additional Cash Remaining
12/31/99 Provision Payments Accrual
-------- ---------- -------- ---------
Employee separation costs $14,100 $ 1,700 $ 9,900 $ 5,900
Other exit costs 2,800 1,300 700 3,400
------- ------- ------- -------
Total $16,900 $ 3,000 $10,600 $ 9,300
======= ======= ======= =======
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Consolidated net sales for the three-month and six-month periods ended June
30, 2000 reached new records. Net sales increased 79 percent for the quarter
and were 88 percent higher for the six months when compared to corresponding
1999 periods. The acquisitions of The Standard Products Company ("Standard")
and Siebe Automotive ("Siebe") added $401 million in sales for the quarter and
$798 million for the six months.
Net income was $35 million for the second quarter of 2000, 7 percent lower
than the $38 million generated for the same period in 1999. For the first six
months net income was $67 million, a 3 percent decrease from the corresponding
1999 period.
Selling, general and administrative expenses were 6.5 percent of net sales for
the quarter, compared to 6.8 percent one year ago. For the six-month period,
these costs were 6.4 percent in 2000 compared to 6.8 percent in 1999.
Business Segments
Tire Segment
Sales
Sales for the Tire segment, at $410 million for the second quarter, increased
$42 million, or 11 percent, from 1999. Sales for the six-month period of 2000
were $856 million, up $135 million or 19 percent over the prior year period.
Sales of Oliver Rubber Company, which was acquired as part of the Company's
acquisition of Standard, and which is a part of the Tire segment, were $41
million for the second quarter and $83 million for the first six months of
2000.
Tire unit sales for the second quarter were down more than 3 percent from the
same period in 1999. The decline was due in part to a general slowing of
demand at the retail level, to increased industry inventories, which caused
some competitors to discount prices heavily to maintain sales, and to a
significant increase in imports of low-priced tires. Slower sales were
particularly evident for the Company's entry-level passenger tires. Softened
demand and generally high levels of inventory in the replacement tire industry
are likely to contribute to a continuation of this intense competition in the
third quarter. The Company will be managing its inventory levels during the
<continued>
8
third quarter through adjustments to its production schedule. For the six
months unit sales were up nearly 5 percent from the 1999 period, due primarily
to the strong demand for Cooper's proprietary and certain private brand
products experienced in the first quarter.
Operating Profit
Operating profit decreased 9 percent from $46 million in the second quarter of
1999 to $42 million in 2000. For the six-month period operating profit at $87
million was up 5 percent from one year ago. Operating margin was 10.3 percent
for the second quarter of 2000, a decrease from 12.5 percent in 1999. For the
six months of 2000, operating margin was 10.2 percent, a decline from 11.6
percent in the same period of 1999. Higher raw material costs, due primarily
to increases in the price of petroleum, were the principal reason for the
decline in margin during the quarter and six-month periods. The Company has
been unable to obtain price increases for its tires sufficient to offset the
increase in raw material costs. This is largely due to intense competitive
pricing in the replacement tire industry, resulting from slowing demand at the
retail level, generally high inventory levels in the replacement tire
industry, and a significant increase in imports of low-priced tires.
Automotive Segment
Sales
Sales for the Automotive group increased nearly four-fold, from $127 million
in the second quarter of 1999 to $485 million in 2000. For the six-month
period, sales increased from $243 million in 1999 to $970 million in 2000.
Second quarter and six-month sales from the automotive businesses of Standard
and Siebe totaled $360 million and $715 million, respectively. North American
light vehicle production continued to be strong during the second quarter,
increasing 5.3 percent in the first six months of 2000 compared to the
corresponding period in 1999. This was the primary reason for strong first
half sales for the Automotive group.
Operating Profit
Operating profit increased 136 percent from $17 million in the second quarter
of 1999 to $41 million for the same period in 2000. For the six-month period,
operating profit increased from $34 million in 1999 to $68 million in 2000, a
103 percent increase. Operating margin was 8.5 percent in the second quarter,
a decrease from 13.7 percent in the prior year quarter, and an improvement
from 5.6 percent in the first quarter. For the year to date, operating margin
declined from 13.8 percent in 1999 to 7.0 percent in 2000.
Margin in the first quarter was adversely affected by production difficulties
experienced at Standard's automotive plastic trim facility in Winnsboro, South
Carolina. That facility was sold on April 28, 2000. Margin was also
adversely affected in the first six months by ongoing costs associated with
the Company's efforts to close one of its manufacturing facilities in France.
The Company substantially completed the closure of this facility at the end of
March. The elimination of the losses from these two operations was the
predominant factor in the improved second quarter margin.
Other
Interest expense was $25 million in the second quarter of 2000, compared to $4
million in the same period of 1999. For the six-month period, interest was
$49 million, $42 million higher than the $7 million recorded in 1999. This
reflects the higher debt levels incurred to finance the acquisitions of
Standard and Siebe.
<continued>
9
Other income at $361,000 for the quarter improved from $348,000 of expense in
1999 due primarily to income from unconsolidated subsidiaries, partially
offset by foreign currency losses. For the six-month period, other income is
$3.8 million higher than in 1999 primarily reflecting income from
unconsolidated subsidiaries.
The effective income tax rate of 39.0 percent in both the second quarter and
six months of 2000 is higher than the rates in 1999. The increase in the
rates reflect the impact of nondeductible goodwill attributable to the
acquisitions of Standard and Siebe.
Liquidity and Capital Resources
Working capital at $442 million is down from December 31, 1999 and up from
June 30, 1999. The current ratio of 1.7 is down from 2.4 at December 31, 1999
and 2.9 at June 30, 1999. Long-term debt, as a percent of total
capitalization is 52.0 percent compared to 18.3 percent one year ago. These
changes reflect the increases in both short-term and long-term debt levels
attributable to the acquisitions of Standard and Siebe.
Net cash provided by operating activities of $43 million during the first six
months of 2000 is lower than the $68 million for the six-month period one year
ago. Net income, adjusted for non-cash charges, increased $44 million, while
changes in operating assets and liabilities used $69 million more cash than in
1999.
Net cash used in investing activities during the first six months reflects the
acquisition of Siebe for $223 million. In May 2000, the Company received $28
million as a post-closing purchase price adjustment. Proceeds from the sale
of the Holm and Winnsboro businesses provided cash of approximately $110
million. Capital expenditures for the six months were $100.2 million compared
to $70.5 million for the same period in 1999.
Financing activities for the six-month period provided cash of $120 million.
Commercial paper of $310 million was issued during the first half of 2000 to
fund the acquisition of Siebe and seasonal working capital requirements. Cash
from the sale of businesses and the Siebe purchase price adjustment was used
to pay down commercial paper during the second quarter. During the six months
ended June 30, 2000, the Company purchased 3,221,800 of its common shares at a
cost of $37.5 million. These repurchases were made under a program approved
in May 1997 and under an additional program to repurchase up to 10,000,000
common shares which was authorized by the Company's Board of Directors in May
2000. The Company paid dividends of $15.7 million during the first six
months.
The Company expects adequate liquidity will be provided by cash flows from
operations and its credit facilities to fund debt service obligations, capital
expenditures, dividends on its common shares and working capital requirements.
Forward-Looking Statements
This report contains "forward-looking statements," as that term is defined
under the Private Securities Litigation Reform Act of 1995, regarding
expectations for future financial performance, which involve uncertainty and
risk. It is possible that the Company's future financial performance may
differ from expectations due to a variety of factors including, but not
limited to: changes in economic and business conditions in the world,
increased competitive activity, achieving sales levels to fulfill revenue
expectations, consolidation among the Company's competitors and customers,
technology advancements, unexpected costs and charges, fluctuations in raw
material and energy prices and in particular changes in the price of crude
<continued>
10
oil, changes in interest and foreign exchange rates, regulatory and other
approvals, the cyclical nature of the automotive industry, loss of a major
customer or program, risks associated with integrating the operations of The
Standard Products Company and Siebe Automotive, and the failure to achieve
synergies or savings anticipated in both acquisitions, and other unanticipated
events and conditions.
It is not possible to foresee or identify all such factors. Any forward-
looking statements in this report are based on certain assumptions and
analyses made by the Company in light of its experience and perception of
historical trends, current conditions, expected future developments and other
factors it believes are appropriate in the circumstances. Prospective
investors are cautioned that any such statements are not a guarantee of future
performance and actual results or developments may differ materially from
those projected. The Company makes no commitment to update any forward-
looking statement included herein, or to disclose any facts, events or
circumstances that may affect the accuracy of any forward-looking statement.
Further information covering issues that could materially affect financial
performance is contained in the Company's periodic filings with the U. S.
Securities and Exchange Commission.
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's Annual Meeting of Stockholders was held on May 2, 2000.
(b) All of the nominees for directors, as listed below under (c) and on
page 2 of the Company's Proxy Statement dated March 21, 2000,
were elected. The following directors have terms of office which
continued after the meeting.
Arthur H. Aronson Deborah M. Fretz
Thomas A. Dattilo Dennis J. Gormley
Edsel D. Dunford Byron O. Pond
John Fahl
(c) A description of each matter voted upon at that meeting is contained on
pages 1, 2, 10 and 11 of the Company's Proxy Statement dated March 21,
2000, which pages are incorporated herein by reference.
The number of votes cast by common stockholders with respect to each
matter is as follows:
Election of directors
Term Affirmative Withheld Broker
Expiration Votes Votes Abstentions Non-votes
---------- ----------- -------- ----------- ---------
John F. Meier 2003 58,602,674 8,944,690 - -
Ronald L. Roudebush 2003 60,004,130 7,543,234 - -
John H. Shuey 2003 60,037,954 7,509,410 - -
Stockholder proposal urging that stockholder rights issued pursuant to
the Company's Stockholder Rights Plan be redeemed. The votes that had
been submitted on the proposal were as follows:
Affirmative Votes 27,919,501
Negative Votes 29,016,863
Abstentions 790,155
Broker Non-Votes 9,820,845
<continued>
11
Item 6(a). Exhibits.
(10) Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and Thomas A. Dattilo
Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and John Fahl
Employment Agreement dated as of June 6, 2000 between Cooper Tire &
Rubber Company and James S. McElya
Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and Roderick F. Millhof
Cooper Tire & Rubber Company Change in Control Severance Pay Plan
Effective June 6, 2000
(27) Financial Data Schedule
Item 6(b). Reports on Form 8-K.
A Form 8-K was filed May 5, 2000 related to the announcement of the
Company's final vote on a stockholder proposal presented at its annual
meeting of stockholders held on Tuesday, May 2, 2000
A Form 8-K was filed June 26, 2000 related to the announcement that the
Company has reached a definitive agreement to sell all of its shares of
its Holm Industries, Inc. subsidiary to a unit of Madison Capital
Partners
A Form 8-K was filed July 11, 2000 related to the announcement that the
Company finalized the sale of its Holm Industries, Inc. subsidiary to
Madison Capital Partners
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COOPER TIRE & RUBBER COMPANY
/S/ P. G. Weaver
---------------------
P. G. Weaver
Vice President and
Chief Financial Officer
(Principal Financial Officer)
/S/ E. B. White
-----------------
E. B. White
Corporate Controller
(Principal Accounting Officer)
August 10, 2000
- ---------------
(Date)
<continued>
12
INDEX TO EXHIBITS
DESCRIPTION
Part II. Item 6(a).
(10) (i) Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and Thomas A. Dattilo
(ii) Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and John Fahl
(iii) Employment Agreement dated as of June 6, 2000 between Cooper Tire &
Rubber Company and James S. McElya
(iv) Amended and Restated Employment Agreement dated as of June 6, 2000
between Cooper Tire & Rubber Company and Roderick F. Millhof
(v) Cooper Tire & Rubber Company Change in Control Severance Pay Plan
Effective June 6, 2000
(27) Financial Data Schedule
13
Part II
Exhibit (10)(i)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
made and entered into this 6th day of June, 2000, between COOPER TIRE & RUBBER
COMPANY, a Delaware corporation with its principal offices located at 701 Lima
Avenue, Findlay, Ohio 45840, (the "Company"), and Thomas A. Dattilo, residing
at 26730 West River Road, Perrysburg, Ohio 43551 (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of January 1, 1999 (the "Original Agreement"), which will
be superseded in its entirety by this Agreement; and
WHEREAS, the Executive and the Company entered into an RSU Award
Agreement dated as of November 18, 1999 (the "Award Agreement"); and
WHEREAS, the Executive has been employed by the Company in the capacity
of Chairman of the Board, President and Chief Executive Officer; and
WHEREAS, the Company desires to continue to retain the services of the
Executive in the future; and
WHEREAS, the Executive desires to continue to serve in the capacity of
Chairman of the Board, President and Chief Executive Officer of the Company,
pursuant to the terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and intending to be
legally bound hereby, the Company and the Executive hereby amend and restate
the Original Agreement to read as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Affiliate" means any corporation, limited liability company,
joint venture, partnership, or other legal entity in which the Company owns,
directly or indirectly, or has previously owned, at least fifty percent (50%)
of the capital stock, profits, interest or capital interest.
(b) "Average Compensation" means the Executive's average annual
compensation, including Base Pay and any annual and long-term incentive
compensation earned, during the five (5) calendar years prior to the year in
which a Termination occurs.
(c) "Base Pay" means the Executive's rate of annual base salary, as
defined in the Compensation Plan, as in effect from time to time.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means:
(X) prior to a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) the willful and continued failure by the Executive
to perform substantially the duties of the Executive's position, and the
<continued>
14
failure of the Executive to correct such failure of performance after
notification by the Board of any such failure; or
(ii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
(iii) the conviction of a criminal violation involving
fraud, embezzlement or theft in connection with Executive's duties or in the
course of Executive's employment with the Company.
(Y) following a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) any act or omission constituting a material breach
by the Executive of any of his significant obligations or agreements under
this Agreement or the continued failure or refusal of the Executive to
adequately perform the duties reasonably required hereunder which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any Affiliate thereof,
after notification by the Board of such breach, failure or refusal and
failure of the Executive to correct such breach, failure or refusal within
thirty (30) days of such notification (other than by reason of the incapacity
of the Executive due to physical or mental illness); or
(ii) the commission by and conviction of the Executive
of a felony, or the perpetration by and criminal conviction of or civil
verdict finding the Executive committed a dishonest act or common law fraud
against the Company or any affiliate thereof (for the avoidance of doubt,
conviction and civil verdict, in each case, shall mean when no further appeals
may be taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
Any notification to be given by the Board in accordance
with Section 1(e)(X)(i), 1(e)(X)(ii), 1(e)(Y)(i) or 1(e)(Y)(iii) shall
specifically identify the breach, failure, refusal, act or omission to which
the notification relates and, in the case of Section 1(e)(X)(i), 1(e)(X)(ii),
1(e)(Y)(i) or 1(e)(Y)(iii), shall describe the injury to the Company, and such
notification must be given within twelve (12) months of the Board becoming
aware, or within twelve (12) months of when the Board should have reasonably
become aware of the breach, failure, refusal, act, or omission identified in
the notification. Notwithstanding Section 23, failure to notify the Executive
within any such twelve (12) month period shall be deemed to be a waiver by the
Board of any such breach, failure, refusal, act or omission by the Executive
and any such breach, failure, refusal, act or omission by the Executive shall
not then be determined to be a breach of this Agreement.
For the avoidance of doubt and for the purpose of
determining Cause, the exercise of business judgment by the Executive shall
not be determined to be Cause, even if such business judgment materially
injures the financial condition or business reputation of, or is otherwise
materially injurious to the Company or any Affiliate thereof, unless such
business judgment by the Executive was not made in good faith, or constitutes
willful or wanton misconduct, or was an intentional violation of state or
federal law.
<continued>
15
(f) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) the Company merges into itself, or is merged or
consolidated with, another entity and as a result of such merger or
consolidation less than 51% of the voting power of the then-outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to such transaction;
(ii) all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
entity or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of
the Company immediately prior to such transaction or series of transactions;
(iii) a person, within the meaning of Section 3(a)(9) or
13(d)(3) (as in effect on the date of this Agreement) of the Securities
Exchange Act of 1934, (the "Exchange Act") become the beneficial owner (as
defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to
the Exchange Act) of (i) 15% or more but less than 35% of the voting power of
the then outstanding voting securities of the Company without prior approval
of the Board, or (ii) 35% or more of the voting power of the then-outstanding
voting securities of the Company; provided, however, that the foregoing does
not apply to any such acquisition that is made by (w) any Affiliate of the
Company; (x) any employee benefit plan of the Company or any Affiliate; or (y)
any person or group of which employees of the Company or of any Affiliate
control a greater than 25% interest unless the Board determines that such
person or group is making a "hostile acquisition;" or (z) any person or group
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Executive; or
(iv) a majority of the members of the Board are not
Continuing Directors, where a "Continuing Director" is any member of the Board
who (x) was a member of the Board on the date of this Agreement or (y) was
nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the Compensation Committee of the Board.
(i) "Common Stock" means the Company's common stock, par value
$1.00 per share.
(j) "Company" means the Company as hereinbefore defined.
(k) "Compensation Plan" means the Company's Top Management
Compensation Plan adopted by the Board on April 28, 1973.
(l) "Disability" or "Disabled" means when, the Executive has been
totally disabled by bodily injury or disease so as to prevent him from being
physically able to perform the job duties as required under this Agreement,
and such total disability shall have continued for five (5) consecutive
months, and, in the opinion of a qualified physician selected by the Company,
such disability will presumably be permanent and continuous during the
remainder of Executive's life.
(m) "Good Reason" means the occurrence of any of the following,
without Executive's express, prior written consent:
<continued>
16
(i) a material breach by the Company of Section 2 or Section
4 of this Agreement, including but not limited to, the assignment to the
Executive of any duties inconsistent with his status as Chairman of the Board,
President and Chief Executive Officer of the Company, or his removal from such
position, or a substantial alteration in the nature or status of his
responsibilities from those described herein, and the failure of the Company
to remedy such breach within thirty (30) days after receipt of written notice
of such breach from the Executive;
(ii) the relocation of the office of the Company where the
Executive is employed to a location other than Findlay, Ohio, except for
required travel on the Company's business to an extent reasonably required to
perform his duties hereunder;
(iii) except as required by law, the failure by the Company to
continue to provide the Executive with benefits at least as favorable as those
provided to him under the Plans (as defined in Section 4(b)), the taking of
any action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe benefits
enjoyed by him or the failure by the Company to provide Executive with the
number of paid vacation days to which he is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the date of this Agreement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 19 hereof or, if the business of the Company for which
the Executive's services are principally performed is sold, the purchaser of
such business shall fail to agree to assume this Agreement or to provide
Executive with the same or a comparable position, duties, benefits, and base
salary and incentive compensation as provided in Section 4 of this Agreement;
(v) the failure of the Board to re-elect Executive to the
positions of Chairman of the Board and Chief Executive Officer during the
Term; or
(vi) following the date a Change in Control of the Company
has occurred, voluntary termination by Executive for any reason, or without
reason, during a period of three hundred sixty-five (365) days from such date.
(n) "Incentive Compensation Plan" means the Cooper Tire & Rubber
Company 1998 Incentive Compensation Plan, as amended.
(o) "Nonqualified Supplementary Benefit Plan" means the Cooper Tire
& Rubber Company Nonqualified Supplementary Benefit Plan, effective November
8, 1984, as amended.
(p) "Retirement Plans" means the Salaried Employees' Retirement
Plan and the Nonqualified Supplementary Benefit Plan or any successor plans
thereto which provide comparable benefits.
(q) "Salaried Employees' Retirement Plan" means the Cooper Tire &
Rubber Company Salaried Employees' Retirement Plan, effective January 1, 1989,
as amended.
(r) "Severance Period" means, in the event of a Termination, the
period of time commencing on the Termination Date and continuing for the
greater of:
(i) two (2) years, or
(ii) the remainder of the Term (as defined in Section 3).
(s) "Termination" means:
<continued>
17
(i) the involuntary termination of the Executive's
employment by the Company at any time without Cause, for any reason other than
retirement, death or disability, or
(ii) termination of his employment by the Executive for
Good Reason.
(t) "Termination Date" means the date on which the Executive's
employment with the Company is terminated by the company or the Executive for
any reason or for no reason. If the Executive's employment is terminated by
the Company, such date shall be specified in a written notice of termination
(which date shall be no earlier than the date of furnishing such notice), or
if no such date is specified therein, the date of receipt by the Executive of
such written notice of termination, otherwise the Executive shall specify such
date in a written notice of his resignation.
(u) "1998 Option Plan" means the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan, as amended.
2. Employment and Duties.
(a) General. The Company hereby employs the Executive and the
Executive agrees upon the terms and conditions herein set forth to serve as
Chairman of the Board, President and Chief Executive Officer, and, in such
capacity, shall perform such duties as may be delineated in the by-laws of the
Company, and such other duties, commensurate with the Executive's title and
position of Chairman of the Board, President and Chief Executive Officer, as
may be assigned to the Executive from time to time by the Board. If elected,
the Executive will serve as a member of the Board or on committees of the
Board.
(b) Exclusive Services. Throughout the Term (as defined in Section
3), Executive shall, except as may from time to time be otherwise agreed in
writing by the Company and during reasonable vacations and unless prevented by
ill health, devote his full-time and undivided attention during normal
business hours to the business and affairs of the Company consistent with his
senior executive position, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the
Board, and shall use his best efforts to promote and serve the interests of
the Company.
(c) Restrictions on Other Employment. Throughout the Term and
provided that such activities do not contravene the provisions of Section 2(b)
hereof or Section 15 hereof:
(i) Executive may engage in charitable and community
affairs;
(ii) Executive may perform inconsequential services without
specific compensation therefor in connection with the management of personal
investments; and,
(iii) Executive may, directly or indirectly, render services
to any other person or organization (including service as a member of the
Board of Directors of any other unaffiliated company), for which he receives
compensation, that is not in competition with the Company, subject in each
case to the approval of the Board. Executive may retain all fees he receives
for such services, and the Company shall not reduce his compensation by the
amount of such fees. For purposes of this Section 2(c)(iii) competition shall
have the same meaning as intended for the purposes of Section 15.
3. Term of Employment. Subject to the provisions of Section 5 through
Section 10 hereof, the Company shall retain the Executive and the Executive
shall serve in the employ of the Company for a period (the "Term") commencing
on January 1, 1999 and continuing in effect through December 31, 2002;
<continued>
18
provided, however, that commencing on January 1, 2000, and each January 1
thereafter until the year in which the Executive's 62nd birthday occurs, the
Term shall automatically be extended for one additional year unless, no later
than September 30 of the preceding year, the Company or the Executive shall
have given notice to the other that it does not wish to extend this Agreement.
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to the Executive Base Pay
at the rate of $650,000 per annum, payable biweekly. The Base Pay will be
reviewed not less than annually by the Board or by the Compensation Committee
and may be increased, but not decreased.
(b) Employee Benefit Plans. At all times during the Term, the
Executive shall be provided the opportunity to participate in such Retirement
Plans, and such employee pension benefit plans, whether or not qualified, and
employee welfare benefit plans, programs and arrangements (collectively, the
"Plans") as are generally made available to executives of the Company. Unless
otherwise required by law, the Plans, when considered as a whole, will provide
for benefits to Executive no less favorable than those currently provided.
(c) Incentive Compensation. The Executive shall be eligible to
participate in the annual incentive compensation program established by the
Compensation Plan.
(d) Long-Term Incentive Compensation. The Executive shall be
eligible to participate in such long-term incentive plans and programs as the
Company generally provides to its senior executives.
5. Termination Without Cause or for Good Reason Prior to a Change in
Control. If, prior to the expiration of the Term, the Executive's employment
is terminated by the Company without Cause, or if the Executive terminates his
employment hereunder for Good Reason, in each case prior to a Change in
Control, and conditioned upon the Executive's delivering to the Company the
Release provided for in Section 16 with all periods for revocation expired,
the Executive shall be entitled to receive:
(a) "Severance Pay" which shall equal the sum of the biweekly
payments that the Executive would receive if he were paid at the rate of his
Average Compensation for the remainder of the Term. Severance Pay shall be
paid in a single lump sum in cash within thirty (30) days following the
expiration of such revocation period.
(b) The Company shall provide the Executive with lifetime life,
accident and health insurance benefits substantially similar to those to which
Executive and Executive's family were entitled immediately prior to the
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 5(b) shall be reduced to the extent comparable benefits are
actually received by Executive from other employment, and any such benefits
actually received by Executive shall be reported to the Company.
(c) In addition to the pension benefits to which the Executive is
entitled under the Retirement Plans, the Company shall pay the Executive in
cash within thirty (30) days following the Termination Date, a single lump sum
equal to the actuarial equivalent of the excess of (1) the retirement pension
(determined as a straight life annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) twenty-four (24)
additional months (or, if greater, the number of months remaining in the Term)
<continued>
19
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall the Executive be deemed to have accumulated
additional months of service credit after his sixty-fifth (65th) birthday),
over (2) the retirement pension (determined as a straight life annuity
commencing at age sixty-five (65)) which the Executive had then accrued
pursuant to the provisions of the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the 1994
Uninsured Pensioner Mortality Table (UP-94) and annual compound interest at
the Corporate Bond yield average for bonds rated Aaa by Moody's reduced by
fifty (50) basis points (.5 percent). The rate chosen from the
aforereferenced table will be for the calendar month five months prior to the
month which contains the effective date of payment and will be truncated to
the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%, etc.).
(d) Notwithstanding any provision in the Award Agreement, all
restricted stock units granted to the Executive which have not otherwise
vested shall immediately vest and within thirty (30) days following the
Termination Date, the Company shall pay to Executive an amount equal to the
fair market value (computed as the average of the high and low trades reported
on the New York Stock Exchange) of the Common Stock represented by such
restricted stock units determined as of the Termination Date. Such cash
payment shall be deemed to be in lieu of and in substitution for any right
Executive may have to such restricted stock units under the terms of the Award
Agreement, and Executive agrees to surrender all restricted stock units being
cashed out hereunder immediately prior to receiving the cash payment described
above;
(e) Notwithstanding any provision in the Incentive Compensation
Plan, 1998 Option Plan or other relevant plan or program, all stock options
granted to the Executive by the Company which have not otherwise vested shall
be vested. Within thirty (30) days after the Termination Date, the Company
shall pay to Executive in cash an amount equal to the aggregate of the
difference between the exercise price of each stock option granted to the
Executive prior to the Termination Date, and the fair market value (computed
as the average of the high and low trades reported on the New York Stock
Exchange) of the Company's stock subject to the related option, determined as
of the Termination Date. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to exercise such stock
option or a related stock appreciation right under the terms of the relevant
stock option plan describing such rights, and Executive agrees to surrender
all stock options and related stock appreciation rights being cashed out
hereunder prior to receiving the cash payment described above.
6. Termination Without Cause or for Good Reason Following a Change in
Control, etc.
(a) If, prior to the expiration of the Term, subsequent to a Change
in Control and during the Severance Period, the Executive's employment is
terminated by the Company without Cause or if the Executive terminates his
employment hereunder for Good Reason, and conditioned upon the Executive's
delivering to the Company the Release provided for in Section 16 with all
periods for revocation expired, the Company shall pay or provide to the
Executive:
(i) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the Executive's
then current Base Pay and pro rata incentive compensation accrued through his
Termination Date; plus
(ii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the greater of:
(A) the Executive's Severance Pay; or
<continued>
20
(B) three (3) times the sum of (x) Executive's Base Pay
plus (y) target annual incentive compensation for the year prior to the Change
in Control; plus
(iii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the actuarial
equivalent of:
(A) the excess of (1) the retirement pension
(determined as a straight line annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) thirty-six (36)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall Executive be deemed to have accumulated additional
months of service credit after his sixty-fifth (65th) birthday), over (2) the
retirement pension (determined as a straight life annuity commencing at age
sixty-five (65)) which Executive had then accrued pursuant to the provisions
of the Retirement Plans; plus
(B) the retirement pension Executive has accrued under
the Nonqualified Supplementary Benefit Plan.
For purposes of this subsection, "actuarial equivalent" shall be determined
using the 1994 Uninsured Pensioner Mortality Table (UP-94) and annual compound
interest at the Corporate Bond yield average for bonds rated Aaa by Moody's
reduced by fifty (50) basis points (.5 percent). The rate chosen from the
aforereferenced table will be for the calendar month five months prior to the
month which contains the effective date of payment and will be truncated to
the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%, etc.);
(iv) for thirty-six (36) months following his Termination
Date, the Company shall arrange to provide Executive with life, accident and
health insurance benefits substantially similar to those to which Executive
and Executive's family were entitled immediately prior to Executive's
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 6(a)(iv) shall be reduced to the extent comparable benefits are
actually received by Executive during the remainder of such period following
his Termination, and any such benefits actually received by Executive shall be
reported to the Company;
(v) following the end of the period specified in subsection
6(a)(iv), lifetime retiree medical and life insurance coverage, which shall be
based on the Company's plans in effect immediately prior to the Change in
Control, and, for purposes of such plans, with the Executive deemed to have
thirty (30) years of credited service and as if he had attained age sixty-five
and retired at the end of such period; and
(vi) outplacement services by a firm selected by the
Executive, at the expense of the Company in an amount up to 15% of the
Executive's Base Pay.
(b) Notwithstanding any provision in the Award Agreement or this
Section 6, all restricted stock units granted to the Executive which have not
otherwise vested shall immediately vest and within five (5) days after the
consummation of the Change in Control the Company shall pay to Executive an
amount equal to the fair market value (computed as the average of the high and
low trades reported on the New York Stock Exchange) of the Common Stock
represented by such restricted stock units determined as of the consummation
of the Change in Control. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to such restricted stock
<continued>
21
units under the terms of the Award Agreement, and Executive agrees to
surrender all restricted stock units being cashed out hereunder immediately
prior to receiving the cash payment described above.
(c) Notwithstanding any provision in the Incentive Compensation
Plan, the 1998 Option Plan, other relevant plan or program or this Section 6,
all stock options granted to the Executive by the Company which have not
otherwise vested shall be vested and within five (5) days after the
consummation of the Change in Control, the Company shall pay to Executive in
cash an amount equal to the aggregate of the difference between the exercise
price of each stock option granted to Executive prior to the consummation of
the Change in Control, and the fair market value (computed as the average of
the high and low trades reported on the New York Stock Exchange) of the Common
Stock subject to the related option, determined as of the consummation of the
Change in Control. Such cash payment shall be deemed to be in lieu of and in
substitution for any right Executive may have to exercise such stock option or
a related stock appreciation right under the terms of the relevant stock
option plan describing such rights, and Executive agrees to surrender all
stock options and related stock appreciation rights being cashed out hereunder
prior to receiving the cash payment described above.
7. Termination for Cause or Without Good Reason. If, prior to the
expiration of the Term, the Executive's employment is terminated by the
Company for Cause, or if the Executive terminates his employment hereunder
without Good Reason, the Executive shall not be eligible to receive Base Pay
under Section 4(a) or to participate in any Plans under Section 4(b) with
respect to periods after the Termination Date, and except as otherwise
provided by applicable law, and except for the right to receive vested
benefits under any Plan in accordance with the terms of such Plan. However,
the Executive shall be eligible to receive a pro rata portion of any incentive
compensation for the Company's fiscal year during which the Termination Date
occurs, but not for any later years.
8. Termination by Death. If the Executive dies prior to the expiration
of the Term, Executive's beneficiary, estate or family, as applicable, shall
be entitled to receive:
(a) for a period of 90 days beginning on the date of the
Executive's death a biweekly amount equal to the biweekly Base Pay paid to the
Executive by the Company for the payroll period immediately prior to his
death,
(b) any pro rata portion of the Executive's incentive compensation
for the fiscal year in which Executive's death occurs, and
(c) lifetime health insurance benefits in effect immediately prior
to Executive's death.
9. Termination by Disability. If, prior to the expiration of the Term,
the Executive becomes Disabled, the Company or the Executive shall be entitled
to terminate his employment, and Executive shall be entitled to:
(a) any pro rata portion of the Executive's incentive compensation
for the fiscal year in which the Executive's Disability occurs, and
(b) all available benefits under the Plans, including lifetime
life, accident and health insurance benefits substantially similar to those to
which Executive and Executive's family were entitled immediately prior to
Executive's termination of employment with the Company because of Executive
becoming Disabled.
10. Termination by Retirement. If, prior to the expiration of the Term,
the Executive voluntarily elects to retire under the Salaried Employees'
Retirement Plan, Executive's employment will be terminated as of the date of
such retirement.
<continued>
22
11. Funding Upon Potential Change in Control.
(a) Upon the earlier to occur of (i) a Change in Control or (ii) a
declaration by the Board that a Change in Control is imminent, the Company
shall promptly pay to the extent it has not done so, and in any event within
five (5) business days, a sum equal to the present value on the date of the
Change in Control (or on such fifth business day if the Board has declared a
Change in Control to be imminent) of the payments to be made to the Executive
under the provisions of Sections 6 and 12 hereof, which shall be transferred
to (the "Trustee") and added to any principal of the Trust under
[ Trust Agreement, dated , 2000 between the
Company and Trustee] (the "Trust Agreement").
(b) Any payments of compensation, pension, severance or other
benefits by the Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay compensation, pension,
severance and other benefits hereunder, it being the intent of the Company
that assets in such Trust be held as security for the Company's obligation to
pay compensation, pension, severance and other benefits under this Agreement.
12. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that following a Change in Control the Executive's employment with
the Company is terminated by the Company or the Executive, and it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 12) or distribution by the Company or
any of its Affiliates 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 pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
successor provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being 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 ("ISO"), as defined by Section 422 of the Code
(or any successor provision thereto) granted prior to the execution of this
Agreement where the addition of a Gross-Up Payment would cause the ISO to lose
such status, 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 12(f), all determinations
required to be made under this Section 12, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and
the amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (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
<continued>
23
Company and the Executive within 30 calendar days after the Termination Date,
if applicable, and any such other 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 (5) business days after receipt of such
determination and calculations with respect to any Payment to the Executive.
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 Company and the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income
or other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any 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 (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Section 12(f) and the Executive
thereafter is required to make a payment of any Excise Tax, 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 five (5) business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide 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, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 12(b). Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by Section
12(b) shall be borne by the Company. If such fees and expenses are initially
paid by the Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five (5) business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no later than
ten (10) business days after the Executive actually receives notice of such
claim and the Executive shall further apprise the Company of the nature of
<continued>
24
such claim and the date on which such claim is requested to be paid (in each
case, to the extent known by the Executive). 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 he gives such notice to the Company and (ii) the
date that any payment of amount 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) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;
(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 competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to
effectively 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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against 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 limiting the foregoing provisions of
this Section 12(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 12(f)
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 (provided, however, that the Executive may participate
therein at his own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue 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 sue 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 or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, 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 any such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 12(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 12(f)) 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 12(f), 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
<continued>
25
intent to contest such denial or refund prior to the expiration of thirty (30)
calendar days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by the Company to the Executive pursuant to this Section 12.
13. Mitigation. Nothing in this Agreement shall be construed to require
Executive to mitigate his damages upon termination of employment without Cause
or for Good Reason. 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 and that the non-competition
covenant contained in Section 15 will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that
its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise 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 or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense. Notwithstanding any existing or prior attorney-client
relationship between the Company and 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. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing;
provided that, in regard to such matters, the Executive has not acted in bad
faith or with no colorable claim of success.
15. Secrecy and Non-competition.
(a) No Competing Employment. For so long as the Executive is
employed by the Company and continuing for two (2) years after the termination
of such employment for any reason (the "Non-Compete Period"), Executive shall
not, unless he receives the prior written consent of the Board, directly or
indirectly, whether as owner, consultant, employee, partner, venturer, agent,
through stock ownership (except ownership of less than one percent (1.0%) of
the number of shares outstanding of any securities which are publicly traded),
investment of capital, lending of money or property, rendering of services, or
otherwise, compete with any of the businesses engaged in by the Company or
Affiliate at the time of the termination of the Executive's employment
hereunder (such businesses are herein after referred to as the "Business"), or
<continued>
26
assist, become interested in or be connected with any corporation, firm,
partnership, joint venture, sole proprietorship or other entity which so
competes with the Business. The restrictions imposed by this subsection shall
not apply to any geographic area in which neither the Company nor any
Affiliate is engaged in the Business.
(b) No Interference. During the Non-Compete Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization or
entity (other than the Company), intentionally solicit, endeavor to entice
away from the Company or any Affiliate or otherwise interfere with the
relationship of the Company or any Affiliate with, any person who is employed
by or associated with the Company or any Affiliate (including, but not limited
to, any independent sales representatives or organizations) or any person or
entity who is, or was within the then most recent 12-month period, a customer
or client of the Company or any Affiliate.
(c) Secrecy. Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder and his past employment with the Company,
he may acquire or has acquired confidential information and trade secrets
concerning the operation of the Company or any Affiliate, the use or
disclosure of which could cause the Company substantial loss and damages which
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, Executive covenants and agrees with the Company that
he will not at any time, except in performance of Executive's obligations to
the Company hereunder or with the prior written consent of the Board, directly
or indirectly, disclose any secret or confidential information that he may
learn or has learned by reason of his association with the Company or any
Affiliate, or use any such information to the detriment of the Company or any
Affiliate. The term "confidential information", includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's or any Affiliate's
products, manufacturing processes, facilities and methods, research and
development, trade secrets, know-how and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer
lists, marketing plans or strategies, financial information (including the
revenues, costs or profits associated with the Company's or any Affiliate's
products), business plans, prospects or opportunities. Executive understands
and agrees that the rights and obligations set forth in this subsection 15(c)
are perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to
the business of the Company shall be and remain the property of the Company.
Upon the termination of his employment with the Company or upon the request of
the Company at anytime, Executive shall promptly deliver to the Company, and
shall not, without the consent of the Board (which consent shall not be
unreasonably withheld), retain copies of, any written materials not previously
made available to the public, records and documents made by Executive or
coming into his possession concerning the business or affairs of the Company
excluding records relating exclusively to the terms and conditions of his
employment relationship with the Company. Executive understands and agrees
that the rights and obligations set forth in this subsection 15(d) are
perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(e) Stock Ownership. Other than as specified in Section 2(c) or
15(a) hereof, nothing in this Agreement shall prohibit Executive from
acquiring or holding any issue of stock or securities of any company or other
business entity.
<continued>
27
(f) Injunctive Relief. Without intending to limit the remedies
available to the Company, executive acknowledges that a breach of any of the
covenants contained in this Section 15 may result in material irreparable
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be entitled
to obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities prohibited by
this Section 15 or such other relief as may be required to specifically
enforce any of the covenants in this Section 15.
(g) Extension of Non-Compete Period. In addition to the remedies
the Company may seek and obtain pursuant to subsection (f) of this Section 15,
the Non-Compete Period shall be extended by any and all periods during which
Executive shall be found by a court possessing personal jurisdiction over him
to have been in violation of the covenants contained in this Section 15.
16. Release. The receipt of payments provided for in Section 5, Section
6 and Section 12 is conditioned upon the Executive executing and delivering a
release substantially in the form of Annex A hereto, and upon the expiration
of the revocation period provided for in Annex A.
17. Breach.
In addition to the remedies provided for in Section 15(f), if
Executive is in breach of this Agreement, then the Company may, at its sole
option, (i) in the case of a breach of any provision of this Agreement,
immediately terminate all remaining payments and benefits described in Section
5 or Section 6 of this Agreement, and (ii) in the case of a breach of either
Section 15(a) or Section 15(c) of this Agreement, obtain reimbursement from
Executive of all payments by the Company already provided pursuant to Section
5 or Section 6 of this Agreement, plus any expenses, fees and damages incurred
as a result of the breach, with the remainder of this Agreement, and all
promises and covenants herein, remaining in full force and effect.
18. Continued Availability and Cooperation.
(a) In the event of a Termination, the Executive shall cooperate
fully with the Company and with the Company's counsel in connection with any
present and future actual or threatened litigation or administrative
proceeding involving the Company that relates to events, occurrences or
conduct occurring (or claimed to have occurred) during the period of the
Executive's employment by the Company. This cooperation by the Executive
shall include, but not be limited to:
(i) making himself reasonably available for interviews and
discussions with the Company's counsel as well as for depositions and trial
testimony;
(ii) if depositions or trial testimony are to occur, making
himself reasonably available and cooperating in the preparation therefor as
and to the extent that the Company or the Company's counsel reasonably
requests;
(iii) refraining from impeding in any way the Company's
prosecution or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of
the Company's prosecution or defense of such litigation or administrative
proceeding.
(b) In addition to Executive's obligations under this Section 18,
during the Non-Compete Period, Executive shall make himself available for
consultation with and advice to the Company at times and for periods of time
which are mutually agreeable to the Company and Executive.
<continued>
28
19. Successors; Assignability.
(a) By Executive. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Executive without the Company's prior written consent; provided, however, that
nothing in this subsection shall preclude the Executive from designating any
of his beneficiaries to receive any benefits payable hereunder upon his death,
or the executors, administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons entitled thereto.
(b) By the Company. 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
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. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive had terminated his employment for Good
Reason subsequent to a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date.
20. 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 remain in the employment of the Company at any time prior
to a Change in Control; provided, however, that any termination of employment
of the Executive or the removal of the Executive from the office or position
in the Company following the commencement of any discussion with a third
person that ultimately results in a Change in Control shall be deemed to be a
Termination of the Executive after a Change in Control for purposes of this
Agreement. Executive expressly acknowledges that he is an employee at will,
and that the Company may terminate him at any time during the Term for any
reason if the Company makes the payments and provides the benefits provided
for under Section 5 or 6 of this Agreement, and otherwise comply with its
other continuing covenants in this Agreement, including without limitation,
Section 4.
21. 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.
22. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is mutually
agreeable to the parties hereto and is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. Notwithstanding the foregoing, 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
nevertheless remain in full force and effect.
23. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.
<continued>
29
24. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by, interpreted and construed in
accordance with the substantive laws of the State of Ohio, without giving
effect to the principles of conflict of laws of such State.
25. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery or certified mail, return receipt
requested. If addressed to Executive, the notice shall be delivered or mailed
to Executive at his principal residence, 26730 West River Road, Perrysburg,
Ohio 43551 or to such other address as Executive shall give notice in writing
in accordance herewith. If addressed to the Company, the notice shall be
delivered or mailed to the Company at its executive offices at 701 Lima
Avenue, Findlay, Ohio 45840 to the attention of the Board. A notice shall be
deemed given, if by personal delivery, on the date of such delivery or, if by
certified mail, on the date shown on the applicable return receipt.
26. Previous Agreements. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement;
provided, however, that this Agreement shall not supersede or in any way limit
the rights, duties or obligations of the Employee or the Company under the
Plans, except that payments pursuant to Section 5(a) or Section 6(b) shall be
in lieu of any other cash severance pay provided by the Company.
27. Counterparts. This Agreement may be executed by either of the
parties hereto in counterpart, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
28. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the Agreement to be
signed by an officer pursuant to the authority of its Board, and Executive has
executed this Agreement, as of the day and year first written above.
COOPER TIRE & RUBBER COMPANY
By:
---------------------------
Title:
------------------------
------------------------------
Thomas A. Dattilo
Executive
<continued>
30
ANNEX A
Form of Release
WHEREAS, there has been a Termination (as such term is defined in the
Amended and Restated Employment Agreement (the "Agreement") made and entered
into on June 6, 2000 between the undersigned (the "Executive") and COOPER TIRE
& RUBBER COMPANY ("Cooper"), of the Executive's employment from Cooper; and
WHEREAS, the Executive is required to sign this Release in order to
receive the severance benefits as described in Section 5, Section 6 and
Section 12 of the Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to Section 5, Section 6 and Section 12 of
the Agreement, which the Executive acknowledges are in addition to payments
and benefits which the Executive would be entitled to receive absent the
Agreement, the Executive, for himself and his dependents, successors, assigns,
heirs, executors and administrators (and his and their legal representatives
of every kind), hereby releases, dismisses, remises and forever discharges its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel (the "Company") from
any and all arbitrations, claims, including claims for attorney's fees,
demands, damages, suits, proceedings, actions and/or causes of action of any
kind and every description, whether known or unknown, which Executive now has
or may have had for, upon, or by reason of any cause whatsoever ("claims"),
against the Company, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the
Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised
Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections
4112.02 and 4112.99 thereof, and any other applicable state statutes and
regulations, and
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied;
provided, however, that the foregoing shall not apply to claims to enforce
rights that Executive may have as of the date hereof or in the future under
any of Cooper's health, welfare, retirement, pension or incentive plans, under
any indemnification agreement between the Executive and Cooper, under Cooper's
indemnification by-laws, under the directors' and officers' liability coverage
maintained by Cooper, under the applicable provisions of the Delaware General
Corporation Law, that Executive may have in the future under the Agreement or
under this Release.
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and
that any such violation, liability or invasion is expressly denied. The
<continued>
31
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to consult
with and to be advised by legal counsel of his choice, fully understands the
terms of this Release, and enters into this Release freely, voluntarily and
intending to be bound;
(c) He has been given a period of twenty-one (21) days to review
and consider the terms of this Release, prior to its execution and that he may
use as much of the twenty-one (21) day period as he desires; and
(d) He may, within 7 days after execution, revoke this Release.
Revocation shall be made by delivering a written notice of revocation to the
General Counsel at Cooper. For such revocation to be effective, written
notice must be actually received by the General Counsel at Cooper no later
than the close of business on the 7th day after Executive executes this
Release. If Executive does exercise his right to revoke this Release, all of
the terms and conditions of the Release shall be of no force and effect and
Cooper shall not have any obligation to make further payments or provide
benefits to Executive as set forth in Section 5, Section 6, and Section 12 of
the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after the Termination Date as defined in the Agreement.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:
------------------------------ --------------------------------
Thomas A. Dattilo
Executive
32
Part II
Exhibit (10)(ii)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is made
and entered into this 6th day of June, 2000, between COOPER TIRE & RUBBER
COMPANY, a Delaware corporation with its principal offices located at 701 Lima
Avenue, Findlay, Ohio 45840, (the "Company"), and John Fahl, residing at 1811
Windsor Place, Findlay, Ohio 45840 (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of May 3rd, 2000 (the "Original Agreement"), which will be
superseded in its entirety by this Agreement; and
WHEREAS, the Executive and the Company entered into an RSU Award
Agreement dated as of November 18, 1999 (the "Award Agreement"); and
WHEREAS, the Executive has been employed by the Company in the capacity
of Vice President and Tire Division President, and
WHEREAS, the Company desires to continue to retain the services of the
Executive in the future; and
WHEREAS, the Executive desires to continue to serve in the capacity of
Vice President and Tire Division President of the Company, pursuant to the
terms and provisions of this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and intending to be
legally bound hereby, the Company and the Executive hereby amend and restate
the Original Agreement to read as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Affiliate" means any corporation, limited liability company,
joint venture, partnership, or other legal entity in which the Company owns,
directly or indirectly, or has previously owned, at least fifty percent (50%)
of the capital stock, profits, interest or capital interest.
(b) "Average Compensation" means the Executive's average annual
compensation, including Base Pay and any annual and long-term incentive
compensation earned, during the five (5) calendar years prior to the year in
which a Termination occurs.
(c) "Base Pay" means the Executive's rate of annual base salary, as
defined in the Compensation Plan, as in effect from time to time.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means:
(X) prior to a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
<continued>
33
(i) the willful and continued failure by the Executive
to perform substantially the duties of the Executive's position, and the
failure of the Executive to correct such failure of performance after
notification by the Board of any such failure; or
(ii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
(iii) the conviction of a criminal violation involving
fraud, embezzlement or theft in connection with Executive's duties or in the
course of Executive's employment with the Company.
(Y) following a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) any act or omission constituting a material breach
by the Executive of any of his significant obligations or agreements under
this Agreement or the continued failure or refusal of the Executive to
adequately perform the duties reasonably required hereunder which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any Affiliate thereof,
after notification by the Board of such breach, failure or refusal and
failure of the Executive to correct such breach, failure or refusal within
thirty (30) days of such notification (other than by reason of the incapacity
of the Executive due to physical or mental illness); or
(ii) the commission by and conviction of the Executive
of a felony, or the perpetration by and criminal conviction of or civil
verdict finding the Executive committed a dishonest act or common law fraud
against the Company or any affiliate thereof (for the avoidance of doubt,
conviction and civil verdict, in each case, shall mean when no further appeals
may be taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
Any notification to be given by the Board in accordance
with Section 1(e)(X)(i), 1(e)(X)(ii), 1(e)(Y)(i) or 1(e)(Y)(iii) shall
specifically identify the breach, failure, refusal, act or omission to which
the notification relates and, in the case of Section 1(e)(X)(i), 1(e)(X)(ii),
1(e)(Y)(i) or 1(e)(Y)(iii), shall describe the injury to the Company, and such
notification must be given within twelve (12) months of the Board becoming
aware, or within twelve (12) months of when the Board should have reasonably
become aware of the breach, failure, refusal, act, or omission identified in
the notification. Notwithstanding Section 23, failure to notify the Executive
within any such twelve (12) month period shall be deemed to be a waiver by the
Board of any such breach, failure, refusal, act or omission by the Executive
and any such breach, failure, refusal, act or omission by the Executive shall
not then be determined to be a breach of this Agreement.
For the avoidance of doubt and for the purpose of determining
Cause, the exercise of business judgment by the Executive shall not be
determined to be Cause, even if such business judgment materially injures the
financial condition or business reputation of, or is otherwise materially
injurious to the Company or any Affiliate thereof, unless such business
judgment by the Executive was not made in good faith, or constitutes willful
or wanton misconduct, or was an intentional violation of state or federal law.
<continued>
34
(f) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) the Company merges into itself, or is merged or
consolidated with, another entity and as a result of such merger or
consolidation less than 51% of the voting power of the then-outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to such transaction;
(ii) all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
entity or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of
the Company immediately prior to such transaction or series of transactions;
(iii) a person, within the meaning of Section 3(a)(9) or
13(d)(3) (as in effect on the date of this Agreement) of the Securities
Exchange Act of 1934, (the "Exchange Act") become the beneficial owner (as
defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to
the Exchange Act) of (i) 15% or more but less than 35% of the voting power of
the then outstanding voting securities of the Company without prior approval
of the Board, or (ii) 35% or more of the voting power of the then-outstanding
voting securities of the Company; provided, however, that the foregoing does
not apply to any such acquisition that is made by (w) any Affiliate of the
Company; (x) any employee benefit plan of the Company or any Affiliate; or (y)
any person or group of which employees of the Company or of any Affiliate
control a greater than 25% interest unless the Board determines that such
person or group is making a "hostile acquisition;" or (z) any person or group
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Executive; or
(iv) a majority of the members of the Board are not
Continuing Directors, where a "Continuing Director" is any member of the Board
who (x) was a member of the Board on the date of this Agreement or (y) was
nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
(g) "Code" means the Internal Revenue Code of 1986, as amended.
(h) "Committee" means the Compensation Committee of the Board.
(i) "Common Stock" means the Company's common stock, par value
$1.00 per share.
(j) "Company" means the Company as hereinbefore defined.
(k) "Compensation Plan" means the Company's Top Management
Compensation Plan adopted by the Board on April 28, 1973.
(l) "Disability" or "Disabled" means when, the Executive has been
totally disabled by bodily injury or disease so as to prevent him from being
physically able to perform the job duties as required under this Agreement,
and such total disability shall have continued for five (5) consecutive
months, and, in the opinion of a qualified physician selected by the Company,
such disability will presumably be permanent and continuous during the
remainder of Executive's life.
(m) "Good Reason" means the occurrence of any of the following,
without Executive's express, prior written consent:
<continued>
35
(i) a material breach by the Company of Section 2 or Section
4 of this Agreement, including but not limited to, the assignment to the
Executive of any duties inconsistent with his status as Vice President and
General Counsel of the Company, or his removal from such position, or a
substantial alteration in the nature or status of his responsibilities from
those described herein, except, in each case, in connection with a promotion
of the Executive, and the failure of the Company to remedy such breach within
thirty (30) days after receipt of written notice of such breach from the
Executive;
(ii) the relocation of the office of the Company where the
Executive is employed to a location other than Findlay, Ohio, except for
required travel on the Company's business to an extent reasonably required to
perform his duties hereunder;
(iii) except as required by law, the failure by the Company to
continue to provide the Executive with benefits at least as favorable as those
provided to him under the Plans (as defined in Section 4(b)), the taking of
any action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe benefits
enjoyed by him or the failure by the Company to provide Executive with the
number of paid vacation days to which he is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the date of this Agreement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 19 hereof or, if the business of the Company for which
the Executive's services are principally performed is sold, the purchaser of
such business shall fail to agree to assume this Agreement or to provide
Executive with the same or a comparable position, duties, benefits, and base
salary and incentive compensation as provided in Section 4 of this Agreement;
(v) the failure of the Board to elect Executive to his
existing position or an equivalent position; or
(vi) following the six-month anniversary date after a Change
in Control of the Company has occurred, voluntary termination by Executive for
any reason, or without reason, during a period of thirty (30) days from such
date.
(n) "Incentive Compensation Plan" means the Cooper Tire & Rubber
Company 1998 Incentive Compensation Plan, as amended.
(o) "Nonqualified Supplementary Benefit Plan" means the Cooper Tire
& Rubber Company Nonqualified Supplementary Benefit Plan, effective November
8, 1984, as amended.
(p) "Retirement Plans" means the Salaried Employees' Retirement
Plan and the Nonqualified Supplementary Benefit Plan or any successor plans
thereto which provide comparable benefits.
(q) "Salaried Employees' Retirement Plan" means the Cooper Tire &
Rubber Company Salaried Employees' Retirement Plan, effective January 1, 1989,
as amended.
(r) "Severance Period" means, in the event of a Termination, the
period of time commencing on the Termination Date and continuing for the
greater of:
(i) two (2) years, or
(ii) the remainder of the Term (as defined in Section 3).
<continued>
36
(s) "Termination" means:
(i) the involuntary termination of the Executive's
employment by the Company at any time without Cause, for any reason other than
retirement, death or disability, or
(ii) termination of his employment by the Executive for Good
Reason.
(t) "Termination Date" means the date on which the Executive's
employment with the Company is terminated by the company or the Executive for
any reason or for no reason. If the Executive's employment is terminated by
the Company, such date shall be specified in a written notice of termination
(which date shall be no earlier than the date of furnishing such notice), or
if no such date is specified therein, the date of receipt by the Executive of
such written notice of termination, otherwise the Executive shall specify such
date in a written notice of his resignation.
(u) "1998 Option Plan" means the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan, as amended.
2. Employment and Duties.
(a) General. The Company hereby employs the Executive and the
Executive agrees upon the terms and conditions herein set forth to serve as
Vice President and Tire Division President, and, in such capacity, shall
perform such duties as may be delineated in the Bylaws of the Company, and
such other duties, commensurate with the Executive's title and position of
Vice President and Tire Division President, as may be assigned to the
Executive from time to time by the Chief Executive Officer of the Company (the
"CEO") or such other officer of the Company as may be designated by the CEO.
(b) Exclusive Services. Throughout the Term (as defined in Section
3), Executive shall, except as may from time to time be otherwise agreed in
writing by the Company and during reasonable vacations and unless prevented by
ill health, devote his full-time and undivided attention during normal
business hours to the business and affairs of the Company consistent with his
senior executive position, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the
Board or such officer of the Company as may be designated by the Board, and
shall use his best efforts to promote and serve the interests of the Company.
(c) Restrictions on Other Employment. Throughout the Term and
provided that such activities do not contravene the provisions of Section 2(b)
hereof or Section 15 hereof:
(i) Executive may engage in charitable and community affairs;
(ii) Executive may perform inconsequential services without
specific compensation therefor in connection with the management of personal
investments; and,
(iii) Executive may, directly or indirectly, render services to
any other person or organization (including service as a member of the Board
of Directors of any other unaffiliated company), for which he receives
compensation, that is not in competition with the Company, subject in each
case to the approval of the Board. Executive may retain all fees he receives
for such services, and the Company shall not reduce his compensation by the
amount of such fees. For purposes of this Section 2(c)(iii) competition shall
have the same meaning as intended for the purposes of Section 15.
3. Term of Employment. Subject to the provisions of Sections 5 through
Section 10 hereof, the Company shall retain the Executive and the Executive
shall serve in the employ of the Company for a period (the "Term") commencing
<continued>
37
on the date hereof and continuing in effect through June 12, 2001, unless
earlier terminated by Executive having given six (6) months prior written
notice to the Company of Executive's intent to terminate this Agreement.
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to the Executive Base Pay at
the rate of $392,000 per annum, payable biweekly. The Base Pay will be
reviewed not less than annually by the Board or by the Compensation Committee
and may be increased, but not decreased.
(b) Employee Benefit Plans. At all times during the Term, the
Executive shall be provided the opportunity to participate in such Retirement
Plans, and such employee pension benefit plans, whether or not qualified, and
employee welfare benefit plans, programs and arrangements (collectively, the
"Plans") as are generally made available to executives of the Company. Unless
otherwise required by law, the Plans, when considered as a whole, will provide
for benefits to Executive no less favorable than those currently provided.
(c) Incentive Compensation. The Executive shall be eligible to
participate in the annual incentive compensation program established by the
Compensation Plan.
(d) Long-Term Incentive Compensation. The Executive shall be
eligible to participate in such long-term incentive plans and programs as the
Company generally provides to its senior executives.
5. Termination Without Cause or for Good Reason Prior to a Change in
Control. If, prior to the expiration of the Term, the Executive's employment
is terminated by the Company without Cause, or if the Executive terminates his
employment hereunder for Good Reason, in each case prior to a Change in
Control, and conditioned upon the Executive's delivering to the Company the
Release provided for in Section 16 with all periods for revocation expired,
the Executive shall be entitled to receive:
(a) "Severance Pay" which shall equal the sum of the biweekly
payments that the Executive would receive if he were paid at the rate of his
Average Compensation, for the remainder of the Term. Severance Pay shall be
paid in a single lump sum in cash within thirty (30) days following the
expiration of such revocation period.
(b) The Company shall provide the Executive with lifetime life,
accident and health insurance benefits substantially similar to those to
which Executive and Executive's family were entitled immediately prior to the
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 5(b) shall be reduced to the extent comparable benefits are
actually received by Executive from other employment, and any such benefits
actually received by Executive shall be reported to the Company.
(c) In addition to the pension benefits to which the Executive is
entitled under the Retirement Plans, the Company shall pay the Executive in
cash within thirty (30) days following the Termination Date, a single lump sum
equal to the actuarial equivalent of the excess of (1) the retirement pension
(determined as a straight life annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) twenty-four (24)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
<continued>
38
Date (but in no event shall the Executive be deemed to have accumulated
additional months of service credit after his sixty-fifth (65th) birthday),
over (2) the retirement pension (determined as a straight life annuity
commencing at age sixty-five (65)) which the Executive had then accrued
pursuant to the provisions of the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the 1994
Uninsured Pensioner Mortality Table (UP-94) and annual compound interest at
the Corporate Bond yield average for bonds rated Aaa by Moody's reduced by
fifty (50) basis points (.5 percent). The rate chosen from the
aforereferenced table will be for the calendar month five months prior to the
month which contains the effective date of payment and will be truncated to
the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%, etc.).
(d) Notwithstanding any provision in the Award Agreement, all
restricted stock units granted to the Executive which have not otherwise
vested shall immediately vest and within thirty (30) days following the
Termination Date, the Company shall pay to Executive an amount equal to the
fair market value (computed as the average of the high and low trades reported
on the New York Stock Exchange) of the Common Stock represented by such
restricted stock units determined as of the Termination Date. Such cash
payment shall be deemed to be in lieu of and in substitution for any right
Executive may have to such restricted stock units under the terms of the Award
Agreement, and Executive agrees to surrender all restricted stock units being
cashed out hereunder immediately prior to receiving the cash payment described
above;
(e) Notwithstanding any provision in the Incentive Compensation
Plan, 1998 Option Plan or other relevant plan or program, all stock options
granted to the Executive by the Company which have not otherwise vested shall
be vested. Within thirty (30) days after the Termination Date, the Company
shall pay to Executive in cash an amount equal to the aggregate of the
difference between the exercise price of each stock option granted to the
Executive prior to the Termination Date, and the fair market value (computed
as the average of the high and low trades reported on the New York Stock
Exchange) of the Company's stock subject to the related option, determined as
of the Termination Date. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to exercise such stock
option or a related stock appreciation right under the terms of the relevant
stock option plan describing such rights, and Executive agrees to surrender
all stock options and related stock appreciation rights being cashed out
hereunder prior to receiving the cash payment described above.
6. Termination Without Cause or for Good Reason Following a Change in
Control, etc.
(a) If, prior to the expiration of the Term and subsequent to a
Change in Control and during the Severance Period, the Executive's employment
is terminated by the Company without Cause or if the Executive terminates his
employment hereunder for Good Reason, and conditioned upon the Executive's
delivering to the Company the Release provided for in Section 16 with all
periods for revocation expired, the Company shall pay or provide to the
Executive:
(i) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the Executive's
then current Base Pay and pro rata incentive compensation accrued through his
Termination Date; plus
(ii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the greater of:
(A) the Executive's Severance Pay; or
<continued>
39
(B) three (3) times the sum of (x) Executive's Base Pay
plus (y) target annual incentive compensation for the year prior to the Change
in Control; plus
(iii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the actuarial
equivalent of:
(A) the excess of (1) the retirement pension (determined
as a straight line annuity commencing at age sixty-five (65)) which he would
have accrued under the terms of the Retirement Plans (without regard to any
amendment to such Retirement Plans or other pension benefit program described
herein), determined as if the Executive were fully vested thereunder and had
accumulated (after the Termination Date) thirty-six (36) additional months
(or, if greater, the number of months remaining in the Term) of service credit
thereunder at his highest annual rate of compensation during any calendar year
for the five (5) years immediately preceding the Termination Date (but in no
event shall Executive be deemed to have accumulated additional months of
service credit after his sixty-fifth (65th) birthday), over (2) the retirement
pension (determined as a straight life annuity commencing at age sixty-five
(65)) which Executive had then accrued pursuant to the provisions of the
Retirement Plans; plus
(B) the retirement pension Executive has accrued under
the Nonqualified Supplementary Benefit Plan.
For purposes of this subsection, "actuarial equivalent" shall be
determined using the 1994 Uninsured Pensioner Mortality Table (UP-94) and
annual compound interest at the Corporate Bond yield average for bonds rated
Aaa by Moody's reduced by fifty (50) basis points (.5 percent). The rate
chosen from the aforereferenced table will be for the calendar month five
months prior to the month which contains the effective date of payment and
will be truncated to the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%,
etc.);
(iv) for thirty-six (36) months following his Termination
Date, the Company shall arrange to provide Executive with life, accident and
health insurance benefits substantially similar to those to which Executive
and Executive's family were entitled immediately prior to Executive's
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 6(a)(iv) shall be reduced to the extent comparable benefits are
actually received by Executive during the remainder of such period following
his Termination, and any such benefits actually received by Executive shall be
reported to the Company;
(v) following the end of the period specified in subsection
6(a)(iv), lifetime retiree medical and life insurance coverage, which shall be
based on the Company's plans in effect immediately prior to the Change in
Control, and, for purposes of such plans, with the Executive deemed to have
thirty (30) years of credited service and as if he had attained age sixty-five
and retired at the end of such period; and
(vi) outplacement services by a firm selected by the
Executive, at the expense of the Company in an amount up to 15% of the
Executive's Base Pay.
(b) Notwithstanding any provision in the Award Agreement or this
Section 6, all restricted stock units granted to the Executive which have not
otherwise vested shall immediately vest and within five (5) days after the
consummation of the Change in Control the Company shall pay to Executive an
amount equal to the fair market value (computed as the average of the high and
low trades reported on the New York Stock Exchange) of the Common Stock
represented by such restricted stock units determined as of the consummation
of the Change in Control. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to such restricted stock
<continued>
40
units under the terms of the Award Agreement, and Executive agrees to
surrender all restricted stock units being cashed out hereunder immediately
prior to receiving the cash payment described above.
(c) Notwithstanding any provision in the Incentive Compensation
Plan, the 1998 Option Plan, other relevant plan or program or this Section 6,
all stock options granted to the Executive by the Company which have not
otherwise vested shall be vested and within five (5) days after the
consummation of the Change in Control, the Company shall pay to Executive in
cash an amount equal to the aggregate of the difference between the exercise
price of each stock option granted to Executive prior to the consummation of
the Change in Control, and the fair market value (computed as the average of
the high and low trades reported on the New York Stock Exchange) of the Common
Stock subject to the related option, determined as of the consummation of the
Change in Control. Such cash payment shall be deemed to be in lieu of and in
substitution for any right Executive may have to exercise such stock option or
a related stock appreciation right under the terms of the relevant stock
option plan describing such rights, and Executive agrees to surrender all
stock options and related stock appreciation rights being cashed out hereunder
prior to receiving the cash payment described above.
7. Termination for Cause or Without Good Reason. If, prior to the
expiration of the Term, the Executive's employment is terminated by the
Company for Cause, or if the Executive terminates his employment hereunder
without Good Reason, the Executive shall not be eligible to receive Base Pay
under Section 4(a) or to participate in any Plans under Section 4(b) with
respect to periods after the Termination Date, and except as otherwise
provided by applicable law, and except for the right to receive vested
benefits under any Plan in accordance with the terms of such Plan. However,
the Executive shall be eligible to receive a pro rata portion of any incentive
compensation for the Company's fiscal year during which the Termination Date
occurs, but not for any later years.
8. Termination by Death. If the Executive dies prior to the expiration
of the Term, Executive's beneficiary, estate or family, as applicable, shall
be entitled to receive:
(i) for a period of 90 days beginning on the date of the
Executive's death a biweekly amount equal to the biweekly Base Pay paid to the
Executive by the Company for the payroll period immediately prior to his
death,
(ii) any pro rata portion of the Executive's incentive compensation
for the fiscal year in which Executive's death occurs, and
(iii) lifetime health insurance benefits in effect immediately prior
to Executive's Death.
9. Termination by Disability. If, prior to the expiration of the Term,
the Executive becomes Disabled, the Company or the Executive shall be entitled
to terminate his employment, and Executive shall be entitled:
(a) any pro rata portion of the Executive's incentive compensation
for the fiscal year in which the Executive's Disability occurs, and
(b) all available benefits under the Plans, including lifetime
life, accident and health insurance benefits substantially similar to those to
which Executive and Executive's family were entitled immediately prior to
Executive's termination of employment with the Company because of Executive
becoming Disabled.
10. Termination by Retirement. If, prior to the expiration of the Term,
the Executive voluntarily elects to retire under the Salaried Employees'
Retirement Plan, Executive's employment will be terminated as of the date of
such retirement.
<continued>
41
11. Funding Upon Potential Change in Control.
(a) Upon the earlier to occur of (i) a Change in Control or (ii) a
declaration by the Board that a Change in Control is imminent, the Company
shall promptly pay to the extent it has not done so, and in any event within
five (5) business days, a sum equal to the present value on the date of the
Change in Control (or on such fifth business day if the Board has declared a
Change in Control to be imminent) of the payments to be made to the Executive
under the provisions of Sections 6 and 12 hereof, which shall be transferred
to (the "Trustee") and added to any principal of the Trust under [
Trust Agreement, dated , 2000 between the Company and Trustee] (the
"Trust Agreement").
(b) Any payments of compensation, pension, severance or other
benefits by the Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay compensation, pension,
severance and other benefits hereunder, it being the intent of the Company
that assets in such Trust be held as security for the Company's obligation to
pay compensation, pension, severance and other benefits under this Agreement.
12. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that following a Change in Control the Executive's employment with
the Company is terminated by the Company or the Executive, and it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 12) or distribution by the Company or
any of its Affiliates 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 pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
successor provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being 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 ("ISO"), as defined by Section 422 of the Code
(or any successor provision thereto) granted prior to the execution of this
Agreement where the addition of a Gross-Up Payment would cause the ISO to lose
such status, 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 12(f), all determinations
required to be made under this Section 12, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and
the amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (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 30 calendar days after the Termination Date,
<continued>
42
if applicable, and any such other 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 (5) business days after receipt of such
determination and calculations with respect to any Payment to the Executive.
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 Company and the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income
or other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any 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 (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Section 12(f) and the Executive
thereafter is required to make a payment of any Excise Tax, 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 five (5) business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide 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, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 12(b). Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services in
connection with the determinations and calculations contemplated by Section
12(b) shall be borne by the Company. If such fees and expenses are initially
paid by the Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five (5) business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no later than
ten (10) business days after the Executive actually receives notice of such
claim and the Executive shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid (in each
<continued>
43
case, to the extent known by the Executive). 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 he gives such notice to the Company and (ii) the
date that any payment of amount 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) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the Company;
(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 competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to
effectively 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 interest and penalties) incurred in
connection with such contest and shall indemnify and hold harmless the
Executive, on an after-tax basis, for and against 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
limiting the foregoing provisions of this Section 12(f), the Company shall
control all proceedings taken in connection with the contest of any claim
contemplated by this Section 12(f) 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 (provided,
however, that the Executive may participate therein at his own cost and
expense) and may, at its option, either direct the Executive to pay the tax
claimed and sue 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 sue 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 or other tax, including
interest or penalties with respect thereto, imposed with respect to such
advance; and provided further, however, 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 any
such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 12(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 12(f)) 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 12(f), 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 thirty (30)
calendar days after such determination, then such advance shall be forgiven
<continued>
44
and shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by the Company to the Executive pursuant to this Section 12.
13. Mitigation. Nothing in this Agreement shall be construed to require
Executive to mitigate his damages upon termination of employment without Cause
or for Good Reason. 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 and that the non-competition
covenant contained in Section 15 will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that
its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise 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 or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense. Notwithstanding any existing or prior attorney-client
relationship between the Company and 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. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing;
provided that, in regard to such matters, the Executive has not acted in bad
faith or with no colorable claim of success.
15. Secrecy and Noncompetition.
(a) No Competing Employment. For so long as the Executive is
employed by the Company and continuing for two (2) years after the termination
of such employment for any reason (the "Non-Compete Period"), Executive shall
not, unless he receives the prior written consent of the Board, directly or
indirectly, whether as owner, consultant, employee, partner, venturer, agent,
through stock ownership (except ownership of less than one percent (1.0%) of
the number of shares outstanding of any securities which are publicly traded),
investment of capital, lending of money or property, rendering of services, or
otherwise, compete with any of the businesses engaged in by the Company or
Affiliate at the time of the termination of the Executive's employment
hereunder (such businesses are herein after referred to as the "Business"), or
assist, become interested in or be connected with any corporation, firm,
partnership, joint venture, sole proprietorship or other entity which so
<continued>
45
competes with the Business. The restrictions imposed by this subsection shall
not apply to any geographic area in which neither the Company nor any
Affiliate is engaged in the Business.
(b) No Interference. During the Non-Compete Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization or
entity (other than the Company), intentionally solicit, endeavor to entice
away from the Company or any Affiliate or otherwise interfere with the
relationship of the Company or any Affiliate with, any person who is employed
by or associated with the Company or any Affiliate (including, but not limited
to, any independent sales representatives or organizations) or any person or
entity who is, or was within the then most recent 12-month period, a customer
or client of the Company or any Affiliate.
(c) Secrecy. Executive recognizes that the services to be performed
by him hereunder are special, unique and extraordinary in that, by reason of
his employment hereunder and his past employment with the Company, he may
acquire or has acquired confidential information and trade secrets concerning
the operation of the Company or any Affiliate, the use or disclosure of which
could cause the Company substantial loss and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, Executive covenants and agrees with the Company that he will not
at any time, except in performance of Executive's obligations to the Company
hereunder or with the prior written consent of the Board, directly or
indirectly, disclose any secret or confidential information that he may learn
or has learned by reason of his association with the Company or any Affiliate,
or use any such information to the detriment of the Company or any Affiliate.
The term "confidential information", includes, without limitation, information
not previously disclosed to the public or to the trade by the Company's
management with respect to the Company's or any Affiliate's products,
manufacturing processes, facilities and methods, research and development,
trade secrets, know-how and other intellectual property, systems, procedures,
manuals, confidential reports, product price lists, customer lists, marketing
plans or strategies, financial information (including the revenues, costs or
profits associated with the Company's or any Affiliate's products), business
plans, prospects or opportunities. Executive understands and agrees that the
rights and obligations set forth in this subsection 15(c) are perpetual and,
in any case, shall extend beyond the Non-Compete Period and Executive's
employment hereunder.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to
the business of the Company shall be and remain the property of the Company.
Upon the termination of his employment with the Company or upon the request of
the Company at anytime, Executive shall promptly deliver to the Company, and
shall not, without the consent of the Board (which consent shall not be
unreasonably withheld), retain copies of, any written materials not previously
made available to the public, records and documents made by Executive or
coming into his possession concerning the business or affairs of the Company
excluding records relating exclusively to the terms and conditions of his
employment relationship with the Company. Executive understands and agrees
that the rights and obligations set forth in this subsection 15(d) are
perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(e) Stock Ownership. Other than as specified in Section 2(c) or
15(a) hereof, nothing in this Agreement shall prohibit Executive from
acquiring or holding any issue of stock or securities of any company or other
business entity.
(f) Injunctive Relief. Without intending to limit the remedies
available to the Company, executive acknowledges that a breach of any of the
covenants contained in this Section 15 may result in material irreparable
<continued>
46
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be entitled
to obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities prohibited by
this Section 15 or such other relief as may be required to specifically
enforce any of the covenants in this Section 15.
(g) Extension of Non-Compete Period. In addition to the remedies
the Company may seek and obtain pursuant to subsection (f) of this Section 15,
the Non-Compete Period shall be extended by any and all periods during which
Executive shall be found by a court possessing personal jurisdiction over him
to have been in violation of the covenants contained in this Section 15.
16. Release. The receipt of payments provided for in Section 5, Section
6 and Section 12 is conditioned upon the Executive executing and delivering a
release substantially in the form of Annex A hereto, and upon the expiration
of the revocation period provided for in Annex A.
17. Breach.
In addition to the remedies provided for in Section 15(f), if
Executive is in breach of this Agreement, then the Company may, at its sole
option, (i) in the case of a breach of any provision of this Agreement,
immediately terminate all remaining payments and benefits described in Section
5 or Section 6 of this Agreement, and (ii) in the case of a breach of either
Section 15(a) or Section 15(c) of this Agreement, obtain reimbursement from
Executive of all payments by the Company already provided pursuant to Section
5 or Section 6 of this Agreement, plus any expenses, fees and damages incurred
as a result of the breach, with the remainder of this Agreement, and all
promises and covenants herein, remaining in full force and effect.
18. Continued Availability and Cooperation.
(a) In the event of a Termination, the Executive shall cooperate
fully with the Company and with the Company's counsel in connection with any
present and future actual or threatened litigation or administrative
proceeding involving the Company that relates to events, occurrences or
conduct occurring (or claimed to have occurred) during the period of the
Executive's employment by the Company. This cooperation by the Executive
shall include, but not be limited to:
(i) making himself reasonably available for interviews and
discussions with the Company's counsel as well as for depositions and trial
testimony;
(ii) if depositions or trial testimony are to occur, making
himself reasonably available and cooperating in the preparation therefor as
and to the extent that the Company or the Company's counsel reasonably
requests;
(iii) refraining from impeding in any way the Company's
prosecution or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of
the Company's prosecution or defense of such litigation or administrative
proceeding.
(b) In addition to Executive's obligations under this Section 18,
during the Non-Compete Period, Executive shall make himself available for
consultation with and advice to the Company at times and for periods of time
which are mutually agreeable to the Company and Executive.
<continued>
47
19. Successors; Assignability.
(a) By Executive. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Executive without the Company's prior written consent; provided, however, that
nothing in this subsection shall preclude the Executive from designating any
of his beneficiaries to receive any benefits payable hereunder upon his death,
or the executors, administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons entitled thereto.
(b) By the Company. 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 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. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall be a breach
of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive had terminated his employment for Good
Reason subsequent to a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date.
20. 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 remain in the employment of the Company at any time prior
to a Change in Control; provided, however, that any termination of employment
of the Executive or the removal of the Executive from the office or position
in the Company following the commencement of any discussion with a third
person that ultimately results in a Change in Control shall be deemed to be a
Termination of the Executive after a Change in Control for purposes of this
Agreement. Executive expressly acknowledges that he is an employee at will,
and that the Company may terminate him at any time during the Term for any
reason if the Company makes the payments and provides the benefits provided
for under Section 5 or 6 of this Agreement, and otherwise comply with its
other continuing covenants in this Agreement, including without limitation,
Section 4.
21. 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.
22. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is mutually
agreeable to the parties hereto and is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. Notwithstanding the foregoing, 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
nevertheless remain in full force and effect.
23. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.
<continued>
48
24. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by, interpreted and construed in
accordance with the substantive laws of the State of Ohio, without giving
effect to the principles of conflict of laws of such State.
25. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery or certified mail, return receipt
requested. If addressed to Executive, the notice shall be delivered or mailed
to Executive at his principal residence, 1811 Windsor Place, Findlay, Ohio
45840, or to such other address as Executive shall give notice in writing in
accordance herewith. If addressed to the Company, the notice shall be
delivered or mailed to the Company at its executive offices at 701 Lima
Avenue, Findlay, Ohio 45840 to the attention of the Board. A notice shall be
deemed given, if by personal delivery, on the date of such delivery or, if by
certified mail, on the date shown on the applicable return receipt.
26. Previous Agreements. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement;
provided, however, that this Agreement shall not supersede or in any way limit
the rights, duties or obligations of the Employee or the Company under the
Plans, except that payments pursuant to Section 5(a) or Section 6(b) shall be
in lieu of any other cash severance pay provided by the Company.
27. Counterparts. This Agreement may be executed by either of the
parties hereto in counterpart, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
28. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by
an officer pursuant to the authority of its Board, and Executive has executed
this Agreement, as of the day and year first written above.
COOPER TIRE & RUBBER COMPANY
By:
---------------------------
Title: Chairman & CEO
------------------------------
John Fahl, Executive
<continued>
49
ANNEX A
Form of Release
WHEREAS, there has been a Termination (as such term is defined in the
Amended and Restated Employment Agreement (the "Agreement") made and entered
into on June 6, 2000 between the undersigned (the "Executive") and COOPER TIRE
& RUBBER COMPANY ("Cooper"), of the Executive's employment from Cooper; and
WHEREAS, the Executive is required to sign this Release in order to
receive the severance benefits as described in Section 5, Section 6 and
Section 12 of the Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to Section 5, Section 6 and Section 12 of
the Agreement, which the Executive acknowledges are in addition to payments
and benefits which the Executive would be entitled to receive absent the
Agreement, the Executive, for himself and his dependents, successors, assigns,
heirs, executors and administrators (and his and their legal representatives
of every kind), hereby releases, dismisses, remises and forever discharges its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel (the "Company") from
any and all arbitrations, claims, including claims for attorney's fees,
demands, damages, suits, proceedings, actions and/or causes of action of any
kind and every description, whether known or unknown, which Executive now has
or may have had for, upon, or by reason of any cause whatsoever ("claims"),
against the Company, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the
Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised
Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections
4112.02 and 4112.99 thereof, and any other applicable state statutes and
regulations, and
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied;
provided, however, that the foregoing shall not apply to claims to enforce
rights that Executive may have as of the date hereof or in the future under
any of Cooper's health, welfare, retirement, pension or incentive plans, under
any indemnification agreement between the Executive and Cooper, under Cooper's
indemnification by-laws, under the directors' and officers' liability coverage
maintained by Cooper, under the applicable provisions of the Delaware General
Corporation Law, or that Executive may have in the future under the Agreement
or under this Release.
<continued>
50
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and
that any such violation, liability or invasion is expressly denied. The
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) Executive has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to consult
with and to be advised by legal counsel of his choice, fully understands the
terms of this Release, and enters into this Release freely, voluntarily and
intending to be bound;
(c) Executive has been given a period of twenty-one (21) days to
review and consider the terms of this Release, prior to its execution and that
he may use as much of the twenty-one (21) day period as he desires; and
(d) Executive may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the General Counsel at Cooper. For such revocation to be
effective, written notice must be actually received by the General Counsel at
Cooper no later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke this
Release, all of the terms and conditions of the Release shall be of no force
and effect and Cooper shall not have any obligation to make further payments
or provide benefits to Executive as set forth in Section 5, Section 6, and
Section 12 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after the Termination Date as defined in the Agreement.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:
-------------------------- ---------------------------
John Fahl, Executive
51
Part II
Exhibit (10)(iii)
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into
this 6th day of June, 2000, between COOPER TIRE & RUBBER COMPANY, a Delaware
corporation with its principal offices located at 701 Lima Avenue, Findlay,
Ohio 45840, (the "Company"), and James S. McElya, residing at 291 Jefferis
Road, Downingtown, Pennsylvania 19335 (the "Executive").
WITNESSETH:
WHEREAS, the Company desires to retain the services of the Executive in
the capacity of President of Cooper-Standard Automotive; and
WHEREAS, the Executive desires to provide his services to the Company on
the terms and conditions herein provided.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and intending to be
legally bound hereby, the Company and the Executive hereby agree as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Affiliate" means any corporation, limited liability company,
joint venture, partnership, or other legal entity in which the Company owns,
directly or indirectly, or has previously owned, at least fifty percent (50%)
of the capital stock, profits, interest or capital interest.
(b) "Award Agreement" means an RSU Award Agreement between the
Executive and the Company.
(c) "Average Compensation" means the Executive's average annual
compensation, including Base Pay and any annual and long-term incentive
compensation earned, during the five (5) calendar years prior to the year in
which a Termination occurs.
(d) "Base Pay" means the Executive's rate of annual base salary, as
defined in the Compensation Plan, as in effect from time to time.
(e) "Board" means the Board of Directors of the Company.
(f) "Cause" means:
(X) prior to a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) the willful and continued failure by the Executive
to perform substantially the duties of the Executive's position, and the
failure of the Executive to correct such failure of performance after
notification by the Board of any such failure; or
(ii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
(iii) the conviction of a criminal violation involving
fraud, embezzlement or theft in connection with Executive's duties or in the
course of Executive's employment with the Company.
<continued>
52
(Y) following a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) any act or omission constituting a material breach
by the Executive of any of his significant obligations or agreements under
this Agreement or the continued failure or refusal of the Executive to
adequately perform the duties reasonably required hereunder which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any Affiliate thereof,
after notification by the Board of such breach, failure or refusal and
failure of the Executive to correct such breach, failure or refusal within
thirty (30) days of such notification (other than by reason of the incapacity
of the Executive due to physical or mental illness); or
(ii) the commission by and conviction of the Executive
of a felony, or the perpetration by and criminal conviction of or civil
verdict finding the Executive committed a dishonest act or common law fraud
against the Company or any affiliate thereof (for the avoidance of doubt,
conviction and civil verdict, in each case, shall mean when no further appeals
may be taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
any notification to be given by the Board in accordance
with Section 1(e)(X)(i), 1(e)(X)(ii), 1(e)(Y)(i) or 1(e)(Y)(iii) shall
specifically identify the breach, failure, refusal, act or omission to which
the notification relates and, in the case of Section 1(e)(X)(i), 1(e)(X)(ii),
1(e)(Y)(i) or 1(e)(Y)(iii), shall describe the injury to the Company, and such
notification must be given within twelve (12) months of the Board becoming
aware, or within twelve (12) months of when the Board should have reasonably
become aware of the breach, failure, refusal, act, or omission identified in
the notification. Notwithstanding Section 23, failure to notify the Executive
within any such twelve (12) month period shall be deemed to be a waiver by the
Board of any such breach, failure, refusal, act or omission by the Executive
and any such breach, failure, refusal, act or omission by the Executive shall
not then be determined to be a breach of this Agreement.
For the avoidance of doubt and for the purpose of determining
Cause, the exercise of business judgment by the Executive shall not be
determined to be Cause, even if such business judgment materially injures the
financial condition or business reputation of, or is otherwise materially
injurious to the Company or any Affiliate thereof, unless such business
judgment by the Executive was not made in good faith, or constitutes willful
or wanton misconduct, or was an intentional violation of state or federal law.
(g) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) the Company merges into itself, or is merged or
consolidated with, another entity and as a result of such merger or
consolidation less than 51% of the voting power of the then-outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to such transaction;
(ii) all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
<continued>
53
entity or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of
the Company immediately prior to such transaction or series of transactions;
(iii) a person, within the meaning of Section 3(a)(9) or
13(d)(3) (as in effect on the date of this Agreement) of the Securities
Exchange Act of 1934, (the "Exchange Act") become the beneficial owner (as
defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to
the Exchange Act) of (i) 15% or more but less than 35% of the voting power of
the then outstanding voting securities of the Company without prior approval
of the Board, or (ii) 35% or more of the voting power of the then-outstanding
voting securities of the Company; provided, however, that the foregoing does
not apply to any such acquisition that is made by (w) any Affiliate of the
Company; (x) any employee benefit plan of the Company or any Affiliate; or (y)
any person or group of which employees of the Company or of any Affiliate
control a greater than 25% interest unless the Board determines that such
person or group is making a "hostile acquisition;" or (z) any person or group
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Executive; or
(iv) a majority of the members of the Board are not
Continuing Directors, where a "Continuing Director" is any member of the Board
who (x) was a member of the Board on the date of this Agreement or (y) was
nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Compensation Committee of the Board.
(j) "Common Stock" means the Company's common stock, par value
$1.00 per share.
(k) "Company" means the Company as hereinbefore defined.
(l) "Compensation Plan" means the Company's Top Management
Compensation Plan adopted by the Board on April 28, 1973.
(m) "Disability" or "Disabled" means when, the Executive has been
totally disabled by bodily injury or disease so as to prevent him from being
physically able to perform the job duties as required under this Agreement,
and such total disability shall have continued for five (5) consecutive
months, and, in the opinion of a qualified physician selected by the Company,
such disability will presumably be permanent and continuous during the
remainder of Executive's life.
(n) "Good Reason" means the occurrence of any of the following,
without Executive's express, prior written consent:
(i) a material breach by the Company of Section 2 or Section
4 of this Agreement, including but not limited to, the assignment to the
Executive of any duties inconsistent with his status as President of Cooper-
Standard Automotive, or his removal from such position, or a substantial
alteration in the nature of his responsibilities from those described herein,
except, in each case, in connection with a promotion of the Executive, and the
failure of the Company to remedy such breach within thirty (30) days after
receipt of written notice of such breach from the Executive;
(ii) the relocation of the office of the Company where the
Executive is employed to a location that is 150 miles away from the current
location, except for relocation to the Company's headquarters and required
travel on the Company's business to an extent reasonably required to perform
his duties hereunder;
<continued>
54
(iii) except as required by law, the failure by the Company to
continue to provide the Executive with benefits at least as favorable as those
provided to him under the Plans (as defined in Section 4(b)), the taking of
any action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe benefits
enjoyed by him or the failure by the Company to provide Executive with the
number of paid vacation days to which he is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the date of this Agreement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 19 hereof or, if the business of the Company for which
the Executive's services are principally performed is sold, the purchaser of
such business shall fail to agree to assume this Agreement or to provide
Executive with the same or a comparable position, duties, benefits, and base
salary and incentive compensation as provided in Section 4 of this Agreement;
(v) the failure of the Board to elect Executive to his
existing position or an equivalent position; or
(vi) following the six-month anniversary date after a Change
in Control of the Company has occurred, voluntary termination by Executive for
any reason, or without reason, during a period of thirty (30) days from such
date.
(o) "Incentive Compensation Plan" means the Cooper Tire & Rubber
Company 1998 Incentive Compensation Plan, as amended.
(p) "Nonqualified Supplementary Benefit Plan" means the Cooper Tire
& Rubber Company Nonqualified Supplementary Benefit Plan, effective November
8, 1984, as amended.
(q) "Retirement Plans" means the Salaried Employees' Retirement
Plan and the Nonqualified Supplementary Benefit Plan or any successor plans
thereto which provide comparable benefits.
(r) "Salaried Employees' Retirement Plan" means the Cooper Tire &
Rubber Company Salaried Employees' Retirement Plan, effective January 1, 1989,
as amended.
(s) "Severance Period" means, in the event of a Termination, the
period of time commencing on the Termination Date and continuing for the
greater of:
(i) two (2) years, or
(ii) the remainder of the Term (as defined in Section 3).
(t) "Termination" means:
(i) the involuntary termination of the Executive's
employment by the Company at any time without Cause, for any reason other than
retirement, death or disability, or
(ii) termination of his employment by the Executive for Good
Reason.
(u) "Termination Date" means the date on which the Executive's
employment with the Company is terminated by the company or the Executive for
any reason or for no reason. If the Executive's employment is terminated by
the Company, such date shall be specified in a written notice of termination
(which date shall be no earlier than the date of furnishing such notice), or
if no such date is specified therein, the date of receipt by the Executive of
<continued>
55
such written notice of termination, otherwise the Executive shall specify such
date in a written notice of his resignation.
(v) "1998 Option Plan" means the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan, as amended.
2. Employment and Duties.
(a) General. The Company hereby employs the Executive and the
Executive agrees upon the terms and conditions herein set forth to serve as
President of Cooper-Standard Automotive, and, in such capacity, shall perform
such duties as may be delineated in the Bylaws of the Company, and such other
duties, commensurate with the Executive's title and position of President of
Cooper-Standard Automotive, as may be assigned to the Executive from time to
time by the President of the Company or such other officer of the Company as
may be designated by the President.
(b) Exclusive Services. Throughout the Term (as defined in Section
3), Executive shall, except as may from time to time be otherwise agreed in
writing by the Company and during reasonable vacations and unless prevented by
ill health, devote his full-time and undivided attention during normal
business hours to the business and affairs of the Company consistent with his
senior executive position, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the
Board or such officer of the Company as may be designated by the Board, and
shall use his best efforts to promote and serve the interests of the Company.
(c) Restrictions on Other Employment. Throughout the Term and
provided that such activities do not contravene the provisions of Section 2(b)
hereof or Section 15 hereof:
(i) Executive may engage in charitable and community
affairs;
(ii) Executive may perform inconsequential services without
specific compensation therefor in connection with the management of personal
investments; and,
(iii) Executive may, directly or indirectly, render services
to any other person or organization (including service as a member of the
Board of Directors of any other unaffiliated company), for which he receives
compensation, that is not in competition with the Company, subject in each
case to the approval of the Board. Executive may retain all fees he receives
for such services, and the Company shall not reduce his compensation by the
amount of such fees. For purposes of this Section 2(c)(iii) competition shall
have the same meaning as intended for the purposes of Section 15.
3. Term of Employment. Subject to the provisions of Section 5 through
Section 10 hereof, the Company shall retain the Executive and the Executive
shall serve in the employ of the Company for a period (the "Term") commencing
on June 6, 2000 and continuing in effect through December 31, 2002; provided,
however, that commencing on January 1, 2001, and each January 1 thereafter
until the year in which the Executive's 63rd birthday occurs, the Term shall
automatically be extended for one additional year unless, no later than
September 30 of the preceding year, the Company or the Executive shall have
given notice to the other that it does not wish to extend this Agreement.
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for services
rendered hereunder:
<continued>
56
(a) Base Salary. The Company shall pay to the Executive Base Pay
at the rate of $380,000.00 per annum, payable biweekly. The Base Pay will be
reviewed not less than annually by the Board or by the Compensation Committee
and may be increased, but not decreased.
(b) Employee Benefit Plans. At all times during the Term, the
Executive shall be provided the opportunity to participate in such Retirement
Plans, and such employee pension benefit plans, whether or not qualified, and
employee welfare benefit plans, programs and arrangements (collectively, the
"Plans") as are generally made available to executives of the Company. Unless
otherwise required by law, the Plans, when considered as a whole, will provide
for benefits to Executive no less favorable than those currently provided.
(c) Incentive Compensation. The Executive shall be eligible to
participate in the annual incentive compensation program established by the
Compensation Plan.
(d) Long-Term Incentive Compensation. The Executive shall be
eligible to participate in such long-term incentive plans and programs as the
Company generally provides to its senior executives.
5. Termination Without Cause or for Good Reason Prior to a Change in
Control. If, prior to the expiration of the Term, the Executive's employment
is terminated by the Company without Cause, or if the Executive terminates his
employment hereunder for Good Reason, in each case prior to a Change in
Control, and conditioned upon the Executive's delivering to the Company the
Release provided for in Section 16 with all periods for revocation expired,
the Executive shall be entitled to receive:
(a) "Severance Pay" which shall equal the sum of the biweekly
payments that the Executive would receive if he were paid at the rate of his
Average Compensation for the remainder of the Term. Severance Pay shall be
paid in a single lump sum in cash within thirty (30) days following the
expiration of such revocation period.
(b) The Company shall provide the Executive with lifetime life,
accident and health insurance benefits substantially similar to those to which
Executive and Executive's family were entitled immediately prior to the
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 5(b) shall be reduced to the extent comparable benefits are
actually received by Executive from other employment, and any such benefits
actually received by Executive shall be reported to the Company.
(c) In addition to the pension benefits to which the Executive is
entitled under the Retirement Plans, the Company shall pay the Executive in
cash within thirty (30) days following the Termination Date, a single lump sum
equal to the actuarial equivalent of the excess of (1) the retirement pension
(determined as a straight life annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) twenty-four (24)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall the Executive be deemed to have accumulated
additional months of service credit after his sixty-fifth (65th) birthday),
over (2) the retirement pension (determined as a straight life annuity
commencing at age sixty-five (65)) which the Executive had then accrued
pursuant to the provisions of the Retirement Plans. For purposes of this
subsection, "actuarial equivalent" shall be determined using the 1994
Uninsured Pensioner Mortality Table (UP-94) and annual compound interest at
the Corporate Bond yield average for bonds rated Aaa by Moody's reduced by
fifty (50) basis points (.5 percent). The rate chosen from the
<continued>
57
aforereferenced table will be for the calendar month five months prior to the
month which contains the effective date of payment and will be truncated to
the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%, etc.).
(d) Notwithstanding any provision in the Award Agreement, all
restricted stock units granted to the Executive which have not otherwise
vested shall immediately vest and within thirty (30) days following the
Termination Date, the Company shall pay to Executive an amount equal to the
fair market value (computed as the average of the high and low trades reported
on the New York Stock Exchange) of the Common Stock represented by such
restricted stock units determined as of the Termination Date. Such cash
payment shall be deemed to be in lieu of and in substitution for any right
Executive may have to such restricted stock units under the terms of the Award
Agreement, and Executive agrees to surrender all restricted stock units being
cashed out hereunder immediately prior to receiving the cash payment described
above;
(e) Notwithstanding any provision in the Incentive Compensation
Plan, 1998 Option Plan or other relevant plan or program, all stock options
granted to the Executive by the Company which have not otherwise vested shall
be vested. Within thirty (30) days after the Termination Date, the Company
shall pay to Executive in cash an amount equal to the aggregate of the
difference between the exercise price of each stock option granted to the
Executive prior to the Termination Date, and the fair market value (computed
as the average of the high and low trades reported on the New York Stock
Exchange) of the Company's stock subject to the related option, determined as
of the Termination Date. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to exercise such stock
option or a related stock appreciation right under the terms of the relevant
stock option plan describing such rights, and Executive agrees to surrender
all stock options and related stock appreciation rights being cashed out
hereunder prior to receiving the cash payment described above.
6. Termination Without Cause or for Good Reason Following a Change in
Control, etc.
(a) If, prior to the expiration of the Term and, subsequent to a
Change in Control and during the Severance Period, the Executive's employment
is terminated by the Company without Cause or if the Executive terminates his
employment hereunder for Good Reason, and conditioned upon the Executive's
delivering to the Company the Release provided for in Section 16 with all
periods for revocation expired, the Company shall pay or provide to the
Executive:
(i) a single lump sum cash payment within five (5) business
days following the expiration of such revocation period equal to the
Executive's then current Base Pay and pro rata incentive compensation accrued
through his Termination Date; plus
(ii) a single lump sum cash payment within five (5) business
days the expiration of such revocation period equal to the greater of:
(A) the Executive's Severance Pay; or
(B) three (3) times the sum of (x) Executive's Base Pay
plus (y) target annual incentive compensation for the year prior to the Change
in Control; plus
(iii) a single lump sum cash payment within five (5) business
days following the expiration of such revocation period equal to the actuarial
equivalent of:
(A) the excess of (1) the retirement pension
(determined as a straight line annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
<continued>
58
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) thirty-six (36)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall Executive be deemed to have accumulated additional
months of service credit after his sixty-fifth (65th) birthday), over (2) the
retirement pension (determined as a straight life annuity commencing at age
sixty-five (65)) which Executive had then accrued pursuant to the provisions
of the Retirement Plans; plus
(B) the retirement pension Executive has accrued under
the Nonqualified Supplementary Benefit Plan.
For purposes of this subsection, "actuarial equivalent" shall
be determined using the 1994 Uninsured Pensioner Mortality Table (UP-94) and
annual compound interest at the Corporate Bond yield average for bonds rated
Aaa by Moody's reduced by fifty (50) basis points (.5 percent). The rate
chosen from the aforereferenced table will be for the calendar month five
months prior to the month which contains the effective date of payment and
will be truncated to the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%,
etc.);
(iv) for thirty-six (36) months following his Termination
Date, the Company shall arrange to provide Executive with life, accident and
health insurance benefits substantially similar to those to which Executive
and Executive's family were entitled immediately prior to his Termination.
Benefits otherwise receivable by Executive pursuant to this subsection
6(a)(iv) shall be reduced to the extent comparable benefits are actually
received by Executive during the remainder of such period following
Executive's Termination, and any such benefits actually received by Executive
shall be reported to the Company;
(v) following the end of the period specified in subsection
6(a)(iv), lifetime retiree medical and life insurance coverage, which shall be
based on the Company's plans in effect immediately prior to the Change in
Control; and
(vi) outplacement services by a firm selected by the
Executive, at the expense of the Company in an amount up to 15% of the
Executive's Base Pay.
(b) Notwithstanding any provision in the Award Agreement or this
Section 6, all restricted stock units granted to the Executive which have not
otherwise vested shall immediately vest and within five (5) days after the
consummation of the Change in Control the Company shall pay to Executive an
amount equal to the fair market value (computed as the average of the high and
low trades reported on the New York Stock Exchange) of the Common Stock
represented by such restricted stock units determined as of the consummation
of the Change in Control. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to such restricted stock
units under the terms of the Award Agreement, and Executive agrees to
surrender all restricted stock units being cashed out hereunder immediately
prior to receiving the cash payment described above.
(c) Notwithstanding any provision in the Incentive Compensation
Plan, the 1998 Option Plan, other relevant plan or program or this Section 6,
all stock options granted to the Executive by the Company which have not
otherwise vested shall be vested and within five (5) business days after the
consummation of the Change in Control, the Company shall pay to Executive in
cash an amount equal to the aggregate of the difference between the exercise
price of each stock option granted to Executive prior to the consummation of
the Change in Control, and the fair market value (computed as the average of
the high and low trades reported on the New York Stock Exchange) of the Common
<continued>
59
Stock subject to the related option, determined as of the consummation of the
Change in Control. Such cash payment shall be deemed to be in lieu of and in
substitution for any right Executive may have to exercise such stock option or
a related stock appreciation right under the terms of the relevant stock
option plan describing such rights, and Executive agrees to surrender all
stock options and related stock appreciation rights being cashed out hereunder
prior to receiving the cash payment described above.
7. Termination for Cause or Without Good Reason. If, prior to the
expiration of the Term, the Executive's employment is terminated by the
Company for Cause, or if the Executive terminates his employment hereunder
without Good Reason, the Executive shall not be eligible to receive Base Pay
under Section 4(a) or to participate in any Plans under Section 4(b) with
respect to periods after the Termination Date, and except as otherwise
provided by applicable law, and except for the right to receive vested
benefits under any Plan in accordance with the terms of such Plan. However,
the Executive shall be eligible to receive a pro rata portion of any incentive
compensation for the Company's fiscal year during which the Termination Date
occurs, but not for any later years.
8. Termination by Death. If the Executive dies prior to the expiration
of the Term, Executive's beneficiary, estate or family, as applicable, shall
be entitled to receive:
(i) for a period of 90 days beginning on the date of the
Executive's death a biweekly amount equal to the biweekly Base Pay paid to the
Executive by the Company for the payroll period immediately prior to his
death,
(ii) any pro rata portion of the Executive's incentive
compensation for the fiscal year in which Executive's death occurs, and
(iii) lifetime health insurance benefits in effect immediately
prior to Executive's death.
9. Termination by Disability. If, prior to the expiration of the Term,
the Executive becomes Disabled, the Company or the Executive shall be entitled
to terminate his employment, and Executive shall be entitled to:
(a) any pro rata portion of the Executive's incentive
compensation for the fiscal year in which the Executive's Disability occurs,
and
(b) all available benefits under the Plans, including
lifetime life, accident and health insurance benefits substantially similar to
those to which Executive and Executive's family were entitled immediately
prior to Executive's termination of employment with the Company because of
Executive becoming Disabled.
10. Termination by Retirement. If, prior to the expiration of the Term,
the Executive voluntarily elects to retire under the Salaried Employees'
Retirement Plan, Executive's employment will be terminated as of the date of
such retirement.
11. Funding Upon Potential Change in Control.
(a) Upon the earlier to occur of (i) a Change in Control or (ii) a
declaration by the Board that a Change in Control is imminent, the Company
shall promptly pay to the extent it has not done so, and in any event within
five (5) business days, a sum equal to the present value on the date of the
Change in Control (or on such fifth business day if the Board has declared a
Change in Control to be imminent) of the payments to be made to the Executive
<continued>
60
under the provisions of Sections 6 and 12 hereof, which shall be transferred
to (the "Trustee") and added to any principal of the Trust
under [ Trust Agreement, dated ,
2000 between the Company and Trustee] (the "Trust Agreement").
(b) Any payments of compensation, pension, severance or other
benefits by the Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay compensation, pension,
severance and other benefits hereunder, it being the intent of the Company
that assets in such Trust be held as security for the Company's obligation to
pay compensation, pension, severance and other benefits under this Agreement.
12. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that following a Change in Control the Executive's employment with
the Company is terminated by the Company or the Executive, and it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 12) or distribution by the Company or
any of its Affiliates 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 pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
successor provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being 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 ("ISO"), as defined by Section 422 of the Code
(or any successor provision thereto) granted prior to the execution of this
Agreement where the addition of a Gross-Up Payment would cause the ISO to lose
such status, 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 12(f), all determinations
required to be made under this Section 12, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and
the amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (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 30 calendar days after the Termination Date,
if applicable, and any such other 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 (5) business days after receipt of such
determination and calculations with respect to any Payment to the Executive.
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 Company and the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income
<continued>
61
or other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any 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 (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Section 12(f) and the Executive
thereafter is required to make a payment of any Excise Tax, 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 five (5) business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide 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, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 12(b). Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by Section
12(b) shall be borne by the Company. If such fees and expenses are initially
paid by the Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five (5) business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no later than
ten (10) business days after the Executive actually receives notice of such
claim and the Executive shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid (in each
case, to the extent known by the Executive). 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 he gives such notice to the Company and (ii) the
date that any payment of amount 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) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;
<continued>
62
(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 competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to
effectively 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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against 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 limiting the foregoing provisions of
this Section 12(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 12(f)
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 (provided, however, that the Executive may participate
therein at his own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue 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 sue 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 or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, 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 any such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 12(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 12(f)) 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 12(f), 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 thirty (30)
calendar days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by the Company to the Executive pursuant to this Section 12.
13. Mitigation. Nothing in this Agreement shall be construed to require
Executive to mitigate his damages upon termination of employment without Cause
or for Good Reason. 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 and that the non-competition
covenant contained in Section 15 will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that
<continued>
63
its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise 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 or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense. Notwithstanding any existing or prior attorney-client
relationship between the Company and 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. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing;
provided that, in regard to such matters, the Executive has not acted in bad
faith or with no colorable claim of success.
15. Secrecy and Noncompetition.
(a) No Competing Employment. For so long as the Executive is
employed by the Company and continuing for two (2) years after the termination
of such employment for any reason (the "Non-Compete Period"), Executive shall
not, unless he receives the prior written consent of the Board, directly or
indirectly, whether as owner, consultant, employee, partner, venturer, agent,
through stock ownership (except ownership of less than one percent (1.0%) of
the number of shares outstanding of any securities which are publicly traded),
investment of capital, lending of money or property, rendering of services, or
otherwise, compete with any of the businesses engaged in by the Company or
Affiliate at the time of the termination of the Executive's employment
hereunder (such businesses are herein after referred to as the "Business"), or
assist, become interested in or be connected with any corporation, firm,
partnership, joint venture, sole proprietorship or other entity which so
competes with the Business. The restrictions imposed by this subsection shall
not apply to any geographic area in which neither the Company nor any
Affiliate is engaged in the Business.
(b) No Interference. During the Non-Compete Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization or
entity (other than the Company), intentionally solicit, endeavor to entice
away from the Company or any Affiliate or otherwise interfere with the
relationship of the Company or any Affiliate with, any person who is employed
by or associated with the Company or any Affiliate (including, but not limited
<continued>
64
to, any independent sales representatives or organizations) or any person or
entity who is, or was within the then most recent 12-month period, a customer
or client of the Company or any Affiliate.
(c) Secrecy. Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder and his past employment with the Company,
he may acquire or has acquired confidential information and trade secrets
concerning the operation of the Company or any Affiliate, the use or
disclosure of which could cause the Company substantial loss and damages which
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, Executive covenants and agrees with the Company that
he will not at any time, except in performance of Executive's obligations to
the Company hereunder or with the prior written consent of the Board, directly
or indirectly, disclose any secret or confidential information that he may
learn or has learned by reason of his association with the Company or any
Affiliate, or use any such information to the detriment of the Company or any
Affiliate. The term "confidential information", includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's or any Affiliate's
products, manufacturing processes, facilities and methods, research and
development, trade secrets, know-how and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer
lists, marketing plans or strategies, financial information (including the
revenues, costs or profits associated with the Company's or any Affiliate's
products), business plans, prospects or opportunities. Executive understands
and agrees that the rights and obligations set forth in this subsection 15(c)
are perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to
the business of the Company shall be and remain the property of the Company.
Upon the termination of his employment with the Company or upon the request of
the Company at anytime, Executive shall promptly deliver to the Company, and
shall not, without the consent of the Board (which consent shall not be
unreasonably withheld), retain copies of, any written materials not previously
made available to the public, records and documents made by Executive or
coming into his possession concerning the business or affairs of the Company
excluding records relating exclusively to the terms and conditions of his
employment relationship with the Company. Executive understands and agrees
that the rights and obligations set forth in this subsection 15(d) are
perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(e) Stock Ownership. Other than as specified in Section 2(c) or
15(a) hereof, nothing in this Agreement shall prohibit Executive from
acquiring or holding any issue of stock or securities of any company or other
business entity.
(f) Injunctive Relief. Without intending to limit the remedies
available to the Company, executive acknowledges that a breach of any of the
covenants contained in this Section 15 may result in material irreparable
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be entitled
to obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities prohibited by
this Section 15 or such other relief as may be required to specifically
enforce any of the covenants in this Section 15.
(g) Extension of Non-Compete Period. In addition to the remedies
the Company may seek and obtain pursuant to subsection (f) of this Section 15,
the Non-Compete Period shall be extended by any and all periods during which
<continued>
65
Executive shall be found by a court possessing personal jurisdiction over him
to have been in violation of the covenants contained in this Section 15.
16. Release. The receipt of payments provided for in Section 5, Section
6 and Section 12 is conditioned upon the Executive executing and delivering a
release substantially in the form of Annex A hereto, and upon the expiration
of the revocation period provided for in Annex A.
17. Breach.
In addition to the remedies provided for in Section 15(f), if
Executive is in breach of this Agreement, then the Company may, at its sole
option, (i) in the case of a breach of any provision of this Agreement,
immediately terminate all remaining payments and benefits described in Section
5 or Section 6 of this Agreement, and (ii) in the case of a breach of either
Section 15(a) or Section 15(c) of this Agreement, obtain reimbursement from
Executive of all payments by the Company already provided pursuant to Section
5 or Section 6 of this Agreement, plus any expenses, fees and damages incurred
as a result of the breach, with the remainder of this Agreement, and all
promises and covenants herein, remaining in full force and effect.
18. Continued Availability and Cooperation.
(a) In the event of a Termination, the Executive shall cooperate
fully with the Company and with the Company's counsel in connection with any
present and future actual or threatened litigation or administrative
proceeding involving the Company that relates to events, occurrences or
conduct occurring (or claimed to have occurred) during the period of the
Executive's employment by the Company. This cooperation by the Executive
shall include, but not be limited to:
(i) making himself reasonably available for interviews and
discussions with the Company's counsel as well as for depositions and trial
testimony;
(ii) if depositions or trial testimony are to occur, making
himself reasonably available and cooperating in the preparation therefor as
and to the extent that the Company or the Company's counsel reasonably
requests;
(iii) refraining from impeding in any way the Company's
prosecution or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of
the Company's prosecution or defense of such litigation or administrative
proceeding.
(b) In addition to Executive's obligations under this Section 18,
during the Non-Compete Period, Executive shall make himself available for
consultation with and advice to the Company at times and for periods of time
which are mutually agreeable to the Company and Executive.
19. Successors; Assignability.
(a) By Executive. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Executive without the Company's prior written consent; provided, however, that
nothing in this subsection shall preclude the Executive from designating any
of his beneficiaries to receive any benefits payable hereunder upon his death,
or the executors, administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons entitled thereto.
(b) By the Company. 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
<continued>
66
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. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive had terminated his employment for Good
Reason subsequent to a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date.
20. 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 remain in the employment of the Company at any time prior
to a Change in Control; provided, however, that any termination of employment
of the Executive or the removal of the Executive from the office or position
in the Company following the commencement of any discussion with a third
person that ultimately results in a Change in Control shall be deemed to be a
Termination of the Executive after a Change in Control for purposes of this
Agreement. Executive expressly acknowledges that he is an employee at will,
and that the Company may terminate him at any time during the Term for any
reason if the Company makes the payments and provides the benefits provided
for under Section 5 or 6 of this Agreement, and otherwise comply with its
other continuing covenants in this Agreement, including without limitation,
Section 4.
21. 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.
22. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is mutually
agreeable to the parties hereto and is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. Notwithstanding the foregoing, 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
nevertheless remain in full force and effect.
23. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.
24. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by, interpreted and construed in
accordance with the substantive laws of the State of Ohio, without giving
effect to the principles of conflict of laws of such State.
25. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery or certified mail, return receipt
requested. If addressed to Executive, the notice shall be delivered or mailed
to Executive at his principal residence, 291 Jefferis Road, Downingtown,
Pennsylvania 19335, or to such other address as Executive shall give notice in
writing in accordance herewith. If addressed to the Company, the notice shall
be delivered or mailed to the Company at its executive offices at 701 Lima
Avenue, Findlay, Ohio 45840 to the attention of the Board. A notice shall be
deemed given, if by personal delivery, on the date of such delivery or, if by
certified mail, on the date shown on the applicable return receipt.
<continued>
67
26. Previous Agreements. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement;
provided, however, that this Agreement shall not supersede or in any way limit
the rights, duties or obligations of the Employee or the Company under the
Plans, except that payments pursuant to Section 5(a) or Section 6(b) shall be
in lieu of any other cash severance pay provided by the Company.
27. Counterparts. This Agreement may be executed by either of the
parties hereto in counterpart, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
28. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the Agreement to be
signed by its officers pursuant to the authority of its Board, and Executive
has executed this Agreement, as of the day and year first written above.
COOPER TIRE & RUBBER COMPANY
By:
----------------------------
Title: Chairman & CEO
By:
----------------------------
-------------------------------
James S. McElya
Executive
<continued>
68
ANNEX A
Form of Release
WHEREAS, there has been a Termination (as such term is defined in the
Employment Agreement (the "Agreement") made and entered into on June 6, 2000
between the undersigned (the "Executive") and COOPER TIRE & RUBBER COMPANY
("Cooper"), of the Executive's employment from Cooper; and
WHEREAS, the Executive is required to sign this Release in order to
receive the severance benefits as described in Section 5, Section 6 and
Section 12 of the Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to Section 5, Section 6 and Section 12 of
the Agreement, which the Executive acknowledges are in addition to payments
and benefits which the Executive would be entitled to receive absent the
Agreement, the Executive, for himself and his dependents, successors, assigns,
heirs, executors and administrators (and his and their legal representatives
of every kind), hereby releases, dismisses, remises and forever discharges its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel (the "Company") from
any and all arbitrations, claims, including claims for attorney's fees,
demands, damages, suits, proceedings, actions and/or causes of action of any
kind and every description, whether known or unknown, which Executive now has
or may have had for, upon, or by reason of any cause whatsoever ("claims"),
against the Company, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the
Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised
Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections
4112.02 and 4112.99 thereof, and any other applicable state statutes and
regulations, and
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied;
provided, however, that the foregoing shall not apply to claims to enforce
rights that Executive may have as of the date hereof or in the future under
any of Cooper's health, welfare, retirement, pension or incentive plans, under
any indemnification agreement between the Executive and Cooper, under Cooper's
indemnification by-laws, under the directors' and officers' liability coverage
maintained by Cooper, under the applicable provisions of the Delaware General
Corporation Law, that Executive may have in the future under the Agreement or
under this Release.
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and
<continued>
69
that any such violation, liability or invasion is expressly denied. The
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) He has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to consult
with and to be advised by legal counsel of his choice, fully understands the
terms of this Release, and enters into this Release freely, voluntarily and
intending to be bound;
(c) He has been given a period of twenty-one (21) days to review
and consider the terms of this Release, prior to its execution and that he may
use as much of the twenty-one (21) day period as he desires; and
(d) He may, within 7 days after execution, revoke this Release.
Revocation shall be made by delivering a written notice of revocation to the
General Counsel at Cooper. For such revocation to be effective, written
notice must be actually received by the General Counsel at Cooper no later
than the close of business on the 7th day after Executive executes this
Release. If Executive does exercise his right to revoke this Release, all of
the terms and conditions of the Release shall be of no force and effect and
Cooper shall not have any obligation to make further payments or provide
benefits to Executive as set forth in Section 5, Section 6, and Section 12 of
the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after the Termination Date as defined in the Agreement.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:
------------------------ -------------------------------
James S. McElya
Executive
70
Part II
Exhibit (10)(iv)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is
made and entered into this 6th day of June, 2000, between COOPER TIRE & RUBBER
COMPANY, a Delaware corporation with its principal offices located at 701 Lima
Avenue, Findlay, Ohio 45840, (the "Company"), and Roderick F. Millhof,
residing at 8918 Connemarro Ct., Fort Wayne, Indiana 46835 (the "Executive").
WITNESSETH:
WHEREAS, the Executive and the Company entered into an Employment
Agreement dated as of May 3rd, 2000 (the "Original Agreement"), which will be
superseded in its entirety by this Agreement; and
WHEREAS, the Executive and the Company entered into an RSU Award
Agreement dated as of November 18, 1999 (the "Award Agreement"); and
WHEREAS, the Executive has been employed by the Company in the capacity
of Vice President and President, Global Sealing Division, Cooper-Standard
Automotive; and
WHEREAS, the Company desires to continue to retain the services of the
Executive in the future; and
WHEREAS, the Executive desires to continue to serve in the capacity of
Vice President and President, Global Sealing Division, Cooper-Standard
Automotive of the Company, pursuant to the terms and provisions of this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual promises
and agreements contained herein and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and intending to be
legally bound hereby, the Company and the Executive hereby amend and restate
the Original Agreement to read as follows:
1. Certain Defined Terms. In addition to terms defined elsewhere
herein, the following terms have the following meanings when used in this
Agreement with initial capital letters:
(a) "Affiliate" means any corporation, limited liability company,
joint venture, partnership, or other legal entity in which the Company owns,
directly or indirectly, or has previously owned, at least fifty percent (50%)
of the capital stock, profits, interest or capital interest.
(b) "Average Compensation" means the Executive's average annual
compensation, including Base Pay and any annual and long-term incentive
compensation earned, during the five (5) calendar years prior to the year in
which a Termination occurs.
(c) "Base Pay" means the Executive's rate of annual base salary, as
defined in the Compensation Plan, as in effect from time to time.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means:
(X) prior to a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
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71
(i) the willful and continued failure by the
Executive to perform substantially the duties of the Executive's position, and
the failure of the Executive to correct such failure of performance after
notification by the Board of any such failure; or
(ii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
(iii) the conviction of a criminal violation involving
fraud, embezzlement or theft in connection with Executive's duties or in the
course of Executive's employment with the Company.
(Y) following a Change in Control, termination of the
Executive's employment with the Company by the Board because of:
(i) any act or omission constituting a material breach
by the Executive of any of his significant obligations or agreements under
this Agreement or the continued failure or refusal of the Executive to
adequately perform the duties reasonably required hereunder which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any Affiliate thereof,
after notification by the Board of such breach, failure or refusal and
failure of the Executive to correct such breach, failure or refusal within
thirty (30) days of such notification (other than by reason of the incapacity
of the Executive due to physical or mental illness); or
(ii) the commission by and conviction of the Executive
of a felony, or the perpetration by and criminal conviction of or civil
verdict finding the Executive committed a dishonest act or common law fraud
against the Company or any affiliate thereof (for the avoidance of doubt,
conviction and civil verdict, in each case, shall mean when no further appeals
may be taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is
materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or any affiliate thereof,
and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
any notification to be given by the Board in accordance
with Section 1(e)(X)(i), 1(e)(X)(ii), 1(e)(Y)(i) or 1(e)(Y)(iii) shall
specifically identify the breach, failure, refusal, act or omission to which
the notification relates and, in the case of Section 1(e)(X)(i), 1(e)(X)(ii),
1(e)(Y)(i) or 1(e)(Y)(iii), shall describe the injury to the Company, and such
notification must be given within twelve (12) months of the Board becoming
aware, or within twelve (12) months of when the Board should have reasonably
become aware of the breach, failure, refusal, act, or omission identified in
the notification. Notwithstanding Section 23, failure to notify the Executive
within any such twelve (12) month period shall be deemed to be a waiver by the
Board of any such breach, failure, refusal, act or omission by the Executive
and any such breach, failure, refusal, act or omission by the Executive shall
not then be determined to be a breach of this Agreement.
For the avoidance of doubt and for the purpose of
determining Cause, the exercise of business judgment by the Executive shall
not be determined to be Cause, even if such business judgment materially
injures the financial condition or business reputation of, or is otherwise
materially injurious to the Company or any Affiliate thereof, unless such
business judgment by the Executive was not made in good faith, or constitutes
<continued>
72
willful or wanton misconduct, or was an intentional violation of state or
federal law.
(f) "Cause" means termination of the Executive's employment with
the Company by the Board because of:
(i) any act or omission constituting a material breach by
the Executive of any of his significant obligations or agreements under this
Agreement or the continued failure or refusal of the Executive to adequately
perform the duties reasonably required hereunder which is materially injurious
to the financial condition or business reputation of, or is otherwise
materially injurious to, the Company or any Affiliate thereof, after
notification by the Board of such breach, failure or refusal and failure of
the Executive to correct such breach, failure or refusal within thirty (30)
days of such notification (other than by reason of the incapacity of the
Executive due to physical or mental illness); or
(ii) the commission by and conviction of the Executive of a
felony, or the perpetration by and criminal conviction of or civil verdict
finding the Executive committed a dishonest act or common law fraud against
the Company or any affiliate thereof (for the avoidance of doubt, conviction
and civil verdict, in each case, shall mean when no further appeals may be
taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is materially
injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any affiliate thereof, and
failure of the Executive to correct such act or omission after notification by
the Board of any such act or omission; or
(iv) any notification to be given by the Board in accordance
with Section 1(e)(i) or 1(e)(iii) shall specifically identify the breach,
failure, refusal, act or omission to which the notification relates and, in
the case of Section 1(e)(i) or 1(e)(iii), shall describe the injury to the
Company, and such notification must be given within twelve (12) months of the
Board becoming aware, or within twelve (12) months of when the Board should
have reasonably become aware of the breach, failure, refusal, act, or omission
identified in the notification. Notwithstanding Section 23, failure to notify
the Executive within any such twelve (12) month period shall be deemed to be a
waiver by the Board of any such breach, failure, refusal, act or omission by
the Executive and any such breach, failure, refusal, act or omission by the
Executive shall not then be determined to be a breach of this Agreement.
For the avoidance of doubt and for the purpose of
determining Cause, the exercise of business judgment by the Executive shall
not be determined to be Cause, even if such business judgment materially
injures the financial condition or business reputation of, or is otherwise
materially injurious to the Company or any Affiliate thereof, unless such
business judgment by the Executive was not made in good faith, or constitutes
willful or wanton misconduct, or was an intentional violation of state or
federal law.
(g) "Change in Control" means the occurrence during the Term of any
of the following events:
(i) the Company merges into itself, or is merged or
consolidated with, another entity and as a result of such merger or
consolidation less than 51% of the voting power of the then-outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to such transaction;
<continued>
73
(ii) all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
entity or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of
the Company immediately prior to such transaction or series of transactions;
(iii) a person, within the meaning of Section 3(a)(9) or
13(d)(3) (as in effect on the date of this Agreement) of the Securities
Exchange Act of 1934, (the "Exchange Act") become the beneficial owner (as
defined in Rule 13d-3 of the Securities and Exchange Commission pursuant to
the Exchange Act) of (i) 15% or more but less than 35% of the voting power of
the then outstanding voting securities of the Company without prior approval
of the Board, or (ii) 35% or more of the voting power of the then-outstanding
voting securities of the Company; provided, however, that the foregoing does
not apply to any such acquisition that is made by (w) any Affiliate of the
Company; (x) any employee benefit plan of the Company or any Affiliate; or (y)
any person or group of which employees of the Company or of any Affiliate
control a greater than 25% interest unless the Board determines that such
person or group is making a "hostile acquisition;" or (z) any person or group
that directly or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the Executive; or
(iv) a majority of the members of the Board are not
Continuing Directors, where a "Continuing Director" is any member of the Board
who (x) was a member of the Board on the date of this Agreement or (y) was
nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the
time of such nomination or election.
(h) "Code" means the Internal Revenue Code of 1986, as amended.
(i) "Committee" means the Compensation Committee of the Board.
(j) "Common Stock" means the Company's common stock, par value
$1.00 per share.
(k) "Company" means the Company as hereinbefore defined.
(l) "Compensation Plan" means the Company's Top Management
Compensation Plan adopted by the Board on April 28, 1973.
(m) "Disability" or "Disabled" means when, the Executive has been
totally disabled by bodily injury or disease so as to prevent him from being
physically able to perform the job duties as required under this Agreement,
and such total disability shall have continued for five (5) consecutive
months, and, in the opinion of a qualified physician selected by the Company,
such disability will presumably be permanent and continuous during the
remainder of Executive's life.
(n) "Good Reason" means the occurrence of any of the following,
without Executive's express, prior written consent:
(i) a material breach by the Company of Section 2 or Section
4 of this Agreement, including but not limited to, the assignment to the
Executive of any duties inconsistent with his status as Vice President and
President, Global Sealing Division, Cooper-Standard Automotive of the Company,
or his removal from such position, or a substantial alteration in the nature
or status of his responsibilities from those described herein, except, in each
case, in connection with a promotion of the Executive, and the failure of the
Company to remedy such breach within thirty (30) days after receipt of written
notice of such breach from the Executive;
<continued>
74
(ii) the relocation of the office of the Company where the
Executive is employed to a location that is 150 miles away from the current
location, except for required travel on the Company's business to an extent
reasonably required to perform his duties hereunder;
(iii) except as required by law, the failure by the Company to
continue to provide the Executive with benefits at least as favorable as those
provided to him under the Plans (as defined in Section 4(b)), the taking of
any action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe benefits
enjoyed by him or the failure by the Company to provide Executive with the
number of paid vacation days to which he is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the date of this Agreement;
(iv) the failure of the Company to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 19 hereof or, if the business of the Company for which
the Executive's services are principally performed is sold, the purchaser of
such business shall fail to agree to assume this Agreement or to provide
Executive with the same or a comparable position, duties, benefits, and base
salary and incentive compensation as provided in Section 4 of this Agreement;
(v) the failure of the Board to elect Executive to his
existing position or an equivalent position; or
(vi) following the six-month anniversary date after a Change
in Control of the Company has occurred, voluntary termination by Executive for
any reason, or without reason, during a period of thirty (30) days from such
date.
(o) "Incentive Compensation Plan" means the Cooper Tire & Rubber
Company 1998 Incentive Compensation Plan, as amended.
(p) Nonqualified Supplementary Benefit Plan" means the Cooper Tire
& Rubber Company Nonqualified Supplementary Benefit Plan, effective November
8, 1984, as amended.
(q) "Retirement Plans" means the Salaried Employees' Retirement
Plan and the Nonqualified Supplementary Benefit Plan or any successor plans
thereto which provide comparable benefits.
(r) "Salaried Employees' Retirement Plan" means the Cooper Tire &
Rubber Company Salaried Employees' Retirement Plan, effective January 1, 1989,
as amended.
(s) "Severance Period" means, in the event of a Termination, the
period of time commencing on the Termination Date and continuing for the
greater of:
(i) two (2) years, or
(ii) the remainder of the Term (as defined in Section 3).
(t) "Termination" means:
(i) the involuntary termination of the Executive's
employment by the Company at any time without Cause, for any reason other than
retirement, death or disability, or
(ii) termination of his employment by the Executive for Good
Reason.
(u) "Termination Date" means the date on which the Executive's
employment with the Company is terminated by the company or the Executive for
<continued>
75
any reason or for no reason. If the Executive's employment is terminated by
the Company, such date shall be specified in a written notice of termination
(which date shall be no earlier than the date of furnishing such notice), or
if no such date is specified therein, the date of receipt by the Executive of
such written notice of termination, otherwise the Executive shall specify such
date in a written notice of his resignation.
(v) "1998 Option Plan" means the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan, as amended.
2. Employment and Duties.
(a) General. The Company hereby employs the Executive and the
Executive agrees upon the terms and conditions herein set forth to serve as
Vice President and President, Global Sealing Division, Cooper-Standard
Automotive, and, in such capacity, shall perform such duties as may be
delineated in the Bylaws of the Company, and such other duties, commensurate
with the Executive's title and position of Vice President and President,
Global Sealing Division, Cooper-Standard Automotive, as may be assigned to the
Executive from time to time by the Chief Executive Officer of the Company (the
"CEO") or such other officer of the Company as may be designated by the CEO.
(b) Exclusive Services. Throughout the Term (as defined in Section
3), Executive shall, except as may from time to time be otherwise agreed in
writing by the Company and during reasonable vacations and unless prevented by
ill health, devote his full-time and undivided attention during normal
business hours to the business and affairs of the Company consistent with his
senior executive position, shall in all respects conform to and comply with
the lawful and reasonable directions and instructions given to him by the
Board or such officer of the Company as may be designated by the Board, and
shall use his best efforts to promote and serve the interests of the Company.
(c) Restrictions on Other Employment. Throughout the Term and
provided that such activities do not contravene the provisions of Section 2(b)
hereof or Section 15 hereof:
(i) Executive may engage in charitable and community
affairs;
(ii) Executive may perform inconsequential services without
specific compensation therefor in connection with the management of personal
investments; and,
(iii) Executive may, directly or indirectly, render services
to any other person or organization (including service as a member of the
Board of Directors of any other unaffiliated company), for which he receives
compensation, that is not in competition with the Company, subject in each
case to the approval of the Board. Executive may retain all fees he receives
for such services, and the Company shall not reduce his compensation by the
amount of such fees. For purposes of this Section 2(c)(iii) competition shall
have the same meaning as intended for the purposes of Section 15.
3. Term of Employment. Subject to the provisions of Sections 5 through
Section 10 hereof, the Company shall retain the Executive and the Executive
shall serve in the employ of the Company for a period (the "Term") commencing
on February 8, 2000, and continuing in effect through December 31, 2002;
provided, however, that commencing on January 1, 2001, and each January 1
thereafter until the year in which the Executive's 63rd birthday occurs, the
Term shall automatically be extended for one additional year unless, no later
than September 30 of the preceding year, the Company or the Executive shall
have given notice to the other that it does not wish to extend this Agreement.
<continued>
76
4. Compensation and Other Benefits. Subject to the provisions of this
Agreement, the Company shall pay and provide the following compensation and
other benefits to the Executive during the Term as compensation for services
rendered hereunder:
(a) Base Salary. The Company shall pay to the Executive Base Pay
at the rate of $320,000.00 per annum, payable biweekly. The Base Pay will be
reviewed not less than annually by the Board or by the Compensation Committee
and may be increased, but not decreased.
(b) Employee Benefit Plans. At all times during the Term, the
Executive shall be provided the opportunity to participate in such Retirement
Plans, and such employee pension benefit plans, whether or not qualified, and
employee welfare benefit plans, programs and arrangements (collectively, the
"Plans") as are generally made available to executives of the Company. Unless
otherwise required by law, the Plans, when considered as a whole, will provide
for benefits to Executive no less favorable than those currently provided.
(c) Incentive Compensation. The Executive shall be eligible to
participate in the annual incentive compensation program established by the
Compensation Plan.
(d) Long-Term Incentive Compensation. The Executive shall be
eligible to participate in such long-term incentive plans and programs as the
Company generally provides to its senior executives.
5. Termination Without Cause or for Good Reason Prior to a Change in
Control. If, prior to the expiration of the Term, the Executive's employment
is terminated by the Company without Cause, or if the Executive terminates his
employment hereunder for Good Reason, in each case prior to a Change in
Control, and conditioned upon the Executive's delivering to the Company the
Release provided for in Section 16 with all periods for revocation expired,
the Executive shall be entitled to receive:
(a) "Severance Pay" which shall equal the sum of the biweekly
payments that the Executive would receive if he were paid at the rate of his
Average Compensation, for the remainder of the Term. Severance Pay shall be
paid in a single lump sum in cash within thirty (30) days following the
expiration of such revocation period.
(b) The Company shall provide the Executive with lifetime life,
accident and health insurance benefits substantially similar to those to
which Executive and Executive's family were entitled immediately prior to the
Termination. Benefits otherwise receivable by Executive pursuant to this
subsection 5(b) shall be reduced to the extent comparable benefits are
actually received by Executive from other employment, and any such benefits
actually received by Executive shall be reported to the Company.
(c) In addition to the pension benefits to which the Executive is
entitled under the Retirement Plans, the Company shall pay the Executive in
cash within thirty (30) days following the Termination Date, a single lump sum
equal to the actuarial equivalent of the excess of (1) the retirement pension
(determined as a straight life annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) twenty-four (24)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall the Executive be deemed to have accumulated
additional months of service credit after his sixty-fifth (65th) birthday),
over (2) the retirement pension (determined as a straight life annuity
commencing at age sixty-five (65)) which the Executive had then accrued
pursuant to the provisions of the Retirement Plans. For purposes of this
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77
subsection, "actuarial equivalent" shall be determined using the 1994
Uninsured Pensioner Mortality Table (UP-94) and annual compound interest at
the Corporate Bond yield average for bonds rated Aaa by Moody's reduced by
fifty (50) basis points (.5 percent). The rate chosen from the
aforereferenced table will be for the calendar month five months prior to the
month which contains the effective date of payment and will be truncated to
the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%, etc.).
(d) Notwithstanding any provision in the Award Agreement, all
restricted stock units granted to the Executive which have not otherwise
vested shall immediately vest and within thirty (30) days following the
Termination Date, the Company shall pay to Executive an amount equal to the
fair market value (computed as the average of the high and low trades reported
on the New York Stock Exchange) of the Common Stock represented by such
restricted stock units determined as of the Termination Date. Such cash
payment shall be deemed to be in lieu of and in substitution for any right
Executive may have to such restricted stock units under the terms of the Award
Agreement, and Executive agrees to surrender all restricted stock units being
cashed out hereunder immediately prior to receiving the cash payment described
above;
(e) Notwithstanding any provision in the Incentive Compensation
Plan, 1998 Option Plan or other relevant plan or program, all stock options
granted to the Executive by the Company which have not otherwise vested shall
be vested. Within thirty (30) days after the Termination Date, the Company
shall pay to Executive in cash an amount equal to the aggregate of the
difference between the exercise price of each stock option granted to the
Executive prior to the Termination Date, and the fair market value (computed
as the average of the high and low trades reported on the New York Stock
Exchange) of the Company's stock subject to the related option, determined as
of the Termination Date. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to exercise such stock
option or a related stock appreciation right under the terms of the relevant
stock option plan describing such rights, and Executive agrees to surrender
all stock options and related stock appreciation rights being cashed out
hereunder prior to receiving the cash payment described above.
6. Termination Without Cause or for Good Reason Following a Change in
Control, etc.
(a) If, prior to the expiration of the Term and subsequent to a
Change in Control and during the Severance Period, the Executive's employment
is terminated by the Company without Cause or if the Executive terminates his
employment hereunder for Good Reason, and conditioned upon the Executive's
delivering to the Company the Release provided for in Section 16 with all
periods for revocation expired, the Company shall pay or provide to the
Executive:
(i) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the Executive's
then current Base Pay and pro rata incentive compensation accrued through his
Termination Date; plus
(ii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the greater of:
(A) the Executive's Severance Pay; or
(B) three (3) times the sum of (x) Executive's Base Pay
plus (y) target annual incentive compensation for the year prior to the Change
in Control; plus
(iii) a single lump sum cash payment within five (5) days
following the expiration of such revocation period equal to the actuarial
equivalent of:
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78
(A) the excess of (1) the retirement pension
(determined as a straight line annuity commencing at age sixty-five (65))
which he would have accrued under the terms of the Retirement Plans (without
regard to any amendment to such Retirement Plans or other pension benefit
program described herein), determined as if the Executive were fully vested
thereunder and had accumulated (after the Termination Date) thirty-six (36)
additional months (or, if greater, the number of months remaining in the Term)
of service credit thereunder at his highest annual rate of compensation during
any calendar year for the five (5) years immediately preceding the Termination
Date (but in no event shall Executive be deemed to have accumulated additional
months of service credit after his sixty-fifth (65th) birthday), over (2) the
retirement pension (determined as a straight life annuity commencing at age
sixty-five (65)) which Executive had then accrued pursuant to the provisions
of the Retirement Plans; plus
(B) the retirement pension Executive has accrued under
the Nonqualified Supplementary Benefit Plan.
For purposes of this subsection, "actuarial equivalent" shall be
determined using the 1994 Uninsured Pensioner Mortality Table (UP-94) and
annual compound interest at the Corporate Bond yield average for bonds rated
Aaa by Moody's reduced by fifty (50) basis points (.5 percent). The rate
chosen from the aforereferenced table will be for the calendar month five
months prior to the month which contains the effective date of payment and
will be truncated to the lower 0.25% increment (e.g. 6.00%, 6.25%, 6.50%,
etc.);
(iv) for thirty-six (36) months following his Termination
Date, the Company shall arrange to provide Executive with life, accident and
health insurance benefits substantially similar to those to which Executive
and Executive's family were entitled immediately prior to his Termination.
Benefits otherwise receivable by Executive pursuant to this subsection
6(a)(iv) shall be reduced to the extent comparable benefits are actually
received by Executive during the remainder of such period following
Executive's Termination, and any such benefits actually received by Executive
shall be reported to the Company;
(v) following the end of the period specified in subsection
6(a)(iv), lifetime retiree medical and life insurance coverage, which shall be
based on the Company's plans in effect immediately prior to the Change in
Control, and, for purposes of such plans, with the Executive deemed to have
thirty (30) years of credited service and as if he had attained age sixty-five
and retired at the end of such period; and
(vi) outplacement services by a firm selected by the
Executive, at the expense of the Company in an amount up to 15% of the
Executive's Base Pay.
(b) Notwithstanding any provision in the Award Agreement or this
Section 6, all restricted stock units granted to the Executive which have not
otherwise vested shall immediately vest and within five (5) days after the
consummation of the Change in Control the Company shall pay to Executive an
amount equal to the fair market value (computed as the average of the high and
low trades reported on the New York Stock Exchange) of the Common Stock
represented by such restricted stock units determined as of the consummation
of the Change in Control. Such cash payment shall be deemed to be in lieu of
and in substitution for any right Executive may have to such restricted stock
units under the terms of the Award Agreement, and Executive agrees to
surrender all restricted stock units being cashed out hereunder immediately
prior to receiving the cash payment described above.
(c) Notwithstanding any provision in the Incentive Compensation
Plan, the 1998 Option Plan, other relevant plan or program or this Section 6,
all stock options granted to the Executive by the Company which have not
otherwise vested shall be vested and within five (5) days after the
<continued>
79
consummation of the Change in Control, the Company shall pay to Executive in
cash an amount equal to the aggregate of the difference between the exercise
price of each stock option granted to Executive prior to the consummation of
the Change in Control, and the fair market value (computed as the average of
the high and low trades reported on the New York Stock Exchange) of the Common
Stock subject to the related option, determined as of the consummation of the
Change in Control. Such cash payment shall be deemed to be in lieu of and in
substitution for any right Executive may have to exercise such stock option or
a related stock appreciation right under the terms of the relevant stock
option plan describing such rights, and Executive agrees to surrender all
stock options and related stock appreciation rights being cashed out hereunder
prior to receiving the cash payment described above.
7. Termination for Cause or Without Good Reason. If, prior to the
expiration of the Term, the Executive's employment is terminated by the
Company for Cause, or if the Executive terminates his employment hereunder
without Good Reason, the Executive shall not be eligible to receive Base Pay
under Section 4(a) or to participate in any Plans under Section 4(b) with
respect to periods after the Termination Date, and except as otherwise
provided by applicable law, and except for the right to receive vested
benefits under any Plan in accordance with the terms of such Plan. However,
the Executive shall be eligible to receive a pro rata portion of any incentive
compensation for the Company's fiscal year during which the Termination Date
occurs, but not for any later years.
8. Termination by Death. If the Executive dies prior to the expiration
of the Term, Executive's beneficiary, estate or family, as applicable, shall
be entitled to receive:
(i) for a period of 90 days beginning on the date of the
Executive's death a biweekly amount equal to the biweekly Base Pay paid to the
Executive by the Company for the payroll period immediately prior to his
death,
(ii) any pro rata portion of the Executive's incentive
compensation for the fiscal year in which Executive's death occurs, and
(iii) lifetime health insurance benefits in effect
immediately prior to Executive's death.
9. Termination by Disability. If, prior to the expiration of the Term,
the Executive becomes Disabled, the Company or the Executive shall be entitled
to terminate his employment, and Executive shall be entitled to:
(a) any pro rata portion of the Executive's incentive compensation
for the fiscal year in which the Executive's Disability occurs, and
(b) all available benefits under the Plans, including lifetime
life, accident and health insurance benefits substantially similar to those to
which Executive and Executive's family were entitled immediately prior to
Executive's termination of employment with the Company because of Executive
becoming Disabled.
10. Termination by Retirement. If, prior to the expiration of the Term,
the Executive voluntarily elects to retire under the Salaried Employees'
Retirement Plan, Executive's employment will be terminated as of the date of
such retirement.
11. Funding Upon Potential Change in Control.
(a) Upon the earlier to occur of (i) a Change in Control or (ii) a
declaration by the Board that a Change in Control is imminent, the Company
shall promptly pay to the extent it has not done so, and in any event within
five (5) business days, a sum equal to the present value on the date of the
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80
Change in Control (or on such fifth business day if the Board has declared a
Change in Control to be imminent) of the payments to be made to the Executive
under the provisions of Sections 6 and 12 hereof, which shall be transferred
to the "Trustee") and added to any principal of the Trust
under [ Trust Agreement, dated , 2000 between the
Company and Trustee] (the "Trust Agreement").
(b) Any payments of compensation, pension, severance or other
benefits by the Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay compensation, pension,
severance and other benefits hereunder, it being the intent of the Company
that assets in such Trust be held as security for the Company's obligation to
pay compensation, pension, severance and other benefits under this Agreement.
12. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event that following a Change in Control the Executive's employment with
the Company is terminated by the Company or the Executive, and it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up
payments provided for in this Section 12) or distribution by the Company or
any of its Affiliates 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 pursuant to or by reason of any other agreement,
policy, plan, program or arrangement, including without limitation any stock
option, performance share, performance unit, stock appreciation right or
similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code (or any
successor provision thereto) by reason of being considered "contingent on a
change in ownership or control" of the Company, within the meaning of Section
280G of the Code (or any successor provision thereto) or to any similar tax
imposed by state or local law, or any interest or penalties with respect to
such tax (such tax or taxes, together with any such interest and penalties,
being 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 ("ISO"), as defined by Section 422 of the Code
(or any successor provision thereto) granted prior to the execution of this
Agreement where the addition of a Gross-Up Payment would cause the ISO to lose
such status, 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 12(f), all determinations
required to be made under this Section 12, including whether an Excise Tax is
payable by the Executive and the amount of such Excise Tax and whether a
Gross-Up Payment is required to be paid by the Company to the Executive and
the amount of such Gross-Up Payment, if any, shall be made by a nationally
recognized accounting firm (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 30 calendar days after the Termination Date,
if applicable, and any such other 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 (5) business days after receipt of such
determination and calculations with respect to any Payment to the Executive.
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
<continued>
81
the Company and the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income
or other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any 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 (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Section 12(f) and the Executive
thereafter is required to make a payment of any Excise Tax, 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 five (5) business days after receipt of such
determination and calculations.
(c) The Company and the Executive shall each provide 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, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Section 12(b). Any determination by the
Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon
the Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
ther documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by Section
12(b) shall be borne by the Company. If such fees and expenses are initially
paid by the Executive, the Company shall reimburse the Executive the full
amount of such fees and expenses within five (5) business days after receipt
from the Executive of a statement therefor and reasonable evidence of his
payment thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no later than
ten (10) business days after the Executive actually receives notice of such
claim and the Executive shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid (in each
case, to the extent known by the Executive). 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 he gives such notice to the Company and (ii) the
date that any payment of amount 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:
<continued>
82
(i) provide the Company with any written records or
documents in his possession relating to such claim reasonably requested by the
Company;
(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 competent in respect of the subject matter and
reasonably selected by the Company;
(iii) cooperate with the Company in good faith in order to
effectively 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 interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against 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 limiting the foregoing provisions of
this Section 12(f), the Company shall control all proceedings taken in
connection with the contest of any claim contemplated by this Section 12(f)
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 (provided, however, that the Executive may participate
therein at his own cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue 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 sue 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 or other tax, including interest or penalties with respect thereto,
imposed with respect to such advance; and provided further, however, 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 any such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 12(f), the Executive receives any refund with
respect to such claim, the Executive shall (subject to the Company's complying
with the requirements of Section 12(f)) 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 12(f), 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 thirty (30)
calendar days after such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required
to be paid by the Company to the Executive pursuant to this Section 12.
13. Mitigation. Nothing in this Agreement shall be construed to require
Executive to mitigate his damages upon termination of employment without Cause
or for Good Reason. The Company hereby acknowledges that it will be difficult
<continued>
83
and may be impossible for the Executive to find reasonably comparable
employment following the Termination Date and that the non-competition
covenant contained in Section 15 will further limit the employment
opportunities for the Executive. In addition, the Company acknowledges that
its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received
thereunder. Accordingly, the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this Agreement is
hereby acknowledged by the Company to be reasonable, and the Executive will
not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits,
income, earnings or other benefits from any source whatsoever create any
mitigation, offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise.
14. Legal Fees and Expenses. It is the intent of the Company that the
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive's
rights under this Agreement by litigation or otherwise 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 or threatens to take any action to declare this Agreement void or
unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or
intended to be provided to the Executive hereunder, the Company irrevocably
authorizes the Executive from time to time to retain counsel of Executive's
choice, at the expense of the Company as hereafter provided, to advise and
represent the Executive in connection with any such interpretation,
enforcement or defense. Notwithstanding any existing or prior attorney-client
relationship between the Company and 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. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be
solely financially responsible for any and all attorneys' and related fees and
expenses incurred by the Executive in connection with any of the foregoing;
provided that, in regard to such matters, the Executive has not acted in bad
faith or with no colorable claim of success.
15. Secrecy and Noncompetition.
(a) No Competing Employment. For so long as the Executive is
employed by the Company and continuing for two (2) years after the termination
of such employment for any reason (the "Non-Compete Period"), Executive shall
not, unless he receives the prior written consent of the Board, directly or
indirectly, whether as owner, consultant, employee, partner, venturer, agent,
through stock ownership (except ownership of less than one percent (1.0%) of
the number of shares outstanding of any securities which are publicly traded),
investment of capital, lending of money or property, rendering of services, or
otherwise, compete with any of the businesses engaged in by the Company or
Affiliate at the time of the termination of the Executive's employment
hereunder (such businesses are herein after referred to as the "Business"), or
assist, become interested in or be connected with any corporation, firm,
partnership, joint venture, sole proprietorship or other entity which so
competes with the Business. The restrictions imposed by this subsection shall
not apply to any geographic area in which neither the Company nor any
Affiliate is engaged in the Business.
(b) No Interference. During the Non-Compete Period, the Executive
shall not, whether for his own account or for the account of any other
individual, partnership, firm, corporation or other business organization or
entity (other than the Company), intentionally solicit, endeavor to entice
<continued>
84
away from the Company or any Affiliate or otherwise interfere with the
relationship of the Company or any Affiliate with, any person who is employed
by or associated with the Company or any Affiliate (including, but not limited
to, any independent sales representatives or organizations) or any person or
entity who is, or was within the then most recent 12-month period, a customer
or client of the Company or any Affiliate.
(c) Secrecy. Executive recognizes that the services to be
performed by him hereunder are special, unique and extraordinary in that, by
reason of his employment hereunder and his past employment with the Company,
he may acquire or has acquired confidential information and trade secrets
concerning the operation of the Company or any Affiliate, the use or
disclosure of which could cause the Company substantial loss and damages which
could not be readily calculated and for which no remedy at law would be
adequate. Accordingly, Executive covenants and agrees with the Company that
he will not at any time, except in performance of Executive's obligations to
the Company hereunder or with the prior written consent of the Board, directly
or indirectly, disclose any secret or confidential information that he may
learn or has learned by reason of his association with the Company or any
Affiliate, or use any such information to the detriment of the Company or any
Affiliate. The term "confidential information", includes, without limitation,
information not previously disclosed to the public or to the trade by the
Company's management with respect to the Company's or any Affiliate's
products, manufacturing processes, facilities and methods, research and
development, trade secrets, know-how and other intellectual property, systems,
procedures, manuals, confidential reports, product price lists, customer
lists, marketing plans or strategies, financial information (including the
revenues, costs or profits associated with the Company's or any Affiliate's
products), business plans, prospects or opportunities. Executive understands
and agrees that the rights and obligations set forth in this subsection 15(c)
are perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(d) Exclusive Property. Executive confirms that all confidential
information is and shall remain the exclusive property of the Company. All
business records, papers and documents kept or made by Executive relating to
the business of the Company shall be and remain the property of the Company.
Upon the termination of his employment with the Company or upon the request of
the Company at anytime, Executive shall promptly deliver to the Company, and
shall not, without the consent of the Board (which consent shall not be
unreasonably withheld), retain copies of, any written materials not previously
made available to the public, records and documents made by Executive or
coming into his possession concerning the business or affairs of the Company
excluding records relating exclusively to the terms and conditions of his
employment relationship with the Company. Executive understands and agrees
that the rights and obligations set forth in this subsection 15(d) are
perpetual and, in any case, shall extend beyond the Non-Compete Period and
Executive's employment hereunder.
(e) Stock Ownership. Other than as specified in Section 2(c) or
15(a) hereof, nothing in this Agreement shall prohibit Executive from
acquiring or holding any issue of stock or securities of any company or other
business entity.
(f) Injunctive Relief. Without intending to limit the remedies
available to the Company, executive acknowledges that a breach of any of the
covenants contained in this Section 15 may result in material irreparable
injury to the Company for which there is no adequate remedy at law, that it
will not be possible to measure damages for such injuries precisely and that,
in the event of such a breach or threat thereof, the Company shall be entitled
to obtain a temporary restraining order and/or a preliminary or permanent
injunction restraining the Executive from engaging in activities prohibited by
this Section 15 or such other relief as may be required to specifically
enforce any of the covenants in this Section 15.
<continued>
85
(g) Extension of Non-Compete Period. In addition to the remedies
the Company may seek and obtain pursuant to subsection (f) of this Section 15,
the Non-Compete Period shall be extended by any and all periods during which
Executive shall be found by a court possessing personal jurisdiction over him
to have been in violation of the covenants contained in this Section 15.
16. Release. The receipt of payments provided for in Section 5, Section
6 and Section 12 is conditioned upon the Executive executing and delivering a
release substantially in the form of Annex A hereto, and upon the expiration
of the revocation period provided for in Annex A.
17. Breach.
In addition to the remedies provided for in Section 15(f), if
Executive is in breach of this Agreement, then the Company may, at its sole
option, (i) in the case of a breach of any provision of this Agreement,
immediately terminate all remaining payments and benefits described in Section
5 or Section 6 of this Agreement, and (ii) in the case of a breach of either
Section 15(a) or Section 15(c) of this Agreement, obtain reimbursement from
Executive of all payments by the Company already provided pursuant to Section
5 or Section 6 of this Agreement, plus any expenses, fees and damages incurred
as a result of the breach, with the remainder of this Agreement, and all
promises and covenants herein, remaining in full force and effect.
18. Continued Availability and Cooperation.
(a) In the event of a Termination, the Executive shall cooperate
fully with the Company and with the Company's counsel in connection with any
present and future actual or threatened litigation or administrative
proceeding involving the Company that relates to events, occurrences or
conduct occurring (or claimed to have occurred) during the period of the
Executive's employment by the Company. This cooperation by the Executive
shall include, but not be limited to:
(i) making himself reasonably available for interviews and
discussions with the Company's counsel as well as for depositions and trial
testimony;
(ii) if depositions or trial testimony are to occur, making
himself reasonably available and cooperating in the preparation therefor as
and to the extent that the Company or the Company's counsel reasonably
requests;
(iii) refraining from impeding in any way the Company's
prosecution or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of
the Company's prosecution or defense of such litigation or administrative
proceeding.
(b) In addition to Executive's obligations under this Section 18,
during the Non-Compete Period, Executive shall make himself available for
consultation with and advice to the Company at times and for periods of time
which are mutually agreeable to the Company and Executive.
19. Successors; Assignability.
(a) By Executive. Neither this Agreement nor any right, duty,
obligation or interest hereunder shall be assignable or delegable by the
Executive without the Company's prior written consent; provided, however, that
nothing in this subsection shall preclude the Executive from designating any
of his beneficiaries to receive any benefits payable hereunder upon his death,
or the executors, administrators, or other legal representatives, from
assigning any rights hereunder to the person or persons entitled thereto.
<continued>
86
(b) By the Company. 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
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. Failure of the Company to obtain such assumption
and agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle the Executive to compensation from
the Company in the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive had terminated his employment for Good
Reason subsequent to a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Termination Date.
20. 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 remain in the employment of the Company at any time prior
to a Change in Control; provided, however, that any termination of employment
of the Executive or the removal of the Executive from the office or position
in the Company following the commencement of any discussion with a third
person that ultimately results in a Change in Control shall be deemed to be a
Termination of the Executive after a Change in Control for purposes of this
Agreement. Executive expressly acknowledges that he is an employee at will,
and that the Company may terminate him at any time during the Term for any
reason if the Company makes the payments and provides the benefits provided
for under Section 5 or 6 of this Agreement, and otherwise comply with its
other continuing covenants in this Agreement, including without limitation,
Section 4.
21. 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.
22. Severability. If the final determination of a court of competent
jurisdiction declares, after the expiration of the time within which judicial
review (if permitted) of such determination may be perfected, that any term or
provision hereof is invalid or unenforceable, (a) the remaining terms and
provisions hereof shall be unimpaired and (b) the invalid or unenforceable
term or provision shall be replaced by a term or provision that is mutually
agreeable to the parties hereto and is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision. Notwithstanding the foregoing, 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
nevertheless remain in full force and effect.
23. Amendment; Waiver. This Agreement may not be modified, amended or
waived in any manner except by an instrument in writing signed by both parties
hereto. The waiver by either party of compliance with any provision of this
Agreement by the other party shall not operate or be construed as a waiver of
any other provision of this Agreement, or of any subsequent breach by such
party of a provision of this Agreement.
24. Governing Law. All matters affecting this Agreement, including the
validity thereof, are to be governed by, interpreted and construed in
accordance with the substantive laws of the State of Ohio, without giving
effect to the principles of conflict of laws of such State.
25. Notices. Any notice hereunder by either party to the other shall be
given in writing by personal delivery or certified mail, return receipt
requested. If addressed to Executive, the notice shall be delivered or mailed
to Executive at his principal residence, 8918 Connemarro Ct., Fort Wayne,
Indiana 46835, or to such other address as Executive shall give notice in
writing in accordance herewith. If addressed to the Company, the notice shall
be delivered or mailed to the Company at its executive offices at 701 Lima
<continued>
87
Avenue, Findlay, Ohio 45840 to the attention of the Board. A notice shall be
deemed given, if by personal delivery, on the date of such delivery or, if by
certified mail, on the date shown on the applicable return receipt.
26. Previous Agreements. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not expressly set forth in this Agreement;
provided, however, that this Agreement shall not supersede or in any way limit
the rights, duties or obligations of the Employee or the Company under the
Plans, except that payments pursuant to Section 5(a) or Section 6(b) shall be
in lieu of any other cash severance pay provided by the Company.
27. Counterparts. This Agreement may be executed by either of the
parties hereto in counterpart, each of which shall be deemed to be an
original, but all such counterparts shall together constitute one and the same
instrument.
28. Headings. The headings of sections herein are included solely for
convenience of reference and shall not control the meaning or interpretation
of any of the provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the Agreement to be signed by
officer pursuant to the authority of its Board, and Executive has executed
this Agreement, as of the day and year first written above.
COOPER TIRE & RUBBER COMPANY
By:
----------------------------
Title: Chairman & CEO
-------------------------------
Roderick F. Millhof, Executive
<continued>
88
ANNEX A
Form of Release
WHEREAS, there has been a Termination (as such term is defined in the
Amended and Restated Employment Agreement (the "Agreement") made and entered
into on June 6, 2000 between the undersigned (the "Executive") and COOPER TIRE
& RUBBER COMPANY ("Cooper"), of the Executive's employment from Cooper; and
WHEREAS, the Executive is required to sign this Release in order to
receive the severance benefits as described in Section 5, Section 6 and
Section 12 of the Agreement.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to Section 5, Section 6 and Section 12 of
the Agreement, which the Executive acknowledges are in addition to payments
and benefits which the Executive would be entitled to receive absent the
Agreement, the Executive, for himself and his dependents, successors, assigns,
heirs, executors and administrators (and his and their legal representatives
of every kind), hereby releases, dismisses, remises and forever discharges its
predecessors, parents, subsidiaries, divisions, related or affiliated
companies, officers, directors, stockholders, members, employees, heirs,
successors, assigns, representatives, agents and counsel (the "Company") from
any and all arbitrations, claims, including claims for attorney's fees,
demands, damages, suits, proceedings, actions and/or causes of action of any
kind and every description, whether known or unknown, which Executive now has
or may have had for, upon, or by reason of any cause whatsoever ("claims"),
against the Company, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the
Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised
Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections
4112.02 and 4112.99 thereof, and any other applicable state statutes and
regulations, and
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied;
provided, however, that the foregoing shall not apply to claims to enforce
rights that Executive may have as of the date hereof or in the future under
any of Cooper's health, welfare, retirement, pension or incentive plans, under
any indemnification agreement between the Executive and Cooper, under Cooper's
indemnification by-laws, under the directors' and officers' liability coverage
maintained by Cooper, under the applicable provisions of the Delaware General
Corporation Law, or that Executive may have in the future under the Agreement
or under this Release.
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and
<continued>
89
that any such violation, liability or invasion is expressly denied. The
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in the Agreement.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) Executive has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to consult
with and to be advised by legal counsel of his choice, fully understands the
terms of this Release, and enters into this Release freely, voluntarily and
intending to be bound;
(c) Executive has been given a period of twenty-one (21) days to
review and consider the terms of this Release, prior to its execution and that
he may use as much of the twenty-one (21) day period as he desires; and
(d) Executive may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the General Counsel at Cooper. For such revocation to be
effective, written notice must be actually received by the General Counsel at
Cooper no later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke this
Release, all of the terms and conditions of the Release shall be of no force
and effect and Cooper shall not have any obligation to make further payments
or provide benefits to Executive as set forth in Section 5, Section 6, and
Section 12 of the Agreement.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after the Termination Date as defined in the Agreement.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:
--------------------------- ------------------------------
Roderick F. Millhof, Executive
90
Part II
Exhibit (10)(v)
COOPER TIRE & RUBBER COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
<continued>
91
Table of Contents
Page
1. General Statement of Purpose 93
2. Effective and Termination Date 93
3. Definitions 93
4. Eligibility; Termination Following a Change in Control 96
5. Severance Compensation 97
6. Funding Upon Potential Change in Control 97
7. Certain Additional Payments by the Company 98
8. No Mitigation Obligation 100
9. Certain Payments not Considered for Other Benefits, etc. 101
10. Confidentiality; Confidential Information; Non-Competition 101
11. Release 101
12. Legal Fees and Expenses 101
13. Employment Rights 101
14. Withholding of Taxes 101
15. Successors and Binding Effect 101
16. Governing Law 102
17. Validity 102
18. Headings 102
19. Construction 102
20. Administration of the Plan 102
21. Amendment and Termination 103
22. Other Plans, etc. 104
Exhibit A - Members of the Operations Committee
Exhibit B - Members of the Management Group
Exhibit C - Severance Compensation
Exhibit D - Form of Confidentiality and Non-Compete Agreement
Exhibit E - Form of Release
<continued>
92
COOPER TIRE & RUBBER COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
1. General Statement of Purpose. The Board of Directors (the "Board")
of Cooper Tire & Rubber Company (the "Company") has considered the effect a
change in control of the Company may have on certain executives of the Company
and its Affiliated Employers (as defined below). The executives have made and
are expected to continue to make major contributions to the short-term and
long-term profitability, growth and financial strength of the Company. The
Company recognizes that, as is the case for most publicly held companies, the
possibility of a change in control exists, desires to assure itself of both
the present and future continuity of management, desires to establish certain
minimum severance benefits for certain of its executives applicable in a
change in control, and wishes to insure that its executives are not
practically disabled from discharging their duties in respect of a proposed or
actual transaction involving a change in control.
As a result, the Board believes that the Cooper Tire & Rubber
Company Change in Control Severance Pay Plan (the "Plan") will assist the
Company in attracting and retaining qualified executives. Accordingly, the
Plan is hereby adopted and supersedes any other change in control arrangement
for the Executives (as defined below).
2. Effective and Termination Dates. The Plan shall be effective as of
June 6, 2000 (the "Effective Date"). The Plan will automatically terminate on
the later of (i) December 31, 2002 or (ii) the second anniversary of a Change
in Control (the "Termination Date"); provided, however, that on each December
31, commencing with the year 2000, the Termination Date set forth in
Subsection (i) of this Section will automatically be extended for an
additional year unless, not later than 120 calendar days prior to such date,
the Company shall have given written notice to the Executives that the
Termination Date is not to be so extended.
3. Definitions. Where the following words and phrases appear in the
Plan, they shall have the respective meanings set forth below, unless their
context clearly indicates otherwise:
(a) "Affiliated Employer" means any corporation, partnership,
limited liability company, joint venture, unincorporated association or other
entity in which the Company has a direct or indirect ownership or other equity
interest.
(b) "Award Agreement" means an RSU Award Agreement between the
Executive and the Company.
(c) "Base Pay" means, with respect to each Executive, the rate of
annual base salary, as defined in the Compensation Plan, as in effect from
time to time.
(d) "Board" means the Board of Directors of the Company.
(e) "Cause" means that, prior to any termination of employment
pursuant to Section 4(c) or (d), the Executive shall have committed:
(i) any act or omission constituting a material breach by
the Executive of any of his significant obligations to or agreements with the
Company or the continued failure or refusal of the Executive to adequately
perform the duties reasonably required by the Company which is materially
injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any Affiliated Employer
thereof, after notification by the Board of such breach, failure or refusal
and failure of the Executive to correct such breach, failure or refusal within
thirty (30) days of such notification (other than by reason of the incapacity
of the Executive due to physical or mental illness); or
<continued>
93
(ii) the commission by and conviction of the Executive of a
felony, or the perpetration by and criminal conviction of or civil verdict
finding the Executive committed a dishonest act or common law fraud against
the Company or any Affiliated Employer thereof (for the avoidance of doubt,
conviction and civil verdict, in each case, shall mean when no further appeals
may be taken by the Executive from such conviction or civil verdict and such
conviction or civil verdict becomes final and binding upon the Executive with
no further right of appeal); or
(iii) any other willful act or omission which is materially
injurious to the financial condition or business reputation of, or is
otherwise materially injurious to, the Company or any Affiliated Employer
thereof, and failure of the Executive to correct such act or omission after
notification by the Board of any such act or omission; or
(iv) any notification to be given by the Board in accordance
with Section 3(e)(i) or 3(e)(iii) shall specifically identify the breach,
failure, refusal, act or omission to which the notification relates and, in
the case of Section 3(e)(i) or 3(e)(iii) shall describe the injury to the
Company, and such notification must be given within twelve (12) months of the
Board becoming aware, or within twelve (12) months of when the Board should
have reasonably become aware of the breach, failure, refusal, act, or omission
identified in the notification. Notwithstanding Section 20, failure to notify
the Executive within any such twelve (12) month period shall be deemed to be a
waiver by the Board of any such breach, failure, refusal, act or omission by
the Executive and any such breach, failure, refusal, act or omission by the
Executive shall not then be determined to be a breach.
For the avoidance of doubt and for the purpose of determining Cause, the
exercise of business judgment by the Executive shall not be determined to be
Cause, even if such business judgment materially injures the financial
condition or business reputation of, or is otherwise materially injurious to
the Company or any Affiliated Employer thereof, unless such business judgment
by the Executive was not made in good faith, or constitutes willful or wanton
misconduct, or was an intentional violation of state or federal law.
(f) "Change in Control" means the occurrence prior to the
Termination Date of any of the following events:
(i) the Company merges into itself, or is merged or
consolidated with, another entity and as a result of such merger or
consolidation less than 51% of the voting power of the then-outstanding voting
securities of the surviving or resulting entity immediately after such
transaction are directly or indirectly beneficially owned in the aggregate by
the former stockholders of the Company immediately prior to such transaction;
(ii) all or substantially all the assets accounted for on the
consolidated balance sheet of the Company are sold or transferred to one or
more corporations or persons, and as a result of such sale or transfer less
than 51% of the voting power of the then-outstanding voting securities of such
entity or person immediately after such sale or transfer is directly or
indirectly beneficially held in the aggregate by the former stockholders of
the Company immediately prior to such transaction or series of transactions;
(iii) a person, within the meaning of Section 3(a)(9) or
13(d)(3) (as in effect on the Effective Date) of the Securities Exchange Act
of 1934, (the "Exchange Act") become the beneficial owner (as defined in Rule
13d-3 of the Securities and Exchange Commission pursuant to the Exchange Act)
of (i) 15% or more but less than 35% of the voting power of the then
outstanding voting securities of the Company without prior approval of the
Board, or (ii) 35% or more of the voting power of the then-outstanding voting
securities of the Company; provided, however, that the foregoing does not
apply to any such acquisition that is made by (w) any Affiliated Employer of
the Company; (x) any employee benefit plan of the Company or any Affiliated
<continued>
94
Employer; or (y) any person or group of which employees of the Company or of
any Affiliated Employer control a greater than 25% interest unless the Board
determines that such person or group is making a "hostile acquisition;" or (z)
any person or group that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with,
the Executive; or
(iv) a majority of the members of the Board are not
Continuing Directors, where a "Continuing Director" is any member of the Board
who (x) was a member of the Board on the Effective Date or (y) was nominated
for election or elected to such Board with the affirmative vote of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
(g) "Code" means the Internal Revenue Code of 1986, as amended, or
any successor thereto.
(h) "Committee" means the Compensation Committee of the Board.
(i) "Committee Action" means a writing by, or minutes of the
actions of, the Committee, the substance of which, as to an Executive, has
been communicated to such Executive.
(j) "Common Stock" means the Company's common stock, par value
$1.00 per share.
(k) "Company" means the Company as hereinbefore defined.
(l) "Compensation Plan" means the Company's Top Management
Compensation Plan adopted by the Board on April 28, 1973.
(m) "Employee Benefits" means the perquisites, benefits and service
credit for benefits as provided under any and all employee retirement income
and welfare benefit policies, plans, programs or arrangements in which an
Executive is entitled to participate, including without limitation any
savings, pension, supplemental executive retirement, or other retirement
income or welfare benefit, stock option, performance share, performance unit,
stock purchase, stock appreciation, deferred compensation, incentive
compensation, group or other life, health, medical/hospital or other insurance
(whether funded by actual insurance or self-insured by the Company or any
Affiliated Employer), disability, salary continuation, expense reimbursement
and other employee benefit policies, plans, programs or arrangements that may
now exist or any policies, plans, programs or arrangements that may be adopted
hereafter by the Company or an Affiliated Employer.
(n) "Employer" means the Company and any Affiliated Employer to
which the Plan has been extended to an Executive of such Affiliated Employer
by the Committee.
(o) "Executive" means any employee of an Employer who is designated
by the Committee to be eligible under the Plan in a Committee Action.
(p) "Incentive Compensation Plan" means the Cooper Tire & Rubber
Company 1998 Incentive Compensation Plan, as amended.
(q) "Nonqualified Supplementary Benefit Plan" means the Cooper Tire
& Rubber Company Nonqualified Supplementary Benefit Plan, effective November
8, 1984, as amended.
(r) For the purposes of this Plan, "Operations Committee" means the
Executives who are identified on Exhibit A as being members of such Committee.
(s) "Plan" means this Cooper Tire & Rubber Company Change in
Control Severance Pay Plan.
<continued>
95
(t) For purposes of this Plan, "Management Group" means the
Executives who are identified on Exhibit B as being members of such Group.
(u) "Retirement Plans" means the Cooper Tire & Rubber Company
Salaried Employees' Retirement Plan, effective January 1, 1989, as amended,
the Cooper Tire & Rubber Company Nonqualified Supplementary Benefits Plan,
effective November 8, 1984, as amended or any successor plans thereto which
provide comparable benefits.
(v) "Severance Compensation" means Severance Pay and other
benefits provided by Section 5(a).
(w) "Severance Pay" means the amounts payable as set forth in
Section 5(a).
(x) "Severance Period" means the period of time commencing on the
date of the first occurrence of a Change in Control and continuing until the
earlier of (i) the second anniversary of the occurrence of the Change in
Control or (ii) the Executive's death.
(y) "Termination Date" means the date of termination of the Plan as
specified in Section 2.
(z) "1998 Option Plan" means the Cooper Tire & Rubber Company 1998
Employee Stock Option Plan, as amended.
4. Eligibility; Termination Following a Change in Control.
(a) Subject to the limitations described below, the Plan applies to
Executives who are employed on the date that a Change in Control occurs.
(b) If an Executive's employment is terminated by an Employer
during the Severance Period and such termination is without Cause, the
Executive will be entitled to the Severance Compensation described in
Section 5.
(c) An Executive may, during the Severance Period, terminate his
employment with an Employer with the right to Severance Compensation described
in Section 5 upon the occurrence of one or more of the following events
(regardless of whether any other reason, other than Cause, for such
termination exists or has occurred, including without limitation other
employment):
(i) (A) if the Executive is a member of the Operations
Committee, a significant adverse change in the nature or scope of the
authorities, powers, functions, responsibilities or duties attached to the
position with the Employer which the Executive held immediately prior to the
Change in Control, (B) a reduction in the Executive's Base Pay, or a reduction
in the Executive's opportunities for incentive compensation established by the
Compensation Plan and any long-term incentive compensation plan or program
established by the Company, or (C) the termination or denial of the
Executive's rights to Employee Benefits or a reduction in the scope or
aggregate value thereof, any of which is not remedied by the Company within
ten (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;
(ii) if the Executive is a member of the Operations
Committee, the Company requires the Executive to have his principal location
of work changed to any location that is in excess of 50 miles from the
location thereof immediately prior to or after the Change in Control; or
(iii) for any material breach of its obligations under the
Plan by the Company or any successor thereto which is not remedied by the
Company within ten (10) calendar days after receipt by the Company of written
notice from the Executive of such breach.
<continued>
96
(d) A termination by an Employer pursuant to Subsection (b) of this
Section or by an Executive pursuant to Subsection (c) of this Section will not
affect any rights that the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company or an Affiliated Employer
providing Employee Benefits, which rights shall be governed by the terms
thereof, except that the Executive shall be considered to be an employee of
the Employer for the period for which Severance Pay is calculated.
(e) Notwithstanding the preceding provisions of this Section, an
Executive will not be entitled to Severance Compensation if his employment
with an Employer is terminated during the Severance Period because:
(i) of the Executive's death; or
(ii) the Executive becomes permanently disabled within the
meaning of, and begins actually to receive disability benefits pursuant to,
the long-term disability plan in effect for, or applicable to, the Executive
immediately prior to the Change in Control.
5. Severance Compensation.
(a) If an Executive's employment is terminated pursuant to Section
4(b) or if an Executive terminates his employment pursuant to Section 4(c),
the Company will pay to the Executive as Severance Pay the amounts described
on Exhibit C within ten (10) business days after the termination date, or, if
later, upon the expiration of the revocation period provided for in Exhibit E,
and will continue to provide to the Executive the other Severance Compensation
described on Exhibit C for the periods described therein.
(b) Without limiting the rights of an 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 Midwest Edition of The Wall Street Journal
plus the lesser of 5% or the maximum rate of interest allowed by law. Such
interest will be payable as it accrues on demand. Any change in such prime
rate or maximum rate will be effective on and as of the date of such change.
(c) Notwithstanding any provision of the Plan to the contrary, the
rights and obligations under this Section and under Sections 7 and 12 will
survive any termination or expiration of the Plan or the termination of an
Executive's employment following a Change in Control for any reason
whatsoever.
6. Funding Upon Potential Change in Control.
(a) Upon the earlier to occur of (i) a Change in Control or (ii) a
declaration by the Board that a Change in Control is imminent, the Company
shall promptly pay to the extent it has not done so, and in any event within
five (5) business days, a sum equal to the present value on the date of the
Change in Control (or on such fifth business day if the Board has declared a
Change in Control to be imminent) of the payments to be made to the Executive
under the provisions of Sections 5 and 7 hereof, which shall be transferred to
the Trustee and added to any principal of the Trust under [ Trust
Agreement, dated , 2000 between the Company and as
Trustee] (the "Trust Agreement").
(b) Any payments of compensation, pension, severance or other
benefits by the Trustee pursuant to the Trust Agreement shall, to the extent
thereof, discharge the Company's obligation to pay compensation, pension,
severance and other benefits hereunder, it being the intent of the Company
that assets in such Trust be held as security for the Company's obligation to
pay compensation, pension, severance and other benefits under this Agreement.
<continued>
97
7. Certain Additional Payments by the Company.
(a) Anything in the Plan to the contrary notwithstanding, in the
event that it shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its Affiliated Employers to or for the
benefit of an Executive, whether paid or payable or distributed or
distributable pursuant to the terms of the Plan or otherwise pursuant to or by
reason of any other agreement, policy, plan, program or arrangement, including
without limitation any stock option, performance share, performance unit,
stock appreciation right or similar right, or the lapse or termination of any
restriction on, or the vesting or exercisability of, any of the foregoing (a
"Payment"), would be subject to the excise tax imposed by Section 4999 of the
Code (or any successor provision thereto) by reason of being considered
"contingent on a change in ownership or control" of the Company, within the
meaning of Section 280G of the Code (or any successor provision thereto) or to
any similar tax imposed by state or local law, or any interest or penalties
with respect to such tax (such tax or taxes, together with any such interest
and penalties, being 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 ("ISO"), as defined by
Section 422 of the Code (or any successor provision thereto) granted prior to
the execution of the Plan where the addition of a Gross-Up Payment would cause
the ISO to lose such status, 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 Subsection (f) of this Section,
all determinations required to be made under this Section, including whether
an Excise Tax is payable by the Executive and the amount of such Excise Tax
and whether a Gross-Up Payment is required to be paid by the Company to the
Executive and the amount of such Gross-Up Payment, if any, shall be made by
the accounting firm serving as the Company's independent public accountants
immediately prior to the change in control (the "Accounting Firm"). The
Company shall direct the Accounting Firm to submit its determination and
detailed supporting calculations to both the Company and the Executive within
thirty (30) calendar days after the date of the Executive's termination, if
applicable, and any such other 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 (5) business days after receipt of such
determination and calculations with respect to any Payment to the Executive.
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 Company and the Executive an opinion that the Executive has substantial
authority not to report any Excise Tax on his federal, state or local income
or other tax return. As a result of the uncertainty in the application of
Section 4999 of the Code (or any successor provision thereto) and the
possibility of similar uncertainty regarding applicable state or local tax law
at the time of any 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 (an "Underpayment"), consistent with the calculations
required to be made hereunder. In the event that the Company exhausts or
fails to pursue its remedies pursuant to Subsection (f) of this Section and
the Executive thereafter is required to make a payment of any Excise Tax, 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
<continued>
98
possible. Any such Underpayment shall be promptly paid by the Company to, or
for the benefit of, the Executive within five (5) business days after receipt
of such determination and calculations.
(c) The Company and the Executive shall each provide 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, reasonably
requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and
calculations contemplated by Subsection (b) of this Section. Any
determination by the Accounting Firm as to the amount of the Gross-Up Payment
shall be binding upon the Company and the Executive.
(d) The federal, state and local income or other tax returns filed
by the Executive shall be prepared and filed on a consistent basis with the
determination of the Accounting Firm with respect to the Excise Tax payable by
the Executive. The Executive shall make proper payment of the amount of any
Excise Payment, and at the request of the Company, provide to the Company true
and correct copies (with any amendments) of his federal income tax return as
filed with the Internal Revenue Service and corresponding state and local tax
returns, if relevant, as filed with the applicable taxing authority, and such
other documents reasonably requested by the Company, evidencing such payment.
If prior to the filing of the Executive's federal income tax return, or
corresponding state or local tax return, if relevant, the Accounting Firm
determines that the amount of the Gross-Up Payment should be reduced, the
Executive shall within five (5) business days pay to the Company the amount of
such reduction.
(e) The fees and expenses of the Accounting Firm for its services
in connection with the determinations and calculations contemplated by
Subsection (b) of this Section shall be borne by the Company. If such fees
and expenses are initially paid by the Executive, the Company shall reimburse
the Executive the full amount of such fees and expenses within ten (10)
business days after receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof.
(f) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service or any other taxing authority that, if
successful, would require the payment by the Company of a Gross-Up Payment.
Such notification shall be given as promptly as practicable but no later than
ten (10) business days after the Executive actually receives notice of such
claim and the Executive shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid (in each
case, to the extent known by the Executive). 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 he gives such notice to the Company and (ii) the
date that any payment of amount with respect to such claim is due. If the
Company notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive shall:
(A) provide the Company with any written records or documents
in his possession relating to such claim reasonably requested by the Company;
(B) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including without limitation accepting legal representation with respect to
such claim by an attorney competent in respect of the subject matter and
reasonably selected by the Company;
(C) cooperate with the Company in good faith in order to
effectively contest such claim; and
(D) permit the Company to participate in any proceedings
relating to such claim;
<continued>
99
provided, however, that the Company shall bear and pay directly all costs and
expenses (including interest and penalties) incurred in connection with such
contest and shall indemnify and hold harmless the Executive, on an after-tax
basis, for and against 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 limiting the foregoing provisions of
this subsection, the Company shall control all proceedings taken in connection
with the contest of any claim contemplated by this subsection 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
(provided, however, that the Executive may participate therein at his own cost
and expense) and may, at its option, either direct the Executive to pay the
tax claimed and sue 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
sue 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 or other tax,
including interest or penalties with respect thereto, imposed with respect to
such advance; and provided further, however, 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 any such contested claim 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.
(g) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Subsection (f) of this Section, the Executive receives
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Subsection (f) of this Section)
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 (f) of this Section, 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 thirty (30) calendar days
after such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of any such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid by the
Company to the Executive pursuant to this Section.
8. No Mitigation Obligation. The Company hereby acknowledges that it
will be difficult and may be impossible for an Executive to find reasonably
comparable employment following his termination of employment with the Company
and the Affiliated Employers and that the non-competition agreement required
by Section 10 will further limit the employment opportunities for an
Executive. Accordingly, the provision of Severance Compensation by the
Company to an Executive in accordance with the terms of the Plan is hereby
acknowledged by the Company to be reasonable, and an Executive will not be
required to mitigate the amount of any payment provided for in the Plan by
seeking other employment or otherwise, nor will any profits, income, earnings
or other benefits from any source whatsoever create any mitigation, offset,
reduction or any other obligation on the part of an Executive hereunder or
otherwise, except as expressly provided in Section 1(d) of Exhibit C.
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100
9. Certain Payments not Considered for Other Benefits, etc. The Gross-
up Payment, legal fee and expense reimbursement provided under Sections 7 and
11 and reimbursements for outplacement counseling provided under Section 1(g)
of Exhibit C will not be included as earnings for the purpose of calculating
contributions or benefits under any employee benefit plan of the Company.
10. Confidentiality; Confidential Information; Non-competition. Receipt
of Severance Compensation by an Executive is conditioned upon the Executive
executing and delivering to the Company a confidentiality and non-compete
agreement substantially in the form provided in Exhibit D for the period
specified on Exhibit C.
11. Release. Receipt of Severance Compensation by an Executive is
conditioned upon the Executive executing and delivering to the Company a
release substantially in the form provided in Exhibit E.
12. Legal Fees and Expenses. It is the intent of the Company that each
Executive not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of his rights under
the Plan by litigation or otherwise (including making a claim pursuant to the
provisions of Section 20(d)) because the cost and expense thereof would
substantially detract from the benefits intended to be extended to each
Executive hereunder. Accordingly, if it should appear to an Executive that
the Company has failed to comply with any of its obligations under the Plan or
in the event that the Company or any other person takes or threatens to take
any action to declare the Plan void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
the Executive the benefits provided or 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 advise and represent the Executive in connection with
any such interpretation, enforcement or defense. Notwithstanding any existing
or prior attorney-client relationship between the Company and 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 agrees that a confidential relationship will exist between the
Executive and such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the foregoing, the
Company will pay and be solely financially responsible for any and all
attorneys' and related fees and expenses incurred by the Executive in
connection with any of the foregoing; provided that, in regard to such
matters, the Executive has not acted in bad faith or with no colorable claim
of success.
13. Employment Rights. Nothing expressed or implied in the Plan shall
create any right or duty on the part of the Company, an Affiliated Employer or
an Executive to have the Executive remain in the employment of the Company or
an Affiliated Employer at any time prior to or following a Change in Control.
Any termination of employment of the Executive or the removal of the Executive
from the office or position in the Company or any Affiliated Employer prior to
a Change in Control but following the commencement of any discussion with any
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 all
purposes of the Plan. Each Executive covered by this Plan expressly
acknowledges that he is an employee at will, and that the Company may
terminate him at any time prior to a Change in Control.
14. Withholding of Taxes. The Company may withhold from any amounts
payable under the Plan all federal, state, city or other taxes as shall be
required pursuant to any law or government regulation or ruling.
15. Successors and Binding Effect.
<continued>
101
(a) The Company will require any successor, (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 the Plan), to expressly
assume and agree to perform the obligations under the Plan in the same manner
and to the same extent the Company would be required to perform if no such
succession had taken place. The Plan shall be binding upon and inure to the
benefit of the Company and any successor to the Company, but shall not
otherwise be assignable, transferable or delegable by the Company.
(b) The rights under the Plan shall inure to the benefit of and be
enforceable by each Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) The rights under the Plan are personal in nature and neither
the Company nor any Executive shall, without the consent of the other, assign,
transfer or delegate the Plan or any rights or obligations hereunder except as
expressly provided in this Section. Without limiting the generality of the
foregoing, an Executive's right to receive payments hereunder shall not be
assignable, transferable or delegable, whether by pledge, creation of a
security interest or otherwise, other than by a transfer by his or her will or
by the laws of descent and distribution and, in the event of any attempted
assignment or transfer contrary to this Section, the Company shall have no
liability to pay any amount so attempted to be assigned, transferred or
delegated.
(d) The obligation of the Company to make payments and/or provide
benefits hereunder shall represent an unsecured obligation of the Company.
(e) The Company recognizes that each Executive will have no
adequate remedy at law for breach by the Company of any of the agreements
contained herein and, in the event of any such breach, the Company hereby
agrees and consents that each Executive shall be entitled to a decree of
specific performance, mandamus or other appropriate remedy to enforce
performance of obligations of the Company under the Plan.
16. Governing Law. All matters affecting this Plan, including the
validity, interpretation, construction and performance of the Plan shall be
governed by the laws of the State of Ohio, without giving effect to the
principals of conflict of laws of such State.
17. Validity. If any provisions of the Plan or the application of any
provision hereof to any person or circumstance is held invalid, unenforceable
or otherwise illegal, the remainder of the Plan and the application of such
provision to any other person or circumstances shall not be affected, and the
provision so held to be invalid, unenforceable or otherwise illegal shall be
reformed to the extent (and only to the extent) necessary to make it
enforceable, valid and legal.
18. Headings. The headings in the Plan are for convenience of reference
only and do not define, limit or describe the scope or intent of the Plan or
any part hereof and shall not be considered in any construction hereof.
19. Construction. The masculine gender, where appearing in the Plan,
shall be deemed to include the feminine gender and the singular shall be
deemed to include the plural, unless the context clearly indicates to the
contrary.
20. Administration of the Plan.
(a) In General: The Plan shall be administered by the Company,
which shall be the named fiduciary under the Plan.
<continued>
102
(b) Delegation of Duties: The Company may delegate any of its
administrative duties, including, without limitation, duties with respect to
the processing, review, investigation, approval and payment of Severance Pay
and Gross-up Payments, to named administrator or administrators.
(c) Regulations: The Company shall promulgate any rules and
regulations it deems necessary in order to carry out the purposes of the Plan
or to interpret the terms and conditions of the Plan; provided, however, that
no rule, regulation or interpretation shall be contrary to the provisions of
the Plan.
(d) Claims Procedure: Subject to the provisions of Section 7, the
Company shall determine the rights of any employee of the Company to any
Severance Compensation or a Gross-up Payment hereunder. Any employee or
former employee of the Company or an Affiliated Employer who believes that he
has not received any benefit under the Plan to which he believes he is
entitled, may file a claim in writing with the General Counsel of the Company.
The Company shall, no later than 90 days after the receipt of a claim, either
allow or deny the claim by written notice to the claimant. If a claimant does
not receive written notice of the Company's decision on his claim within such
90-day period, the claim shall be deemed to have been denied in full.
A denial of a claim by the Company, wholly or partially, shall be written in a
manner calculated to be understood by the claimant and shall include:
(i) the specific reason or reasons for the denial;
(ii) specific reference to pertinent Plan provisions on which
the denial is based;
(iii) a description of any additional material or information
necessary for the claimant to perfect the claim and an explanation of why such
material or information is necessary; and
(iv) an explanation of the claim review procedure.
A claimant whose claim is denied (or his duly authorized representative) may,
within thirty (30) days after receipt of denial of his claim, request a review
of such denial by the Company by filing with the Secretary of the Company a
written request for review of his claim. If the claimant does not file a
request for review with the Company within such 30-day period, the claimant
shall be deemed to have acquiesced in the original decision of the Company on
his claim. If a written request for review is so filed within such 30-day
period, the Company shall conduct a full and fair review of such claim.
During such full review, the claimant shall be given the opportunity to review
documents that are pertinent to his claim and to submit issues and comments in
writing. The Company shall notify the claimant of its decision on review
within sixty (60) days after receipt of a request for review. Notice of the
decision on review shall be in writing. If the decision on review is not
furnished to the claimant within such 60-day period, the claim shall be deemed
to have been denied on review.
(e) Requirement of Receipt: Upon receipt of any Severance
Compensation or a Gross-up Payment hereunder, the Company reserves the right
to require any Executive to execute a receipt evidencing the amount and
payment of such Severance Compensation and/or Gross-up Payment.
21. Amendment and Termination. The Company reserves the right, except
as hereinafter provided, at any time and from time to time, to amend, modify,
change or terminate the Plan and/or any Committee Action, including any
Exhibit thereto; provided, however, that after the occurrence of a Change in
Control any such amendment, modification, change or termination that adversely
affects the rights of any Executive under the Plan may not be made without the
written consent of any such Executive.
<continued>
103
22. Other Plans, etc. If the terms of this Plan are inconsistent with
the provisions of any other plan, program, contract or arrangement of the
Company or any Affiliated Employer, to the extent such plan, program, contract
or arrangement may be amended by the Company or an Affiliated Employer, the
terms of the Plan will be deemed to so amend such plan, program, contract or
arrangement, and the terms of the Plan will govern.
IN WITNESS WHEREOF, Cooper Tire & Rubber Company has caused the Plan to
be executed this 6th day of June, 2000.
COOPER TIRE & RUBBER COMPANY
By:
------------------------
Its:
-----------------------
<continued>
104
EXHIBIT A
MEMBERS OF THE OPERATIONS COMMITTEE
William S. Klein
Other executives whose names are not required to be disclosed.
<continued>
105
EXHIBIT B
MEMBERS OF THE MANAGEMENT GROUP
Executives whose names are not required to be disclosed.
<continued>
106
COOPER TIRE & RUBBER COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
EXHIBIT C
Severance Compensation
----------------------
1. Severance Pay. Each Executive whose employment is terminated
pursuant to Section 4(b) or who terminates his employment pursuant to Section
4(c) shall, within ten (10) business days after such termination or, if later,
upon the expiration of the revocation period provided for in Exhibit E,
receive Severance Pay from the Company as follows:
(a) a single lump sum cash payment within five (5) days following
the expiration of such revocation period equal to the Executive's then current
Base Pay and pro rata incentive compensation accrued through his date of
termination; plus
(b) a single lump sum cash payment within five (5) days following
the expiration of such revocation period equal to two (2) (for members of the
Operations Committee), one (1) (for members of the Management Group) or the
multiple set forth in a Committee Action (for any other Executive) times the
sum of the Executive's (i) Base Pay plus (ii) target annual incentive
compensation for the year prior to the Change in Control; plus
(c) a single lump sum cash payment within five (5) days following
the expiration of such revocation period equal to the actuarial equivalent of:
(i) the excess of (1) the retirement pension (determined as a
straight line annuity commencing at age sixty-five (65)) which he would have
accrued under the terms of the Retirement Plans (without regard to any
amendment to such Retirement Plans or other pension benefit program described
herein), determined as if the Executive were fully vested thereunder and had
accumulated (after the date of termination) twenty-four (24) additional months
(for members of the Operations Committee), twelve (12) (for members of the
Management Group) or the period specified in a Committee Action (for any other
Executive) (or, if greater, the number of months remaining in the Severance
Period) of service credit thereunder at his highest annual rate of
compensation during any calendar year for the five (5) years immediately
preceding the date of termination (but in no event shall Executive be deemed
to have accumulated additional months of service credit after his sixty-fifty
(65th) birthday), over (2) the retirement pension (determined as a straight
life annuity commencing at age sixty-five (65)) which Executive had then
accrued pursuant to the provisions of the Retirement Plans; plus
(ii) the retirement pension Executive has accrued under the
Nonqualified Supplementary Benefit Plan. For purposes of this subsection,
"actuarial equivalent" shall be determined using the 1994 Uninsured Pensioner
Mortality Table (UP-94) and annual compound interest at the Corporate Bond
yield average for bonds rated Aaa by Moody's reduced by fifty (50) basis
points (.5 percent). The rate chosen from the aforereferenced table will be
for the calendar month five months prior to the month which contains the
effective date of payment and will be truncated to the lower 0.25% increment
(e.g. 6.00%, 6.25%, 6.50%, etc.);
(d) for twenty-four (24) months following his date of termination,
the Company shall arrange to provide Executive with life, accident and health
insurance benefits substantially similar to those to which he was entitled
immediately prior to his termination. Benefits otherwise receivable by
Executive pursuant to this Subsection (d) shall be reduced to the extent
comparable benefits are actually received by Executive during the remainder of
such period following his termination, and any such benefits actually received
by Executive shall be reported to the Company.
<continued>
107
(e) notwithstanding any provision in any Award Agreement between
the Company and the Executive, all restricted stock units granted to the
Executive which have not otherwise vested shall immediately vest and within
five (5) days after the consummation of the Change in Control the Company
shall pay to Executive an amount equal to the fair market value of the Common
Stock represented by such restricted stock units determined as of the
consummation of the Change in Control. Such cash payment shall be deemed to
be in lieu of and in substitution for any right Executive may have to such
restricted stock units under the terms of the Award Agreement, and Executive
agrees to surrender all restricted stock units being cashed out hereunder
immediately prior to receiving the cash payment described above;
(f) notwithstanding any provision in the Incentive Compensation
Plan, 1998 Option Plan or other relevant plan or program, all stock options
granted to the Executive by the Company which have not otherwise vested shall
be vested and within five (5) days after the consummation of the Change in
Control, the Company shall pay to Executive in cash an amount equal to the
aggregate of the difference between the exercise price of each stock option
granted to Executive prior to the consummation of the Change in Control, and
the fair market value of the Common Stock subject to the related option,
determined as of the consummation of the Change in Control. Such cash payment
shall be deemed to be in lieu of and in substitution for any right Executive
may have to exercise such stock option or a related stock appreciation right
under the terms of the relevant stock option plan describing such rights, and
Executive agrees to surrender all stock options and related stock appreciation
rights being cashed out hereunder prior to receiving the cash payment
described above;
(g) following the end of the period specified in Subsection (d),
lifetime retiree medical and life insurance coverage for Executive and
Executive's family, which shall be based on the Company's plans in effect
immediately prior to the Change in Control; and
(h) outplacement services by a firm selected by the Executive, at
the expense of the Company in an amount up to 15% of the Executive's Base Pay.
2. Non-Compete Period. The non-competition period for each Executive
shall be for so long as the Executive is employed by the Company and
continuing for two (2) years (for members of the Operations Committee), one
(1) year (for members of the Management Group) or the period specified in a
Committee Action (for any other Executive) after the termination of such
employment.
<continued>
108
COOPER TIRE & RUBBER COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
EXHIBIT D
Form of Confidentiality and Non-Compete Agreement
-------------------------------------------------
WHEREAS, the Executive's employment has been terminated in accordance
with Section 4(b) or (c) of the Cooper Tire & Rubber Company Change in Control
Severance Pay Plan (the "Plan"); and
WHEREAS, the Executive is required to sign this Confidentiality and Non-
Compete Agreement ("Agreement") in order to receive the Severance Compensation
(as such term is defined in the Plan) as described in Exhibit C of the Plan
and the other benefits described in the Plan.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. Effective Date of Agreement. This Agreement is effective on the
date hereof and will continue in effect as provided herein.
2. Confidentiality; Confidential Information. In consideration of the
payments to be made and the benefits to be received by the Executive pursuant
to the Plan:
(a) The Executive acknowledges and agrees that in the performance
of his duties as an employee of the Cooper Tire & Rubber Company (the
"Company") or an Affiliated Employer, he was brought into frequent contact
with, had access to, and became informed of confidential and proprietary
information of the Company and the Affiliated Employers and/or information
which is a trade secret of the Company and/or an Affiliated Employer
(collectively, "Confidential Information"), as more fully described in
Subsection (b) of this Section. The Executive acknowledges and agrees that
the Confidential Information of the Company and the Affiliated Employers
gained by the Executive during his association with the Company and the
Affiliated Employers was developed by and/or for the Company and the
Affiliated Employers through substantial expenditure of time, effort and money
and constitutes valuable and unique property of the Company and the Affiliated
Employers.
(b) The Executive will keep in strict confidence, and will not,
directly or indirectly, at any time, disclose, furnish, disseminate, make
available, use or suffer to be used in any manner any Confidential Information
of the Company or an Affiliated Employer without limitation as to when or how
the Executive may have acquired such Confidential Information. The Executive
specifically acknowledges that Confidential Information includes any and all
information, whether reduced to writing (or in a form from which information
can be obtained, translated, or derived into reasonably usable form), or
maintained in the mind or memory of the Executive and whether compiled or
created by the Company or an Affiliated Employer, which derives independent
economic value from not being readily known to or ascertainable by proper
means by others who can obtain economic value from the disclosure or use of
such information, that reasonable efforts have been put forth by the Company
and the Affiliated Employers to maintain the secrecy of Confidential
Information, that such Confidential Information is and will remain the sole
property of the Company and the Affiliated Employers, and that any retention
or use by the Executive of Confidential Information after the termination of
the Executive's employment with and services for the Company and the
Affiliated Employers shall constitute a misappropriation of the Company's
Confidential Information.
<continued>
109
(c) The Executive further agrees that he shall return, within ten
(10) days of the effective date of his termination as an employee of the
Company and the Affiliated Employers, in good condition, all property of the
Company and the Affiliated Employers then in his possession, including,
without limitation, whether in hard copy or in any other media (i) property,
documents and/or all other materials (including copies, reproductions,
summaries and/or analyses) which constitute, refer or relate to Confidential
Information of the Company or an Affiliated Employer, (ii) keys to property of
the Company or an Affiliated Employer, (iii) files and (iv) blueprints or
other drawings.
(d) The Executive further acknowledges and agrees that his
obligation of confidentiality shall survive until and unless such Confidential
Information of the Company or an Affiliated Employer shall have become,
through no fault of the Executive, generally known to the public or the
Executive is required by law (after providing the Company with notice and
opportunity to contest such requirement) to make disclosure. The Executive's
obligations under this Section are in addition to, and not in limitation or
preemption of, all other obligations of confidentiality which the Executive
may have to the Company and the Affiliated Employers under general legal or
equitable principles or statutes.
3. Non-Compete. The Executive agrees that he will not, for a period of
two (2) years (for members of the Operations Committee), one (1) year (for
members of the Management Group) or the period specified in a Committee Action
(for any other Executive) following his termination with the Company and the
Affiliated Employers, engage in Competitive Activity.
4. Nonsolicitation. The Executive further agrees that he will not,
directly or indirectly, for a period of two (2) years following his
termination with the Company and the Affiliated Employers:
(a) induce or attempt to induce customers, business relations or
accounts of the Company or any of the Affiliated Employers to relinquish their
contracts or relationships with the Company or any of the Affiliated
Employers; or
(b) solicit, entice, assist or induce other employees, agents or
independent contractors to leave the employ of the Company or any of the
Affiliated Employers or to terminate their engagements with the Company and/or
any of the Affiliated Employers or assist any competitors of the Company or
any of the Affiliated Employers in securing the services of such employees,
agents or independent contractors.
5. Definitions. For the purposes of this Agreement, "Competitive
Activity" means 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
or any Affiliated Employer and such enterprise's sales of any product or
service competitive with any product or service of the Company or any
Affiliated Employer amounted to 5% 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 5% of, as applicable, the Company's or Affiliated
Employer's net sales for its most recently completed fiscal year.
"Competitive Activity" will not include (i) the mere ownership of 5% or more
of securities in any such enterprise and the exercise of rights appurtenant
thereto or (ii) participation in the management of any such enterprise other
than in connection with the competitive operations of such enterprise.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Agreement on the date set forth below.
Dated:
------------------------------- -----------------------------
[ ]
Executive
<continued>
110
COOPER TIRE & RUBBER COMPANY
CHANGE IN CONTROL SEVERANCE PAY PLAN
EXHIBIT E
Form of Release
WHEREAS, the Executive's employment has been terminated in accordance
with Section 4(b) or (c) of the Cooper Tire & Rubber Company Change in Control
Severance Pay Plan (the "Plan"); and
WHEREAS, the Executive is required to sign this Release in order to
receive the Severance Compensation (as such term is defined in the Plan) as
described in Exhibit C of the Plan and the other benefits described in the
Plan.
NOW THEREFORE, in consideration of the promises and agreements contained
herein and other good and valuable consideration, the sufficiency and receipt
of which are hereby acknowledged, and intending to be legally bound, the
Executive agrees as follows:
1. This Release is effective on the date hereof and will continue in
effect as provided herein.
2. In consideration of the payments to be made and the benefits to be
received by the Executive pursuant to the Plan, which the Executive
acknowledges are in addition to payments and benefits which the Executive
would be entitled to receive absent the Plan, the Executive, for himself and
his dependents, successors, assigns, heirs, executors and administrators (and
his and their legal representatives of every kind), hereby releases,
dismisses, remises and forever discharges Cooper Tire & Rubber Company
("Cooper"), its predecessors, parents, subsidiaries, divisions, related or
affiliated companies, officers, directors, stockholders, members, employees,
heirs, successors, assigns, representatives, agents and counsel (the
"Company") from any and all arbitrations, claims, including claims for
attorney's fees, demands, damages, suits, proceedings, actions and/or causes
of action of any kind and every description, whether known or unknown, which
Executive now has or may have had for, upon, or by reason of any cause
whatsoever ("claims"), against the Company, including but not limited to:
(a) any and all claims arising out of or relating to Executive's
employment by or service with the Company and his termination from the
Company;
(b) any and all claims of discrimination, including but not limited
to claims of discrimination on the basis of sex, race, age, national origin,
marital status, religion or handicap, including, specifically, but without
limiting the generality of the foregoing, any claims under the Age
Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Americans with Disabilities Act, Ohio Revised
Code Section 4101.17 and Ohio Revised Code Chapter 4112, including Sections
4112.02 and 4112.99 thereof, and any other applicable state statutes and
regulations; and
provided, however, that the foregoing shall not apply to claims to enforce
rights that Executive may have as of the date hereof or in the future under
any of Cooper's health, welfare, retirement, pension or incentive plans, under
any indemnification agreement between the Executive and Cooper, under Cooper's
indemnification by-laws, under the directors' and officers' liability coverage
maintained by Cooper, under the applicable provisions of the Delaware General
Corporation Law, or that Executive may have in the future under the Plan or
under this Release.
(c) any and all claims of wrongful or unjust discharge or breach of
any contract or promise, express or implied.
<continued>
111
3. Executive understands and acknowledges that the Company does not
admit any violation of law, liability or invasion of any of his rights and
that any such violation, liability or invasion is expressly denied. The
consideration provided for this Release is made for the purpose of settling
and extinguishing all claims and rights (and every other similar or dissimilar
matter) that Executive ever had or now may have against the Company to the
extent provided in this Release. Executive further agrees and acknowledges
that no representations, promises or inducements have been made by the Company
other than as appear in the Plan.
4. Executive further agrees and acknowledges that:
(a) The release provided for herein releases claims to and
including the date of this Release;
(b) Executive has been advised by the Company to consult with legal
counsel prior to executing this Release, has had an opportunity to consult
with and to be advised by legal counsel of his choice, fully understands the
terms of this Release, and enters into this Release freely, voluntarily and
intending to be bound;
(c) Executive has been given a period of 21 days to review and
consider the terms of this Release, prior to its execution and that he may use
as much of the 21 day period as he desires; and
(d) Executive may, within 7 days after execution, revoke this
Release. Revocation shall be made by delivering a written notice of
revocation to the General Counsel at Cooper. For such revocation to be
effective, written notice must be actually received by the General Counsel at
Cooper no later than the close of business on the 7th day after Executive
executes this Release. If Executive does exercise his right to revoke this
Release, all of the terms and conditions of the Release shall be of no force
and effect and Cooper shall not have any obligation to make payments or
provide benefits to Executive as set forth in Sections 5, 7 and 12 of the
Plan.
5. Executive agrees that he will never file a lawsuit or other
complaint asserting any claim that is released in this Release.
6. Executive waives and releases any claim that he has or may have to
reemployment after
--------------------.
IN WITNESS WHEREOF, the Executive has executed and delivered this
Release on the date set forth below.
Dated:
------------------------------- ------------------------------
[Executive ]
112