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EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), effective as of
May 8, 2001, between Hercules, Inc., a Delaware corporation (hereinafter called
the "Company"), and William H. Joyce, a resident of Connecticut (hereinafter
called "Executive").
The Company wishes to employ Executive as Chairman and Chief
Executive Officer of the Company. Executive is willing to be so employed upon
the terms and conditions set forth in this Agreement. In consideration of the
foregoing and the mutual agreements herein contained, the parties agree as
follows:
ARTICLE 1.
TERM OF AGREEMENT
SECTION 1.01. Term. The term of this Agreement (the "Term") shall
commence on May 8, 2001 (the "Effective Date") and shall terminate on the first
to occur of the following dates:
(a) the date of Executive's death or adjudicated incompetency;
(b) the date on which Executive becomes "permanently and
totally disabled" (within the meaning of Section 22(e)(3) of the Internal
Revenue Code of 1986, as amended);
(c) the date on which Executive's employment is terminated by
the Company with or without "Cause" (as defined in Section 4.01) or by
Executive's resignation; and
(d) April 30, 2003.
SECTION 1.02. Extension. The Term of this Agreement may be extended by
mutual agreement of the Company and Executive.
SECTION 1.03. Announcements. The Company shall issue a press release
regarding the hiring of Executive as its Chief Executive Officer in a form
mutually agreed by the Company and Executive.
ARTICLE 2.
TERMS OF EMPLOYMENT
SECTION 2.01. Position and Duties. During the Term, Executive shall
serve as the Chief Executive Officer of the Company. Executive accepts
employment on the terms and conditions contained herein. Executive has been
appointed as a member of the Board of Directors of the Company (the "Board").
The Company shall nominate Executive for reelection to the Board at each annual
meeting that occurs during the Term when his membership on the
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Board would expire if he were not reelected. In addition, when Thomas L. Gossage
ceases to serve as non-employee Chairman of the Board, Executive shall be
appointed as Chairman of the Board, and shall continue to serve as such for the
remainder of the Term, so long as he is a member of the Board.
SECTION 2.02. Office and Staff. During the Term, the Company shall (i)
maintain appropriately appointed executive offices for Executive at the
Company's headquarters in Wilmington, Delaware from which Executive shall
perform his duties; and (ii) provide Executive with executive secretarial and
other administrative staff and services suitable to his offices and duties,
staffed by persons approved by Executive.
SECTION 2.03. Base Salary, Variable Compensation and Expenses.
(a) During the Term, Executive shall receive a base annual
salary of One Million Dollars ($1,000,000) (the "Base Salary"), pro rated for
any partial year, payable in equal monthly installments, subject to applicable
tax withholdings, in accordance with the Company's normal payroll practices.
(b) During the Term, Executive shall be eligible to earn
annual variable compensation ("Variable Compensation"), pro-rated for any
partial year. For each year, Executive's target Variable Compensation shall be
One Million Dollars ($1,000,000), with actual variable compensation being more
or less than the target amount depending upon the achievement of the performance
criteria referred to in this clause (b), and with such target amount pro-rated
for any partial year. The Variable Compensation will be established and paid
under the Company's Annual Management Incentive Compensation Plan or any
successor thereto, with the performance criteria for the Variable Compensation
being established by the Compensation Committee of the Board or another
appropriate committee or outside directors, taking into account in good faith
the recommendations of Executive with respect thereto.
(c) The Company shall promptly reimburse Executive for all
ordinary, necessary, reasonable and proper business expenses actually incurred
by Executive during the Term in connection with the performance and discharge of
his duties and responsibilities under this Agreement in accordance with the
policies and procedures established by the Company from time to time. Executive
will not incur expenses other than in accordance with the Company's policies and
procedures both as to the nature and amount of such expenses.
SECTION 2.04. Stock Options. (a) The Company shall grant to Executive
stock options to acquire 1,250,000 shares of the Company's common stock (the
"Company Stock"), effective upon the execution of this Agreement, with a
per-share exercise price equal to $12.00, the closing price of the Company's
Stock on the New York Stock Exchange-Composite Transactions on May 8, 2001. Such
stock options shall have a term of ten (10) years and shall vest and become
exercisable upon the earliest of:
(i) any "Change in Control" of the Company (as defined in the
Hercules Long Term Incentive Compensation Plan (the "LITP"));
(ii) the termination of Executive's employment by the Company
other than for Cause;
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(iii) the death or disability of the Executive; and
(iv) April 30, 2003.
The foregoing stock options shall otherwise have the normal terms
and conditions applicable to the stock options granted to other senior
executives of the Company under the LTIP.
(b) Executive shall receive further grants of stock options for each
calendar year during the Term after 2001, at such times as the Company generally
makes stock option grants to other employees of the Company, with the amounts
and terms and conditions of such stock options being consistent with Executive's
position as Chairman and Chief Executive Officer of the Company.
(c) The Company intends to take such actions as may be reasonably
practicable so that its ability to take federal income tax deductions with
respect to the exercise of the options provided for above is not limited by the
application of Section 162(m) of the Internal Revenue Code of 1986, as amended
(the "Code"). However, Executive acknowledges that it may not be feasible for
the Company to preserve full deductibility, and he therefore agrees to cooperate
with the Company in arranging to defer, under a mutually agreeable plan of
deferred compensation, receipt of shares of the Company's common stock otherwise
deliverable in connection with his exercise of such options (or cash, to the
extent such options are phantom stock options) if and to the extent necessary to
preserve such deductibility; provided, that in no event shall the period of any
such deferral extend beyond the occurrence of a Change in Control of the Company
unless Executive, in his sole discretion, agrees otherwise.
SECTION 2.05. Qualified Plans. Executive shall be entitled to
participate in each "pension plan" (as defined in Section 3(2) of the Employee
Retirement Income Security Act of 1974, as amended) (a "Pension Plan") sponsored
by the Company that is intended to be qualified under Section 401(a) of the Code
(each, a "Qualified Plan"), in which senior executives of the Company are
entitled to participate. Each Qualified Plan shall recognize all of Executive's
service with his prior employer for vesting purposes to the extent permitted by
its terms, by applicable law and under the rules governing qualification under
Section 401(a) of the Code.
SECTION 2.06. Non-Qualified Plans. Executive shall be entitled to
participate in all Pension Plans sponsored by the Company that are not Qualified
Plans (each, a "Non-Qualified Plan") to the same extent as other senior
executives of the Company and shall be immediately vested in any benefit accrued
by him thereunder, notwithstanding any vesting provisions of such Non-Qualified
Plans. In addition, if any benefits that Executive accrues under any Qualified
Plan are forfeited as a result of his having insufficient years of service that
would not have been forfeited had such Qualified Plan recognized his years of
service with his prior employer in full for purposes of vesting, Executive shall
be entitled to receive such benefits under a Non-Qualified Plan or an individual
non-qualified arrangement.
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ARTICLE 3.
CERTAIN BENEFITS; INDEMNIFICATION
SECTION 3.01. Personal Benefits. During the Term:
(i) Executive shall be entitled to receive all fringe benefits
and participate in all plans generally available to executive personnel of the
Company, including without limitation, any hospital, medical, accident,
disability, life insurance, and dental coverages. All such coverages shall be
effective as of the Effective Date.
(ii) Executive will be entitled to the holidays observed by
other employees of the Company.
(iii) Executive shall be entitled to such sick days and
personal days as may be established by the Company for executives of the
Company.
(iv) Executive shall be entitled to four (4) weeks of vacation
per year.
(v) The Company shall provide Executive with an automobile of
his selection for his exclusive business and personal use, primarily in Delaware
and for travel from Delaware on Company business or to Connecticut, and pay all
expenses of ownership, operation, repair and maintenance of such vehicle;
(vi) The Company shall pay for suitable housing for the
Executive in the Wilmington, Delaware area.
(vii) Executive shall be entitled to receive paid
transportation to and from Connecticut at such times as Executive shall
determine, but not more frequently than one round trip per week and one round
trip per holiday.
SECTION 3.02. Indemnification. Anything in this Agreement to the
contrary notwithstanding, the Company agrees to pay all costs and expenses
incurred by Executive in connection with the enforcement of his rights and
entitlements under this Agreement, unless the trier of fact in such matter finds
that Executive's claim was brought or maintained in bad faith or was frivolous.
In addition, Executive shall be indemnified and covered by liability insurance
on the same terms and conditions as other senior executives of the Company with
respect to his service as an employee of the Company and as other directors of
the Company with respect to his service on the Board.
SECTION 3.03. Reimbursement. The Company shall reimburse Executive up
to $6,500 for expenses incurred in connection with the preparation and
negotiation of this Agreement.
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ARTICLE 4.
TERMINATION OF EMPLOYMENT; CHANGE IN CONTROL
SECTION 4.01. Termination of Employment. In the event Executive's
employment is terminated by the Company other than for Cause (as defined below)
prior to a Change in Control, the Company shall pay to Executive, within five
(5) days after the date of termination, an amount equal to the Base Salary and
Variable Compensation that Executive would have received, had he remained
employed hereunder through April 30, 2003, assuming that the Base Salary
continued to be paid at the rate in effect immediately before the date of
termination and that the Variable Compensation was earned at the target rate,
but in any event not less than Two Million Dollars ($2,000,000).
A termination of Executive's employment by the Company shall
be considered to be for "Cause" under this Agreement if the Board terminates his
employment based upon a determination that Executive has (i) engaged in serious
misconduct in connection with the performance of his duties hereunder, (ii)
willfully neglected his duties hereunder, or (iii) engaged in criminal conduct
or other serious misconduct that is likely to be harmful to the business or
reputation of the Company; provided, that if the foregoing actions or inactions
on the part of Executive are capable of cure, the Board shall give Executive
notice of the first occurrence thereof and five business days' opportunity to
cure.
SECTION 4.02. Change in Control. The consequences of the termination of
Executive's employment after a Change in Control shall be governed by the
provisions of a separate Change in Control Employment Agreement, to be entered
into by the Company and Executive within 30 days after the execution of this
Agreement (the "Change in Control Agreement"). The Change in Control Agreement
shall provide for severance pay and benefits consisting of: (A) a cash lump sum
payment (or other form of payment if the Company and Executive mutually agree)
equal to three times the sum of (x) the Base Salary and (y) the annual target
amount of the Variable Compensation, each as in effect immediately before the
date of termination or, if higher, immediately before the Change in Control, and
(B) continuation of Executive's welfare benefits for a period of three years
following the date of termination. The Change in Control Agreement shall also
provide that if (1) the Change in Control occurs on or before April 30, 2002,
and (2) in connection therewith, all or substantially all Company Stock is
purchased for cash and all or substantially all employee stock options are
cancelled in exchange for cash or for no consideration and without being
replaced by comparable new stock options, then the Company shall pay the
Executive, within five business days after the Change in Control, a cash payment
equal to $3,000,000, less the excess (if any) of (a) the per share amount of the
cash paid for the Company's Stock, over (b) $12.00, times 1,250,000. The
provisions of the Change in Control Agreement (other than those providing the
amount of the severance pay and benefits and for the payment described in the
preceding sentence) shall otherwise be substantially similar to the Change in
Control Employment Agreements currently in effect between the Company and its
other senior executives, including without limitation a provision for a grossup
payment with respect to any excise tax imposed under Section 4999 of the Code.
SECTION 4.03. Resignation. Notwithstanding any other provision of this
Agreement, upon the termination of the Executive's employment for any reason,
unless otherwise requested
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by the Board, he shall immediately resign from the Board and from all boards of
directors of subsidiaries and affiliates of the Company of which he may be a
member. The Executive hereby agrees to execute any and all documentation of such
resignations upon request by the Company, but he shall be treated for all
purposes as having so resigned upon termination of his employment, regardless of
when or whether he executes any such documentation.
ARTICLE 5.
GENERAL PROVISIONS
SECTION 5.01. Entire Agreement. This Agreement sets forth the entire
agreement between the parties with respect to its subject matter and merges and
supersedes all prior discussions, agreements and understandings of every kind
and nature between any of them, and neither party shall be bound by any term or
condition other than as expressly set forth or provided for in this Agreement.
This Agreement may not be changed or modified except by an agreement in writing,
signed by the parties hereto.
SECTION 5.02. Waiver. The failure of any party to this Agreement to
enforce any of its terms, provisions or covenants shall not be construed as a
waiver of the same or of the right of such party to enforce the same. Waiver by
any party hereto of any breach or default by any other party of any term or
provision of this Agreement shall not operate as a waiver of any other breach of
default.
SECTION 5.03. Severability. In the event that any one or more of the
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remainder of the
Agreement shall not in any way be affected or impaired thereby. Moreover, if any
one, or more of the provisions contained in this Agreement shall be held to be
excessively broad as to duration, activity or subject, such provisions shall be
construed by limiting and reducing them so as to be enforceable to the maximum
extent allowed by applicable law.
SECTION 5.04. Notices. Any notice given hereunder shall be in writing
and shall be deemed to have been given when delivered by messenger or courier
service (against appropriate receipt), or mailed by registered or certified mail
(return receipt requested), addressed as follows:
If to the Company: Hercules, Inc.
Hercules Plaza
1313 North Market Street
Wilmington, DE 19894
Attention:
If to Executive: William H. Joyce
12 Shepard Hill Road
Newtown, CT 06470
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or at such other address as shall be indicated to either party in writing.
Notice of change of address shall be effective only upon receipt.
SECTION 5.05. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without regard to
conflicts of law principles. The parties agree to the jurisdiction of the
Delaware courts and that proper venue of such courts is Wilmington.
SECTION 5.06. Confidentiality. Executive shall keep confidential all
proprietary and other information concerning the Company and its business,
including but not limited to information concerning the Company's customers,
vendors and others with whom it transacts business, its methods of operation and
other trade secrets, its future plans and strategies, and any financial
information concerning the Company (collectively, "Confidential Information").
The Employee agrees that all Confidential Information is the exclusive property
of the Company and that Employee will not remove the originals or make copies of
any Confidential Information without the Company's prior written consent. The
Employee shall not use Confidential Information for any purposes other than to
carry out his obligations under this Agreement and will not divulge Confidential
Information to any other person or entity during or after the term of this
Agreement without the Company's prior written consent, unless required by law or
judicial or other process.
SECTION 5.07. Descriptive Headings. The section headings contained
herein are for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
SECTION 5.08. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original for all purposes but
which, together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the Effective Time.
HERCULES, INC.
By:
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Name:
Title:
EXECUTIVE
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William H. Joyce
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