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EXHIBIT 10.6
May 1, 1995
FEDERAL-MOGUL CORPORATION
Dear :
Federal-Mogul Corporation (the "Corporation") considers the
retention of a sound and vital management to be essential to
protecting and enhancing the best interests of the Corporation and
its shareholders. In this connection, the Corporation recognizes
that, as is the case with many publicly held corporations, the
possibility of a "change in control" may exist and that such a
"change in control", and the uncertainty and questions which it may
raise among management, may result in the departure or distraction
of management personnel to the detriment of the Corporation and its
shareholders. Accordingly, the Corporation's Board of Directors
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of
the Corporation's management, including yourself, to their assigned
duties without distraction in the face of the potentially
disturbing circumstances arising from the possibility of a "change
in control."
In order to reduce such distractions, the Corporation agrees to
provide you the benefits set forth in this letter (the "Agreement")
in the event there should occur a "change in control" of the
Corporation (as defined in Article II hereof).
I. TERM.
This Agreement shall commence as of May 1, 1995 and shall
recommence each January 1st thereafter, the term of this Agreement
shall automatically be extended for one additional calendar year
unless not later than the September 30 immediately preceding any
such March 1, the Corporation shall have given notice that it does
not wish to have this Agreement extended for the following year;
provided further, however, that subsequent to a "change in control"
of the Corporation occurring when this Agreement is in effect, this
Agreement shall thereafter remain in effect for thirty (30) months
from the end of the calendar month in which the "change in control"
occurs. Notwithstanding the foregoing provisions of this Article
I, this Agreement shall automatically terminate upon your ceasing
to be an employee of the Corporation for any reason at any time prior
to a "change in control."
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II. "CHANGE IN CONTROL".
For purposes of this Agreement, a "change in control" shall
mean (i) any purchase under a tender or exchange offer for the
Corporation's shares of Common Stock other than by the Corporation
or a wholly-owned subsidiary of the Corporation following which the
offeror owns beneficially more than 20% of the Corporation's
outstanding Common Stock, (ii) shareholder approval of any merger,
consolidation or sale of all or substantially all of the
Corporation's assets to or into any person or entity other than a
wholly-owned subsidiary of the Corporation formed for the purpose
of changing the Corporation's corporate domicile, (iii) a change in
the identity of a majority of the members of the Board of Directors
within any 12-month period, which change or changes are not
recommended by the incumbent Directors immediately prior to any
such change or changes, or (iv) any "person" (as the term "person"
is defined in Sections 13(d) and 14(d) of the Exchange Act as in
effect on February 6, 1985) is or becomes the "beneficial owner"
(as the term "beneficial owner" is defined in Rule 13d-3 under the
Exchange Act as in effect on February 6, 1985), directly or
indirectly, of securities of the Corporation representing 20% or
more of the combined voting power of the Corporation's then
outstanding securities. For purposes of this Agreement, ownership
of voting securities shall take into account and include ownership
as determined by applying the provisions of said Rule 13d-3.
III. TERMINATION FOLLOWING "CHANGE IN CONTROL".
A. Benefits. No salary or supplemental compensation benefits
shall be payable hereunder unless there shall have been a
"change in control" of the Corporation and your employment
except as set forth below by the Corporation or any successor
of the Corporation shall have been terminated on or before
the last day of the 30th calendar month next following the
date on which the "change in control" of the Corporation shall
have occurred. In that event you shall be entitled to the
benefits provided in Article IV hereof unless your employment
was terminated (i) because of your death, (ii) by the
Corporation by reason of Disability, Retirement or
Cause (as those terms are defined in Article III.B.1 and 2.
hereof) or (iii) by you other than for Good Reason (as defined
in Article III.B.3 hereof). Service based vesting portions of
long term incentive stock awards previously granted by the
Board of Directors shall fully vest and be immediately
exercisable upon change in control except to the extent as may
be limited by provisions of applicable securities laws or
regulations. Portions of long term incentive stock awards
which are dependent upon attainment of performance based
goals, such as price of stock of the Corporation, shall be
determined by the highest price attained following date of
grant and prior to date of termination of employment.
B. Certain Defined Terms. In addition to the terms elsewhere
defined herein, the following terms as used herein shall have
the following meanings unless their context or use clearly
indicates a different meaning:
1. Disability/Retirement For purpose of this Agreement, your
employment shall be deemed to have terminated by reason of
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"Disability" if, at the time of termination, you
are eligible for benefits under the terms of the
Federal-Mogul Long-term Disability Plan, or are eligible
for a Social Security award on account of disability. In
the event that the Federal-Mogul Long-term Disability
Plan is no longer in effect, the following definition
shall apply. Employment shall be deemed to have
terminated because of disability if you are unable to
perform the duties of your job because of a physical
injury or disease or a mental illness. The injury or
illness must be one from which you are medically
determined not expected to recover. Termination of your
employment based on Retirement shall mean termination of
your employment and immediate eligibility for benefits
under the Personal Retirement Account (PRA), provided you also
are at least age 55 with 5 or more years of service. Further,
if you are not immediately eligible, upon termination, for
unreduced Social Security benefits, your termination under this
definition shall be deemed retirement if you signed a written
statement that accompanies your application for pension benefit
stating that the Corporation has not compelled or otherwise
coerced you to retire.
2. Cause. The Corporation may terminate your employment
for "Cause". For the purposes of this Agreement, the
Corporation shall have Cause to terminate your employment
hereunder upon (i) the willful and continued failure by you to
substantially perform your duties with the Corporation (other
than any such failure resulting from your incapacity due to
physical or mental illness), after a demand for substantial
performance is delivered to you by the Board of Directors of the
Corporation or of any successor of the Corporation (the Board)
which specifically identifies the manner in which the Board
believes that you have not substantially performed your duties,
or (ii) the willful engaging by you in gross misconduct
materially and demonstrably injurious to the Corporation. For
purposes of this subsection 2, no act or failure to act on your
part shall be considered willful merely because it was the
result of bad judgment or negligence; rather, such act or
failure to act must have been done, or omitted to have been
done, by you not in good faith and without reasonable belief
that your action or omission was in the best interests of the
Corporation. Notwithstanding the foregoing, your employment
shall not be deemed to have been terminated for Cause unless and
until there shall have been delivered to you a copy of a
resolution duly adopted by the affirmative vote of not less than
three-quarters of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice to you and an opportunity for you, together
with your counsel, to be heard before the Board), finding that
in the good faith opinion of the Board you were guilty of
conduct described above in clauses (i) or (ii) of this
subsection 2, and specifying the particulars thereof in detail.
3. Good Reason. You shall be entitled to terminate your
employment for "Good Reason". For purposes of this Agreement,
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any termination of employment under any one or more of the
following circumstances shall be for "Good Reason":
a. without your express written consent, the
assignment to you of any duties inconsistent with your
positions, duties, responsibilities and status with the
Corporation immediately prior to a "change in control" of
the Corporation, or a change in your reporting
responsibilities, titles or offices as in effect
immediately prior to a "change in control" of the
Corporation, or any removal of you from or any failure to
re-elect you to any of such positions, except in connection
with the termination of your employment for Cause,
Disability, Retirement or as a result of your death;
b. a reduction by the Corporation in your base salary, as
in effect immediately prior to a "change in control" of
the Corporation or as the same may thereafter be increased
from time to time; or the failure by the Corporation to
increase such base salary each year after a "change in
control" of the Corporation by an amount which at least
equals, on a percentage basis, the current average annual
percentage merit increase in the base salaries of the
elected officers in the other Corporation or companies (and
its or their Affiliates) involved in such "change in
control";
c. a failure by the Corporation to continue your
participation in
(1) any compensation or incentive plan in which you
participate on the effective date of this Agreement,
including but not limited to the following of the
Corporation's plans: Supplemental Executive Retirement Plan
(SERP), the Advisory Board Employees' part of the 1977
Supplemental Compensation Plan (SCP), 1984-1989 Stock
Option Plans (SOP), and any other compensation or incentive
plan that the Corporation maintained in effect on the date
immediately preceding the date on which occurs a "change in
control", or
(2) any welfare or benefit plan, qualified retirement
plan, life insurance plan, vacation plan, holiday plan,
car lease plan, medical expense, health and accident plan
or disability plan (and any other plans, arrangements and
privileges as are now in effect providing you with benefits
substantially similar to those now provided to you) in
which you participate on the effective date of this
Agreement, and any other welfare or benefit plan,
arrangement or privilege that the Corporation maintains in
effect or provides on the date immediately preceding the
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date on which occurs a "change in control" (any such plan
is individually a "Plan" and collectively the "Plans"), or
the Corporation taking any action (prompt notice of which
the Corporation shall provide you) which would adversely
affect your participation in (including increasing your
costs of such participation) or materially reduce your
benefits under any of the Plans or deprive you of any other
fringe or personal benefit enjoyed by you at the time of
the "change in control"; provided, however, that
notwithstanding the provisions of this paragraph c., the
Corporation's providing benefits of a type or amount
different than as provided for hereinabove shall not be
deemed a violation of this paragraph c. if required by law
or if the change in benefit type or amount is substantially
equivalent to the changes thereof effected for the five
highest compensated of all the employees whose rank is
substantially equal to yours and who are employed in the
other corporation or companies (and its or their
Affiliates) involved in such "change in control";
d. the relocation of the Corporation's principal executive
offices to a location outside Oakland, Wayne or Macomb
Counties, Michigan or the Corporation's requiring you to be
based anywhere other than the Corporation's principal
executive offices or the location where you are based
immediately prior to the "change in control", except for
required travel on the Corporation's business to an extent
substantially consistent with your business travel
obligations in effect immediately prior to the "change in
control", or, in the event you consent to any such
relocation of the Corporation's principal executive offices
or change in the location where you are based, the failure
by the Corporation (i) to pay (or promptly reimburse you
for) all reasonable moving expenses you incur relating to
a change of your principal residence in connection with
such relocation, and (ii) to indemnify you against any loss
defined as your cost of terminating any lease for such
residence, if it is leased, or if you own such residence
the difference between the actual sale price of such
residence and the higher of your aggregate investment in
such residence or the fair market value of such residence
as determined by any real estate appraiser designated by
you and reasonably satisfactory to the Corporation)
realized in the lease termination or sale of your principal
residence in connection with any such change of residence,
and (iii) to reimburse you for the amount of any federal,
state and local income taxes for which you become liable by
reason of your receipt of any amounts under clauses (i),
(ii) and (iii) of this paragraph d.;
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e. the failure of the Corporation to obtain the assumption
of this Agreement by any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise)
to all or substantially all of the assets of the
Corporation, by agreement in form and substance
satisfactory to you, to expressly assume and agree to
perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it
if a "change in control" had occurred without any such
succession having taken place. Failure of the Corporation
to obtain such agreement prior to the effectiveness of any
such succession shall be a breach of this Agreement and
shall entitle you to compensation from the Corporation in
the same amount and on the same terms as you would be
entitled hereunder if you terminated your employment for
Good Reason, except that for purposes of implementing the
foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination (as
defined in Article III.B.5. hereof). As used in this
Agreement, "Corporation" shall mean the Corporation
as hereinabove defined and any successor to its business or
assets as aforesaid which executes and delivers the
Agreement provided for in this paragraph e. or otherwise
becomes bound by this Agreement by operation of law; or
f. any purported termination of your employment by the
Corporation which is not effected pursuant to a Notice of
Termination satisfying the requirements of subsection 4.
below (and, if applicable, subsection 2. above).
4. Notice of Termination. Any termination of your employment
by the Corporation for Cause, Disability or Retirement, or by
you for Good Reason, shall be communicated by written Notice
of Termination to the other party hereto. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated.
5. Date of Termination. "Date of Termination" shall mean the
following:
a. if this Agreement is terminated for Disability or
Retirement, the date you retire under the disability form,
or other form of Retirement;
b. if you shall terminate your employment for Good Reason,
the date specified in the Notice of Termination; or
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c. if your employment is terminated for any other reason,
the date on which the Notice of Termination is given or, if
earlier, the date on which the Corporation determined that
your employment would be terminated.
IV. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
After a "change in control" of the Corporation but during the term of
this Agreement:
A. While you are in the employ of the Corporation during the term of
this Agreement, and thereafter as required by this Agreement, the
Corporation shall timely provide you the salary and perquisites, and
the other benefits provided for in the Plans, so that the failure to
provide you the same shall not afford you Good Reason as provided in
Article III.B.3. of this Agreement. You shall continue to receive
that part of such salary, perquisites and other benefits as,
immediately before any "change in control", is provided disabled
employees of your rank under the Corporation's disability benefit
Plans during any period that you fail to perform your duties as a
result of incapacity due to physical or mental illness and until your
employment is terminated for Disability, Retirement or death.
Thereafter, your benefits shall be determined in accordance with the
Plans and the Corporation shall have no further obligations to you
under this Agreement.
B. If your employment shall be terminated for Cause, the Corporation
shall pay you your full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is given, and
you shall receive the accrued benefits to which you would otherwise
have been entitled under the Plans as of the Date of Termination, and
the Corporation shall have no further obligations to you under this
Agreement.
C. If your employment with the Corporation shall be terminated by
the Corporation other than for Cause, Retirement or Disability, or by
you for Good Reason, then you shall be entitled to the benefits
provided below:
1. The Corporation shall pay you your full base salary through
the Date of Termination at the rate in effect at the time
the Notice of Termination is given, and you shall continue as a
participant in any Plan for which you are eligible through such
date.
2. In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay
you as severance pay (which, together with any amount payable to
you pursuant to Article IV.D.1. below, are hereinafter called
"Severance Payments"), the following (reduced by the amount
of any applicable tax withheld):
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a. Not later than the fifth day following the Date of
Termination, a lump sum amount equal to the sum of: (i)
2.999 times your total annual compensation, including
current annual base salary at the rate in effect
immediately prior to the occurrence of the circumstance
giving rise to the Notice of Termination (or, if higher, at
the highest rate in effect in the three year period
preceding such occurrence) and supplemental incentive
compensation (equal to the highest annual amount received
in the three (3) previous years under the SCP, the
determination in respect of each such Plan being separately
made), and (ii) any incentive compensation under the SCP
which had been allocated or awarded to you for a calendar
year or other measuring period that concluded prior to the
Date of Termination but has not yet been paid, and (iii) a
pro rata part (in proportion to the number of days in the
SCP period for measuring financial performance then in
progress, that has elapsed before your Date of Termination)
of the aggregate value of all contingent incentive
compensation awards to you for all uncompleted award
periods and for the period in progress under the SCP. The
compensation payable to you under such Plan to be made as
provided in clause (iii) above shall be determined as if
the period for measuring the Corporation's financial
performance specified in such Plan (and for each award
theretofore made to you) had concluded the day preceding
your Date of Termination and the Corporation had fully
attained the financial objectives that the Board specified
for such periods and, in the case of the SCP, the Board had
further determined that you were entitled to an award in
the full standard amount based on your salary rate and
position.
b. At your option, in lieu of lump sum payout of your
Severance Payments as set forth in paragraph a. above, you
may elect as provided in Article IV.J. to receive 1/36th of
such aggregate sum in monthly installments for a three-year
period commencing on the first day of the month coinciding
with or next following your Date of Termination and
continuing on the first day of each month thereafter until
you have received thirty-six such payments or you die or
attain age 65 (if earlier), and if you shall attain age 65
or die prior to the end of such payout period, a lump sum
amount equal to the aggregate sum of any remaining
installments shall be paid in cash, (i) to you within
thirty days of the date you attain age 65, or (ii) to the
person or persons you designate in writing at the time you
elect the installment method of payout within thirty days
of the date you die. If you elect the installment method
of payment, you shall, during such period but prior to the
date you attain age 65, continue to be covered by such of
the Plans as provide hospital-surgical-medical and life
insurance benefits. Further, if at the conclusion of the
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installment period you shall have attained a minimum of age
55 and 15 or more years of service (including the
installment period) you will be eligible for retiree health
care coverage and benefits as were in effect the day
preceding the "change in control."
c. This Agreement supersedes the arrangements for "change
in control" in any Plan in effect now or at any time during
the term of this Agreement. However you may, by written
notice to the Corporation within ninety (90) days following
your Date of Termination, designate any of the Plans which,
on the date of a "change in control", has specific terms or
provisions for severance and other benefits in the event of
"change in control". An election under this paragraph will
reduce any benefits payable to you pursuant to this
Agreement.
D. If your employment shall be terminated (i) by the Corporation
other than for Cause, Disability or Retirement, or (ii) by you for
Good Reason, and you elect to receive your Severance Payments on an
installment basis as provided in Article IV.C.2.b. above, then you
will also be entitled to receive the benefits provided for in
subsection 1 below.
1. In addition to the accrued vested retirement benefits
to which you are entitled under the PRA and the SERP, or any
successor plans thereto, you will accumulate constructive credit
toward vesting service, contributions and interest on a monthly
basis. This constructive credit will continue during the period
of severance and will cease at the earliest of 36 months,
attainment of age 65, or your death.
The constructive credit will be applied using the amount of your
current PRA and SERP account balance at the time of termination
as a base. A credit plus interest is applied to this base,
using the same formulas for the PRA and SERP as were in effect
the day before the "change in control." Total Compensation
shall be based upon the formula for determining severance pay
amounts described in Article IV.
The constructive PRA and SERP account balances will accumulate
in the same manner as the PRA and SERP did prior to the "change
in control" for 36 months or attainment of age 65 or death.
At that time, but not later than five days after severance
payments cease, an amount equal to the total value of the
constructive PRA and SERP balances, minus an amount equal to the
PRA and SERP vested balances at the time of termination, will be
paid to you in a single lump sum check.
In the event of your death prior to completion of the 36 month
severance period, an amount equal to the difference between
the accumulated constructive PRA and SERP account balances and
the PRA and SERP vested account balances at time of termination
will be paid to your beneficiary.
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If you are not vested in your PRA or SERP account balance at
time of termination, the 36-month severance period will count as
constructive service toward vesting in the constructive PRA and
SERP account balance.
E. In addition to all other amounts payable to you under this
Article IV, you shall also be entitled to receive all benefits
payable to you under the Corporation's tax qualified (as defined by
the Code) retirement plans as detailed in Exhibit B and any other
applicable nonqualified (for purposes of the Code) deferred
compensation agreements including long term incentive plan grants
between you and the Corporation.
F. If your employment with the Corporation shall be terminated (i)
by the Corporation other than for Cause, Disability or Retirement, or
(ii) by you for Good Reason, then in addition to the other benefits
to which you are entitled under this Article IV, the Corporation will
allow you to purchase at par or other stated value (howsoever the
same shall be denominated, which in any case shall be the prescribed
stock value, but not including any amount for stock transfer fee) any
country club stock and luncheon club stock which the Corporation owns
or holds on your behalf, and allow you to purchase at the rate then
applicable to Corporation retirees (or at the rate for retirees in
effect on the date of the "change in control", if in your sole
opinion that rate is more favorable to you than such rate as is then
in effect) the lease car(s) which you are leasing at your Date of
Termination.
G. You shall not be required to mitigate the amount of any payment
provided for in this Article IV by seeking other employment or
otherwise, nor shall the amount of any payment provided for in this
Article IV be reduced by any compensation earned by you or the
amount of any benefits provided to you as the result of employment
by another employer after the Date of Termination, or otherwise.
H. The Corporation shall pay you all legal fees and expenses
incurred by you in seeking to obtain or enforce any right or
benefit provided for in this Agreement.
I. Certain additional payments may be paid by the Corporation
as follows:
1. Anything in this Agreement to the contrary notwithstanding,
in the event it shall be determined that any payment or
distribution by the Corporation to or for the benefit of
you (whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required
under this section I.) (a "Payment") would be subject to
the excise tax imposed by Section 4999 of the Code or any
interest or penalties are incurred by you with respect to
such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then you shall be entitled
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to receive an additional payment (a "Gross-Up Payment") in an
amount such that after payment by you of all taxes (including any
interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest
and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, you retain an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
2. Subject to the provisions of section I.3., all
determinations required to be made under this section I.,
including whether and when a Gross-Up Payment is required and
the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by the
Corporation's independent auditors, or such other firm as may be
designated by the Corporation, (the Firm) which shall provide
detailed supporting calculations both to the Corporation and you
within 15 business days of the receipt of notice from you that
there has been a payment, or such earlier time as is requested
by the Corporation. In the event that the Firm is serving as
accountant or auditor or legal advisor for the individual,
entity or group effecting the Change of Control, the Corporation
shall appoint another nationally recognized accounting or law
firm to make the determinations required hereunder (which firm
shall then be referred to as the "Firm" hereunder). All fees
and expenses of the Firm shall be borne solely by the
Corporation. Any Gross-Up Payment, as determined pursuant to
this section I., shall be paid by the Corporation to you within
five days of the receipt of the Firm's determination. If the
Firm determines that no Excise Tax is payable by you, it shall
furnish you with a written opinion that failure to report the
Excise Tax on your applicable federal income tax return would
not result in the imposition of a negligence or similar penalty.
Any determination by the Firm shall be binding upon the
Corporation and you. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Firm hereunder, it is possible that
Gross-Up Payments will not have been made by the Corporation
which should have been made to you (the "Underpayment"),
consistent with the calculations required to be made hereunder.
In the event that the Corporation exhausts its remedies pursuant
to section I.3. and you thereafter are required to make a
payment of any Excise Tax, the Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
shall be promptly paid by the Corporation to or for the benefit
of you, in accordance with the provisions of section I.1.
3. You shall notify the Corporation in writing of any claim
by the Internal Revenue Service that, if successful, would
require the payment by the Corporation of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no
later than ten business days after you are informed in
writing of such claim and shall apprise the Corporation
of the nature of such claim and the date on which such
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claim is requested to be paid. You shall not pay such claim
prior to the expiration of the 30-day period following the date
on which you give such notice to the Corporation (or such
shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Corporation
notifies you in writing prior to the expiration of such period
that it desires to contest such claim, you shall:
a. give the Corporation any information reasonable
requested by the Corporation relating to such claim,
b. take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim
by an attorney reasonably selected by the Corporation,
c. cooperate with the Corporation in good faith in
order effectively to contest such claim, and
d. permit the Corporation to participate in any
proceedings relating to such claim;
provided, however, that the Corporation shall bear and
pay directly all costs and expenses (including additional
interest and penalties) incurred in connection with such
contest and shall indemnify and hold you harmless, on an
after-tax basis, for any Excise Tax, payroll tax, or income
tax (including interest and penalties with respect thereto)
imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing
provisions of this section I.3., the Corporation shall
control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such
claim and may, at its sole option, either direct you to pay
the tax claimed and sue for a refund or contest the claim in
any permissible manner, and you agree to prosecute such contest
to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate
courts, as the Corporation shall determine, provided, however,
that if the Corporation directs you to pay such claim and sue
for a refund, the Corporation shall advance the amount of such
payment to you, on an interest-free basis and shall indemnify
and hold you harmless, on an after-tax basis, from any Excise
Tax, payroll tax, or income tax (including interest or
penalties with respect thereto) imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for your
taxable year with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Corporation's control of the contest
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shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and you shall be entitled to
settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.
4. If, after the receipt by you of an amount advanced by
the Corporation pursuant to section I.3., you become entitled to
receive any refund with respect to such claim, you shall
(subject to the Corporation's complying with the requirements of
section I.3.) promptly pay to the Corporation the amount of such
refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by you
of an amount advanced by the Corporation pursuant to section
I.3., a determination is made that you shall not be entitled to
any refund with respect to such claim and the Corporation does
not notify you in writing of its intent to contest such
denial of refund prior to the expiration of 30 days after
determination, then such advance shall be forgiven and shall not
be required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
J. Any election you make as provided for in Article IV.C.2.(b) or in
Article IV.D. shall be by notice in writing, which shall be
acceptable to the Corporation if substantially in the form of
Exhibit A attached hereto, Any such election, when made, may
subsequently be revoked and replaced with a new election, made in
like manner, at any time before a "change in control". Thereafter
such an election may be changed only if made in like manner, before
the first to occur of the 90th day following a "change in control"
or the date you receive a Notice of Termination.
V. BINDING AGREEMENT.
This Agreement shall inure to the benefit of and be enforceable by
your executors, administrators, successors, heirs, distributees, devisees,
legatees or other personal or legal representative.
VI. CONFIDENTIAL INFORMATION.
You shall hold in a fiduciary capacity for the benefit of the
Corporation all secret or confidential information, knowledge or
data relating to the Corporation or any of its affiliated
companies, and their respective businesses, which shall have been
obtained by you during your employment by the Corporation or any of
its affiliated companies and which shall not be or become public
knowledge (other than by your acts in violation of this Agreement).
After termination of your employment with the Corporation, you
shall not, without the prior written consent of the Corporation or
as may other wise be required by law or legal process, communicate
or divulge any such information, knowledge or data to anyone other
than the Corporation and those designated by it. In no event
shall an asserted violation of the provisions of this
14
Section constitute a basis for deferring or withholding any amounts
otherwise payable to you under this Agreement.
VII. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing
and shall be deemed to have been duly given when delivered or
mailed by United States certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses set forth on
the first page of this Agreement, provided that all notices to the
Corporation (except notices substantially in the form of Exhibit A
attached hereto) shall be directed to the attention of the
Secretary of the Corporation, or to such other address as either
party may have furnished to the other by notice in writing in
accordance herewith, except that notices of change of address shall
be effective only upon receipt.
VIII. MISCELLANEOUS.
Except for the right to amend as provided below in Article IX,
no provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed
to in writing signed by you and, on behalf of the Corporation, by
such officer or officers thereof as may be specifically designated
by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any
provision or condition of this Agreement to be performed by such
other party shall be deemed a waiver of that or any similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time or times. No agreements or representations, oral
or otherwise, express or implied, with respect to the subject
matter hereof have been made by either party which are not set
forth expressly in this Agreement. Nothing expressed or implied
herein shall create any right or duty (on the part of you or the
Corporation) to have you remain in the employment of the
Corporation at any time prior to a "change in control" of the
Corporation, each reserving all rights to terminate the employment
relationship at any time prior to a "change in control" of the
Corporation with or without Cause.
IX. VALIDITY.
The validity, interpretation, construction and performance of
this Agreement shall be governed by the laws of the State of
Michigan, without reference to principles of conflict of laws. The
invalidity or unenforceability of any one or more provisions of
this Agreement shall not affect the validity or enforceability of
the remaining provisions of this Agreement, which shall remain in
full force and effect.
X. AMENDMENTS.
The Corporation reserves the right unilaterally to amend this
Agreement, upon thirty (30) days' prior notice to you (or such shorter
time as you may agree to in writing), at any time before a "change in
control" occurs so long as such amendment is not in conflict with
Exhibit 8 to the minutes of the February 6, 1985 meeting of the Board or
any subsequent resolution of the Board and so long as any additional costs
15
to the Corporation resulting from such amendments are not significant.
Any such amendment shall become effective, if signed for the Corporation
by its Chairman of the Board or Vice President - Human Resources, on the
date specified in such notice to you. This Agreement may not be amended
or modified in any respect after the occurrence of a "change in control"
without the express written consent thereto of you and of the Corporation.
XI. COUNTERPARTS.
This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
If this letter correctly sets forth our agreement on the
subject matter hereof, please sign both of the enclosed copies of
this letter and return one of them to the Corporation. This letter
will then constitute our agreement on such subject.
Very truly yours,
FEDERAL-MOGUL CORPORATION
By:
------------------------------------
(Typed Name)
---------------------------
Title:
---------------------------------
Executed and effective this
day of May, 1995
- -----------------------------
Witness
- -----------------------------
(Typed Name)
16
INDEX OF DEFINED TERMS
-EXECUTIVE SEVERANCE AGREEMENT-
AGREEMENT SECTION PAGE WHERE
IN WHICH TERM DEFINITION
TERM IS DEFINED APPEARS
- ----------------- ----------------- ----------
Agreement Introduction 1
Base Period IV.C.2.a. 8
Board III.B.2. 3
Cause III.B.2. 3
Change in Control II. 2
Code IV.I.2. 11
Corporation Introduction;III.B.3.d. 1, 5
Date of Termination III.B.5. 6
Disability III.B.1. 2
Exchange Act II. 2
Good Reason III.B.3. 3
Notice of Termination III.B.4. 6
Plan/Plans III.B.3.c. 4
Retirement III.B.1. 3
SERP III.B.3.c.(1) 4
Severance Payments IV.C.2. 7
Payment IV.I. 10
17
EXHIBIT A
Date
------------------------
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Treasurer
RE: EXECUTIVE SEVERANCE AGREEMENT DATED MAY 1, 1995
BETWEEN THE UNDERSIGNED AND FEDERAL-MOGUL CORPORATION
(THE "AGREEMENT")
Gentlemen:
I elect that any payments made to me as provided in Article IV. of
the Agreement by paid (check either of A. or B. below):
A. In a lump sum as provided in Article IV.C.2.a.
- -----
B. In 36 monthly payments as provided in Article IV.C.2.b.
- -----
The foregoing election(s) respecting the optional alternatives set
forth above shall forthwith revoke and supersede such contrary
election(s), if any, as were heretofore made by me or by my
personal or legal representative.
Very truly yours,
By:
-----------------------------------
Typed Name:
---------------------------
WITNESS:
- ------------------------------------
Signature
Typed Name:
-------------------------
City of , and
State of .
18
EXHIBIT B
INDEX OF RETIREMENT PLANS
Personal Retirement Account (PRA)
Supplemental Executive Retirement Plan (SERP)
Salaried Employees' Investment Program (SEIP)