EXHIBIT 10.9
EMPLOYMENT AGREEMENT dated as of April 13, 1992, between
COLTEC INDUSTRIES INC, a Pennsylvania corporation (the "Company")
and LAURENCE H. POLSKY (the "Executive").
W I T N E S S E T H :
In consideration of the mutual promises hereinafter set forth, the
parties hereto, intending to be legally bound, agree as follows:
1. EMPLOYMENT. (a) During the Employment Period (as hereinafter
defined), the Company shall employ the Executive, and the Executive shall serve,
with such functions, duties and responsibilities as shall be assigned to him by
the Company. If at any time during the Employment Period a Change of Control
(as hereinafter defined) shall occur, the Company shall employ the Executive,
and the Executive shall serve, for the remainder of the Employment Period with
the same functions, duties and responsibilities as on the date such Change of
Control occurred. During the Employment Period, the Executive shall devote his
best efforts and services to his employment in substantially the same manner and
to substantially the same extent as the Executive has
heretofore devoted his efforts. During the Employment Period, the Executive
shall render his services on substantially a full-time basis. The term
"Employment Period" shall mean the period commencing on the date hereof and
ending on the earlier of (i) July 1, 1996, or (ii) the date of death of the
Executive; PROVIDED, HOWEVER, that if the Executive shall notify the Company of
his election to serve for a Terminal Employment Period (as hereinafter defined)
and a Consulting Period (as hereinafter defined) pursuant to paragraph 1(b)
hereof, the Employment Period shall end.
(b) Anything to the contrary herein notwithstanding, if at any time
after a Change of Control shall have occurred the Executive shall make a
determination in good faith that any of such Executive's management functions,
duties or responsibilities or any aspect of his employment has changed adversely
(whether or not such change shall constitute a material breach of the Company's
obligations hereunder), the Executive shall have the option to serve hereunder
for a terminal employment period (the "Terminal Employment Period") followed by
a consulting period (the "Consulting Period"). The Terminal Employment Period
shall commence upon notice to the Company by the Executive of his election to
serve for such Terminal Employment Period and Consulting Period and the Terminal
Employment Period shall end on
2
the earlier of two years from the date of its commencement or the date the
Executive attains the age of 65 years. During the Terminal Employment Period,
the Company shall employ the Executive with such functions, duties and
responsibilities as shall be assigned to him by the Company; PROVIDED, HOWEVER,
that such functions, duties and responsibilities shall be substantially similar
to those performed by or assigned to the Executive on the date of the Change of
Control and shall be acceptable to the Executive. The Executive shall make
himself available to the Company during normal business hours; PROVIDED,
HOWEVER, that during the Terminal Employment Period, if the Company does not
require the full-time services of the Executive, the Executive may engage in
other business activities subject to the provisions of paragraph 3 hereof.
During the Employment Period and the Terminal Employment Period, the place of
employment shall continue to be in the New York City metropolitan area unless
otherwise agreed by the Company and the Executive. During the Terminal
Employment Period the Company shall provide office space and secretarial
assistance to the Executive in the same manner as provided by the Company prior
to the Change of Control.
(c) The Consulting Period shall commence upon the expiration of the
Terminal Employment Period and shall end two
3
years after its commencement. During the Consulting Period, the Executive shall
render advisory services concerning the business affairs of the Company with
which the Executive shall have had substantial familiarity in the course of his
prior management responsibilities. During the Consulting Period, the Executive
shall not be required to devote more than one day each week and three days each
calendar month to such services, and shall not be required to render any
services at a distance of more than 50 miles from his then home, it being
understood that he may move from the metropolitan area in which he presently
resides. The Executive's consulting services under this Agreement shall be
required only at times and places consistent with his other employment or with
his private activities.
(d) A "Change of Control" shall be deemed to have occurred if any
partnership, corporation or any person, group or entity, other than entities
controlled by Morgan Stanley Group Inc., shall acquire beneficial ownership of a
majority of the outstanding shares of capital stock of the Company entitled to
vote together without regard to class for the election of directors.
2. COMPENSATION. (a) (i) Subject to the terms of this paragraph 2,
during the term of this Agreement, the Executive shall be paid a salary at an
annual rate not less than the annual rate
4
payable to the Executive on the date hereof and shall be entitled to participate
in such plans and other compensation arrangements as and to the extent that the
Board of Directors of the Company shall determine. Incentive compensation
awards for calendar years 1992 and 1993 shall be not less than $150,000 in each
year, provided the Executive shall be an employee at the time the award is paid.
If a Change of Control shall have occurred, in no event shall the Executive be
paid a salary at an annual rate less than his annual salary rate in effect at
the time of the Change of Control. All such compensation shall be paid in
appropriate installments to conform with the regular payroll payment dates of
the Company. Following a Change of Control and during both the Employment
Period and the Terminal Employment Period, the Executive shall be entitled, to
the same extent as he does on the date hereof or to any greater extent
determined by the Board subsequently, to (i) participate in all the Company's
employee benefit plans, including, without limitation, the Company's 1977 Long-
Term Performance Plan, Incentive Compensation Plan (determined as in prior years
and paid pro rata for any partial year with the Terminal Employment Period),
Retirement Savings Plan, Family Protection Plan, any other pension and
retirement plans, group life insurance, hospitalization and surgical and major
medical coverages, sick leave, vacations and
5
holidays, long-term disability and such other related fringe benefits and
executive perquisites as are available to executive employees of the Company
(each computed in the same manner as in prior years) and (ii) such other
benefits or perquisites as he has received prior to the date of such Change of
Control; PROVIDED, HOWEVER, that if the Company is unable by operation of law or
the terms of the applicable plan to continue the participation of the Executive
in any such plan the Company will provide the Executive with a comparable level
of compensation or benefits. The Executive's election pursuant to paragraph
1(b) hereof to commence a Terminal Employment Period and Consulting Period shall
not adversely affect the Executive's right to receive any compensation accrued
prior to the date of such election.
(ii) The Company shall pay the Executive, at the time the Executive
exercises any option for shares granted to the Executive in the option agreement
dated April 13, 1992 (the "Option Agreement"), an amount equal to the amount per
share by which the option exercise price of shares granted in the Option
Agreement exceeds $15 per shares multiplied by the number of options so
exercised. Notwithstanding anything in this Agreement to the contrary, the
provisions of this paragraph 2(a)(ii) shall survive the termination or
expiration of this Agreement to the extent that
6
the Executive or his estate may exercise options pursuant to the terms of the
Option Agreement.
(b) During the Consulting Period, the Executive shall receive a
consulting fee at an annual rate in no event less than the annual rate of his
salary on the date hereof. The salary equivalent portion of the consulting fee
calculated in accordance with the preceding sentence shall be paid in equal
installments on the first day of each month during the Consulting Period. The
consulting fee shall begin to accrue upon the commencement of the Consulting
Period. During the Consulting Period, the Executive shall participate in all
the Company's formal group life insurance, hospitalization and surgical and
major medical coverages and long-term disability benefits, in each case to the
same extent as would an officer of the Company receiving comparable
compensation; PROVIDED, HOWEVER, that if the Executive is ineligible (e.g., by
operation of law or the terms of the applicable plan) to continue the
participation of the Executive in any such plan the Company will provide the
Executive with a comparable level of compensation or benefits; and further
provided that participation in any of these plans shall terminate if the
Executive is eligible for similar benefits under another company's plans; and
further provided that upon attainment of age 65, the Executive's
7
entitlement to participation in such benefit plans shall follow normal practice
of the Company with respect to retired executives.
(c) After a Change of Control occurs, the Company shall be obligated
hereunder to reimburse the Executive for reasonable business expenses actually
incurred or paid by him, consistent with the policies of the Company, in
rendering to the Company the services provided for herein, upon presentation of
expense statements or such other supporting information as the Company may
customarily require of its senior executives.
(d) If the Executive engages in self-employment or part-time
employment at any time during the Terminal Employment Period or the Consulting
Period, amounts payable hereunder shall be reduced by an amount equal to one-
half of all cash compensation earned by the Executive during such Terminal
Employment Period or Consulting Period, as the case may be, from such self-
employment or part-time employment.
3. OTHER ACTIVITIES. At all times during the Terminal Employment
Period and the Consulting Period the Executive shall not, without the written
consent of the Company, directly or indirectly engage in, as a director,
officer, employee or partner, any business, association, firm or corporation
(other than the Company or any parent, subsidiary or successor of it) that is
8
engaged in whole or in part in a business that is in substantial and direct
competition with the business of the Company or any of its subsidiaries and at
all times will not act in any manner which could reasonably be held to be
contrary to the best interests of the Company.
4. TERMINATION. (a) The Company may terminate this Agreement and
all the Company's obligations hereunder, except for obligations accrued but
unpaid to the effective date of termination, solely for "cause". "Cause" shall
mean (i) the Executive's wilful refusal, without proper cause, to render
services hereunder on substantially a full-time basis or (ii) conviction of a
crime involving moral turpitude. Such termination shall be effected by notice
thereof hand delivered by the Company to the Executive and, except as
hereinafter provided, shall be effective as of the thirtieth day after receipt
by the Executive of such notice. If, within the 30-day period following the
date of receipt of such notice of termination for cause as defined in clause (i)
above, the Executive shall resume rendering services on substantially a full-
time basis, the termination shall not be effective.
(b) This Agreement may be terminated for any reason by the Executive
upon not less than six month's prior notice to the
9
Company. After the occurrence of a Change of Control, this Agreement may be
terminated by the Executive upon not less than 10 days' prior notice to the
Company because of a breach by the Company of its obligations hereunder. In the
event the Executive terminates this Agreement because of a breach by the Company
of its obligations hereunder, although the Employment Period (or the Terminal
Employment Period or Consulting Period, as the case may be) will then be
terminated, the Executive shall continue to receive all the compensation
provided for in paragraph 2 hereof and shall be entitled to all the benefits
otherwise provided for herein for the remainder of the term of this Agreement,
notwithstanding such termination.
(c) In the event of termination of this Agreement by the Executive as
a result of the breach by the Company of any of its obligations hereunder, or in
the event of the termination of the Executive's employment by the Company in
breach of this Agreement, the Executive shall be required to seek other
employment in order to mitigate his damages hereunder, unless he has reached age
62.
(d) In the event that the Executive institutes any legal action to
enforce his rights under, or to recover damages for breach of this Agreement,
the Executive, if he is the prevailing party, shall be entitled to recover from
the Company any actual
10
expenses for attorney's fees and disbursements incurred by him.
5. FULL-TIME REEMPLOYMENT. Immediately upon commencement of the
Terminal Employment Period and until the Executive attains the age of 62 years,
the Executive has the obligation to seek, vigorously and expeditiously,
appropriate employment elsewhere. During the Terminal Employment Period or the
Consulting Period, upon receipt of a written notice from the Executive that he
has been reemployed by another corporation or other entity on a full-time basis,
the obligation of the Company hereunder to pay the Executive the compensation
provided for in paragraph 2 hereof (except for obligations accrued but unpaid to
the date of such notice) shall terminate. Upon receipt of such notice the
Company shall pay the Executive, in addition to any amounts accrued hereunder
but unpaid, an amount equal to one quarter of the aggregate amount that would
otherwise have been payable to him under this Agreement during the remainder of
the Terminal Employment Period and the Consulting Period had he not become so
reemployed.
6. DISABILITY. In the event the Employment Period is terminated as a
result of Disability, until the earlier of the date on which the Employment
Period was otherwise scheduled to end at the time of such Disability, the date
of the Executive's death or
11
the date on which the Executive attains the age of 65 years, or in the event the
Executive becomes unable to render services hereunder during either the Terminal
Employment Period or the Consulting Period as a result of Disability until the
end of the Consulting Period, the Executive shall be paid all compensation
payable to the Executive under the Company's long-term disability plan or
policy, for such period, plus an additional payment from the Company (if
necessary) such that the aggregate amount received by the Executive in the
nature of salary continuation from all sources equals the salary at the rate in
effect at the commencement of Disability.
7. INDEMNIFICATION. After the occurrence of a Change of Control, the
Executive shall be entitled throughout the remaining term of this Agreement and
thereafter to indemnification in respect of any actions or omissions as an
employee, officer or director of the Company (or any successor pursuant to
paragraph 12 hereof), whether occurring before or after such Change of Control,
to the fullest extent permitted by law.
8. REMEDIES. Effective upon the occurrence of a Change of Control,
the Company waives, and will not assert, any right to setoff the amount of any
claims, liabilities, damages or losses the Company may have against any amounts
payable by the Company to the Executive hereunder, and any amounts payable to or
otherwise
12
accrued for the account of the Executive in respect of any period prior to the
effective termination of this Agreement shall be paid as provided in this
Agreement. After the occurrence of a Change of Control, the Company's sole
remedy for any asserted violation of any provision of this Agreement shall be to
terminate the Executive's employment in accordance with this Agreement.
9. ARBITRATION. After the occurrence of a Change of Control, any
controversy or claim arising out of or relating to this Agreement, or any breach
thereof, shall be adjudicated only by arbitration in accordance with the rules
of the American Arbitration Association, and judgment upon such award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. The
arbitration shall be held in New York City, New York, or such other place as may
be agreed upon at the time by the parties to the arbitration.
10. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York.
11. ASSIGNABILITY. (a) In the event that the Company shall merge or
consolidate with any other corporation or all or substantially all the Company's
business or assets shall be transferred in any manner to any other person, such
successor shall
13
thereupon succeed to, and be subject to, all rights, interests, duties and
obligations of, and shall thereafter be deemed for all purposes hereof to be,
the Company hereunder. This Agreement shall be binding upon and inure to the
benefit of any such successor and the legal representatives of the Executive.
(b) This Agreement is personal in nature and neither of the parties
hereto shall assign or transfer this Agreement or any rights or obligations
hereunder, except by operation of law or pursuant to the terms of this paragraph
11.
12. AMENDMENTS; WAIVERS. This Agreement may be amended, modified,
superseded, canceled, renewed or extended and the terms or covenants hereof may
be waived only by a written instrument executed by both of the parties hereto,
or, in the case of a waiver, by the party waiving compliance. The failure of
either party at any time or times to require performance of any provision hereof
shall in no manner affect the right at a later time to enforce the same. No
waiver by either party of the breach of any term or covenant contained in this
Agreement, whether by conduct or otherwise, in any one or more instances, shall
be deemed to be, or construed as, a further or continuing waiver of any such
breach, or a waiver of the breach of any other term or covenant contained in
this Agreement.
14
IN WITNESS WHEREOF the parties hereto have executed this Agreement, as
of the date and year first above written.
/s/ Laurence H. Polsky
-----------------------------
COLTEC INDUSTRIES INC
By /s/ John W. Guffey, Jr.
-----------------------------
15