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EXHIBIT 10.32
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated as of this 15th day of July, 1998 between Laurence
H. Polsky (the "Executive") and Coltec Industries Inc, a Pennsylvania
corporation (the "Corporation").
WHEREAS, the Executive and the Corporation desire to set forth the
terms and conditions upon which the Executive shall be employed by the
Corporation.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises herein contained, the parties agree as follows:
1. Employment Term
The Corporation agrees to employ the Executive and the Executive agrees
to be employed by the Corporation, upon the terms and conditions
contained in this Agreement until terminated in accordance with the
provisions set forth in Section 5 below (the "Contract Period").
2. Duties
2.1 The Executive shall serve, subject to the supervision and control
of the Corporation's Chairman and Chief Executive Officer as the
Executive Vice President, Administration of the Corporation with the
responsibilities and authority, and status and perquisites which have,
consistent with past practice, been delegated or granted by the
Corporation to an employee holding such position(s) or which are
customarily delegated or granted by similarly situated corporations to
an employee holding similar position(s). If Executive is appointed to
additional offices by the Corporation during the Contract Period, the
Executive shall have the responsibilities and authority, and status and
perquisites consistent with the past practices of the Corporation or
which are customarily delegated or granted by similarly situated
corporations to an employee holding such position(s). Executive shall
also perform any additional lawful services and assume any reasonable
additional responsibilities, not inconsistent with his then current
position, as shall from time to time be assigned to him by the Board of
Directors of the Corporation (the "Board") or by the Chairman and Chief
Executive Officer of the Corporation.
2.2 Executive agrees that during the Contract Period, he shall devote
substantially all of his full working time and attention and give his
best effort, skill and abilities exclusively to the business and
interests of the Corporation; provided, however, that the foregoing
shall not be construed to prohibit Executive's service as a (i)
director or officer of any trade association, civic, educational or
charitable organization or governmental entity or, subject to approval
by the Chairman and Chief Executive Officer as (ii) a director of any
corporation which is not a
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competitor of the Corporation, provided that such service by Executive
does not materially interfere with the performance by Executive of the
responsibilities delegated under Section 2.1 above.
2.3 Executive shall carry out all responsibilities delegated in Section
2.1 above at such location within the continental United States as the
Chairman and Chief Executive Officer may from time to time, after
consultation with Executive, deem appropriate, except for travel
reasonably required in the performance of Executive's responsibilities.
3. Compensation and Benefits
Throughout the contract period hereof, unless otherwise specifically
provided elsewhere herein:
3.1 Executive shall receive an annual base salary which is not less
than his annual base salary on the Effective Date and shall have the
opportunity for periodic increases in accordance with the Corporation's
regular practices.
3.2 Executive shall be entitled to participate, to the extent
determined by the Board, in all currently existing and future incentive
compensation plans of the Corporation including, but not limited to:
the Annual Incentive Plan for Certain Employees of Coltec Industries
Inc and Its Subsidiaries, the 1994 Long-Term Incentive Plan of Coltec
Industries Inc and the Coltec Industries Inc 1992 Stock Option and
Incentive Plan (the "Incentive Compensation Plans"), provided, however,
that the Executive's participation in all incentive compensation plans
shall be at a level not less than the level customarily approved by the
Board for an employee with Executive's responsibilities and shall not
in any case be less than Executive's level of participation in such
plans on the Effective Date. Any payment to Executive under an
Incentive Compensation Plan shall be calculated and made in accordance
with the provisions of the respective plan, except as elsewhere
provided for in this Agreement.
3.3 Executive shall be entitled to receive all employee benefits,
fringe benefits and perquisites (including but not limited to the use
of company cars, club memberships and financial planning services
("Company Perquisites")) customarily made available to an employee with
Executive's responsibilities, and Executive shall be entitled to
participate in all applicable group, life, health, disability and
accident insurance plans and programs including, and not limited to,
the Retirement Savings Plan, the Retirement Program, the Benefits
Equalization Plan (collectively the "Retirement Plan") and the Family
Protection Plan as well as any other applicable Corporation benefit
plans and programs maintained currently upon terms and at levels no
less favorable than now exist or that shall be established or
maintained in the future for employees generally or for the
Corporation's executives.
3.4 Executive shall be entitled to annual vacation and holidays in
accordance with the Corporation's established practice for its
employees.
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3.5 The Executive shall be entitled to receive reimbursement for all
reasonable out-of-pocket expenses incurred in performing his
responsibilities described in Section 2.1 above, provided that the
Executive properly accounts for such expenses in accordance with the
Corporation's established policies.
4. Indemnification
The Executive shall be entitled to indemnification by the Corporation
to the fullest extent permitted by law and the By-Laws of the
Corporation in respect of any actions or omissions which Executive has
taken or has failed to take as an employee, officer or director of the
Corporation while carrying out the responsibilities delegated under
Section 2.1 above.
5. Termination of Employment
The Contract Period shall terminate prior to the completion of its term
on the Date of Termination as defined in Sections 5.2 or 5.3 below
following receipt by the Executive or the Corporation, as the case may
be, of a Notice of Termination as defined in Section 5.1 below.
5.1 "Notice of Termination" shall mean any purported termination of
Executive's employment by the Corporation or by Executive which shall
be communicated by written notice to the other party hereto in
accordance with Section 8 of this Agreement, and which shall (1)
indicate the specific termination provision in this Agreement relied
upon, (2) set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of Executive's employment
under the provision so indicated, and (3) set forth the date on which
the Executive's employment with the Corporation shall terminate.
5.2 "Date of Termination" shall mean:
a. thirty (30) days after Notice of Termination is given by
the Corporation for termination of employment due to
Disability; provided that Executive shall not have returned to
the full-time performance of his duties during such thirty
(30) day period;
b. the date of death in the event of Executive's death;
c. at least thirty days (30) but not more than sixty (60) days
after Notice of Termination is given by Executive for
termination of employment for Good Reason in respect of a
termination covered by Sections 6.6 or 6.7 below;
d. at least fifteen days (15) after Notice of Termination is
given by the Corporation for termination of employment for
Cause;
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e. at least fifteen days (15) after Notice of Termination is
given by Executive for retirement after the age of 55 years
but before the age of 65 years to the extent such retirement
is permitted under the Retirement Savings Plan, the Retirement
Program or the BE Plan ("Early Retirement"); or
f. the date specified in the Notice of Termination for
termination of employment for any other reason.
5.3 This Agreement shall automatically terminate upon the earlier of
Executive's 65th birthday or the date set forth in the Notice of
Termination for Early Retirement as provided in Paragraph 5.2(e) above
("Retirement Termination")
6. Compensation Upon Termination or During Disability
6.1 For purposes of this Agreement, "Disability", "Cause", "Good
Reason" and "Change-in-Control" shall have the meanings set forth
below:
a. Disability - If, as a result of Executive's incapacity due
to physical or mental illness, Executive shall have become
eligible for benefits under the applicable long-term
disability plan or policy of the Corporation, Executive's
employment may be terminated by the Corporation for
"Disability".
b. Cause - Termination by the Corporation of Executive's
employment for "Cause" shall mean termination upon:
i. the prolonged or repeated absence from duty
without the consent of the Board for reasons other
than the Executive's incapacity due to physical or
mental illness;
ii. the acceptance by Executive of a position with
another employer which conflicts with his duties
as an employee of the Corporation without the
consent of the Chairman and Chief Executive
Officer;
iii. the willful engaging by Executive in conduct
relating to the Corporation which is demonstrably
and materially injurious to the Corporation after
a written demand for cessation of such conduct is
delivered to Executive by the Board, which demand
specifically identifies the manner in which the
Board believes the Executive has engaged in such
conduct and the injury to the Corporation;
iv. a willful material breach of an established
written policy or procedure of the Corporation
which breach is materially injurious to the
Corporation;
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v. Executive's conviction for a crime involving
moral turpitude; or
vi. the breach of Executive's Agreement set forth in
Section 10.1 below.
For purposes of this Paragraph, no act, or failure to act, on
Executive's part shall be deemed "willful" unless knowingly
done, or omitted to be done, by Executive not in good faith
and without reasonable belief that Executive's action or
omission was in the best interests of the Corporation.
c. Good Reason - Executive shall be entitled to terminate his
employment for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean the occurrence, without Executive's
express written consent, of any of the following circumstances
unless such circumstances are fully corrected prior to the
Date of Termination (as defined in Section 5.2 above),
specified in the Notice of Termination :
i. the terms of this Agreement are materially
adversely altered by action of the Corporation or
the Corporation breaches in any material respect
any of its agreements set forth herein;
ii. the failure of the Corporation to obtain a
satisfactory agreement, required in Section 7
below, from any successor to assume and perform
this Agreement (a copy of the agreement evidencing
such assumption shall be provided by the
Corporation to Executive);
iii. any purported termination of Executive's
employment by the Corporation which is not
effected pursuant to a Notice of Termination
satisfying the requirements set forth in Section 5
above; for purposes of this Agreement, no such
purported termination shall be effective;
iv. Executive makes a determination in good faith
that the cumulative effect of actions by one or
more of the members of the Board, the Chairman and
Chief Executive Officer, the President and Chief
Operating Officer or their respective agents or
associates constitutes harassment or unreasonable
interference with the performance of Executive's
day-to-day duties under this Agreement (after a
written demand for cessation of such actions is
delivered by Executive to the President and Chief
Operating Officer, the Chairman and Chief
Executive Officer or to the Board which demand
specifically identifies the manner in which
Executive believes that such President and Chief
Operating Officer, Chairman and Chief Executive
Officer or Board members (or their agents or
associates) have harassed Executive or
unreasonably interfered with Executive's ability
to perform his day-to-day duties);
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provided, however, that appropriate involvement of
the President and Chief Operating Officer, the
Chairman and Chief Executive Officer or the Board
members in regular reviews of those items which
have, consistent with the Corporation's past
practices, been normally within the purview of the
President and Chief Operating Officer, the
Chairman and Chief Executive Officer or the
Board's responsibilities as well as any bona fide
business disagreements between the Executive and
the Corporation shall not be taken into account by
Executive in making his determination under this
Agreement;
v. the Corporation or any successor during the two
year period following a Change-in-Control delivers
to the Executive a Notice of Termination other
than for Cause or takes any other action or
actions, including, but not limited to, a material
decrease in duties or authority or change in
reporting relationships, which may have an adverse
effect upon Executive's employment or which
purport to terminate Executive's employment other
than for Cause;
vi. relocation of the Executive's place of employment
to a location outside the continental United
States or relocation of the Executive's place of
employment within the continental United States
without reimbursing Executive his cost of
relocation at a level at least as favorable as
that provided under the Corporation's policy and
practice in effect on the date of this Agreement;
or
vii. after a Change-in-Control as hereafter defined,
the Corporation a) reduces Executive's annual
salary, b) impairs Executive's opportunity to earn
incentive compensation on a basis comparable to
that before the Change-in-Control, c) reduces the
Company perquisites made available to Executive
before the Change-in-Control or d) eliminates or
impairs Executive's ability to participate in the
Retirement Plans;
viii. the Executive chooses to terminate his employment
with the Corporation for any reason during the
thirty (30) day period immediately preceding
either, at the option of the Executive, the twelve
(12) month anniversary or the twenty-four (24)
month anniversary of a Change-in-Control as
hereafter defined.
Executive's right to terminate his employment pursuant to this
Paragraph shall not be affected by his incapacity due to
physical illness. In addition, Executive's continued
employment with the Corporation shall not constitute a waiver
of Executive's rights under this Paragraph (c) nor constitute
a consent to any act or omission by the Corporation
constituting Good Reason.
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d. Change-in-Control - A Change-in-Control shall be deemed to
occur as of the date on which any of the following occur:
i. the acquisition, other than from the Corporation,
by any individual, entity or group (within the
meaning of Section 13 (d) (3) or 14 (d) (2) of the
Securities and Exchange Act of 1934, as amended
(the "Exchange Act") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20 percent or more of
either the then outstanding shares of common stock
of the Corporation or the combined voting power of
the then outstanding voting securities of the
Corporation entitled to vote generally in the
election of directors; or
ii. Individuals who, as of the date of this Agreement,
constitute the Board (the "Incumbent Board") cease
for any reason to constitute at least a majority
of the Board, provided that any individual
becoming a director subsequent to the date hereof
whose election, or nomination for election by the
Corporation's shareholders, was approved by a vote
of at least a majority of the directors then
comprising the Incumbent Board shall be considered
as though such individual as a member of the
Incumbent Board, but excluding, for this purpose,
any such individual whose initial assumption of
office is in connection with an actual or
threatened election contest relating to the
election of the directors of the Corporation (as
such terms are used in Rule 14a-ll of Regulation
14A promulgated under the Exchange Act); or
iii. Approval by the shareholders of the Corporation of
(1) a reorganization, merger or consolidation, in
each case, with respect to which the individuals
and entities who were the respective beneficial
owners of the common stock and voting securities
of the Corporation immediately prior to such
reorganization, merger or consolidation do not,
following such reorganization, merger or
consolidation, beneficially own, directly or
indirectly, more than 50 percent of, respectively,
the then outstanding shares of common stock, and
the combined voting power of the then outstanding
voting securities entitled to vote generally in
the election of directors, as the case may be, of
the corporation resulting from such
reorganization, merger or consolidation; (2) a
complete liquidation or dissolution of the
Corporation; or of (3) the sale or other
disposition of all or substantially all of the
assets of the Corporation.
6.2 During any period of Disability and until the earlier of the end of
the Contract Period or Executive's death, Executive shall receive all
accrued but unpaid base
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salary plus all amounts or benefits payable or due to him (including a
pro rata share under Incentive Compensation Plans targeted for the year
in which the Disability occurs) under the Corporation's compensation
and benefit plans and programs in which Executive is participating at
the commencement of any such period, plus an additional payment from
the Corporation (if necessary) such that the aggregate amount received
by Executive in the nature of salary continuation from all sources
equals Executive's base salary at the rate in effect at the
commencement of any such period. Thereafter, Executive shall be
entitled to participate in all applicable group, life, Family
Protection Plan, health, disability and accident insurance plans and
programs as well as any other applicable Corporation benefit plans and
programs (including, but not limited to, the 1992 Stock Option and
Incentive Plan) in accordance with the terms of such plans and
programs; provided that such terms shall not be less advantageous to
Executive than the terms in effect as of the date hereof.
6.3 If Executive's employment shall be terminated by reason of
Executive's death, the Executive shall be entitled to the benefits
provided below:
a. The Corporation shall pay to Executive's estate as soon as
practicable after the date of Executive's death, Executive's
accrued but unpaid base salary through the date of Executive's
death, at the rate in effect at the time of Executive's death,
plus all other amounts to which Executive is entitled under
any benefit or compensation plan of the Corporation including,
but not limited to, a pro rata share under Incentive
Compensation Plans earned during the year in which Employee's
death occurs.
b. After Executive's death, Executive's beneficiaries shall be
entitled to participate in all applicable group, life, health,
disability and accident insurance plans and programs as well
as any other applicable Corporation benefit plans and programs
including, but not limited to, the 1992 Stock Option and
Incentive Plan, in accordance with the terms of such plans and
programs.
6.4 If Executive's employment shall be terminated as a result of a
Retirement Termination or as a result of a voluntary resignation for
other than Good Reason ("Resignation"), then Executive shall receive
all accrued but unpaid base salary plus all amounts payable to him
under the Corporation's compensation (including, but not limited to, a
pro rata share under Incentive Compensation Plans targeted for the year
the Retirement Termination or Resignation occurs) and benefit plans and
programs in which Executive is participating at the time the Retirement
Termination or Resignation becomes effective. In the event of a
Retirement Termination, Executive shall be entitled to participate in
all retirement and other plans and programs effective on the Date of
Termination to which he is eligible in accordance with their terms .
6.5 If Executive's employment shall be terminated by the Corporation
for Cause, then Executive shall be entitled to the following benefits:
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a. The Corporation shall pay Executive's full base salary
through the Date of Termination at the rate in effect at the
time Notice of Termination is given plus all other amounts to
which Executive is entitled under any benefit or compensation
plan of the Corporation, excluding any bonus, other incentive
compensation and vacation pay, if any, otherwise payable to
Executive pursuant to the terms of the applicable plan or
program of the Corporation, at the time such payments are due.
b. Executive shall be entitled to participate in all
applicable group life, health, disability and accident
insurance plans and programs, but only to the extent required
by the terms of such plans, or only to the extent specifically
required by Federal or state law.
6.6 If Executive's employment shall be terminated (1) by the
Corporation for other than Cause, (2) by Executive for Good Reason
other than Good Reason as specified in Section 6.7 below ("Section 6.7
Good Reason") then Executive shall be entitled to the following
benefits:
a. The Corporation shall pay Executive, as soon as practicable
following the Date of Termination a sum equal to Executive's
accrued but unpaid base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is
given plus all other amounts to which Executive is entitled
under any benefit or compensation plan of the Corporation
(including but not limited to a pro rata share under Incentive
Compensation Plans targeted for the year in which Executive's
employment is terminated).
b. The Corporation shall pay Executive as soon as practicable
following the Date of Termination an additional payment equal
to two times (2x) the sum of Executive's annual base salary
plus the Executive's highest annual incentive bogey used in
any of the three years prior to the Date of Termination to
calculate Executive's award under the Coltec Annual Incentive
Plan.
c. In accordance with a valid election on file with the
Corporation, the Corporation shall pay to Executive a sum of
money equal to the value of Executive's accrued balance of
the Benefits Equalization Plan (the "BE Plan").
d. For a period of two years from the Date of Termination (the
"Relevant Damage Period"), the Corporation shall continue to
make available to Executive all Company Perquisites, or, in
the alternative, the Corporation shall pay to Executive as
soon as practicable after the Date of Termination a sum of
money reasonably approximating the cash value of the Company
Perquisites. Additionally, during the Relevant Damage Period
Executive shall, subject to Section 6.9, be allowed to
participate in all applicable group, life, health, disability
and accident insurance plans and programs as
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well as any other applicable Corporation benefit plans and
programs (including, but not limited to, the 1992 Stock Option
and Incentive Plan) as if he were an active employee (limited,
in the case of coverage under life insurance plans, to the
level of coverage that the Corporation is able to obtain on
Executive's behalf based upon the annual premium cost of
providing Executive with life insurance during Executive's
last twelve months of employment with the Corporation), in
which Executive was participating 30 days prior to the time
Notice of Termination is given or comparable plans substituted
therefor; provided, however, that if Executive is ineligible
(e.g., by operation of law or the terms of the applicable
plan) to continue to participate in any such plan, the
Corporation will provide Executive with a comparable level of
compensation or benefit.
e. For purposes of Section 6.6(d), Executive's participation
in respect to the Corporation's 1994 Long Term Incentive Plan
(the "LTIP") shall be as follows (the defined terms within
this section and not otherwise defined within this Agreement
being the same as defined in the LTIP as in effect on the date
hereof):
i. all of the Executive's Restricted Shares
previously issued under the LTIP and not yet
vested by the Date of Termination shall become
100% vested, nonforfeitable and fully transferable
as of such date; and
ii. the Corporation will pay the Executive as soon as
practicable following the Date of Termination an
amount in cash equal to three times the product of
(x) the number of Performance Units previously
granted under the LTIP to the Executive and still
outstanding, times (y) the Award Value at the
Threshold Target level.
f. For purposes of Section 6.6(d), Executive's benefits with
respect to the Corporation's Retirement Plan for Salaried
Employees and the BE Plan or any equivalent or superior plans
or arrangements in which the Executive participated prior to
the Date of Termination (any such Plan or arrangement, the
"Pension Plans") and the Corporation's welfare benefit plans
in which the Executive participates on the date hereof or any
equivalent or superior successor plans or arrangements in
which the Executive participates prior to the Date of
Termination ("Welfare Benefit Plans") the contemplated
continued participation shall require the Corporation to pay
or provide the executive with the benefits, earnings credits
for benefits and service credits for benefits, and where
applicable, any increases in benefits as a result of
increasing age which the Executive would have received under
the Pension Plans and Welfare Benefit Plans if (x) the
Executive's employment and his coverage under the Pension
Plans and the Welfare Benefit Plans had continued during the
Relevant Damage Period, and (y) the compensation described in
Section 6.6(b) which would
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have been credited under the Pension Plans and/or the Welfare
Plans were paid to the Executive ratably over the Relevant
Damage Period.
g. All restrictions, if any, on shares of restricted stock
previously granted to Executive which would have lapsed if
Executive had been employed throughout the Relevant Damage
Period shall immediately lapse as of the Date of Termination,
and Executive shall be entitled to the possession of the
shares of such stock as of such date upon the payment of any
applicable withholding taxes.
6.7 If Executive's employment by the Corporation shall be terminated
(1) by the Corporation for other than Cause at any time during a period
commencing sixty (60) days prior to a the public announcement of a
Change-of-Control which does, in fact, later occur and ending on the
happening of such Change-of-Control ("Pending Change-of-Control
Period"), or (2) by Executive for Good Reason where Executive has given
Notice of Termination to the Corporation within two years from the
occurrence of an event constituting a Change-of-Control, then Executive
shall be entitled to the following benefits in lieu of the benefits
under the Section 6.6:
a. The Corporation shall pay Executive his accrued but unpaid
base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given, plus all
other amounts to which Executive is entitled under any benefit
or compensation plan of the Corporation (including, but not
limited to, a pro rata share under Incentive Compensation
Plans earned during the year in which employment is
terminated)
b. In lieu of any further base salary payments to Executive
for period subsequent to the Date of Termination, the
Corporation shall pay to Executive a lump sum equal to three
times (3x) the sum of Executive's annual base salary at the
rate in effect immediately prior to the time Notice of
Termination is given plus the highest annual bonus received by
the Executive during any of the three preceding calendar
years.
c. In lieu of any further participation by Executive in the
Family Protection Plan, the Corporation shall transfer to
Executive a fully paid up insurance policy or policies then
insuring the life of the Executive pursuant to the terms of
the Family Protection Plan, plus an amount of money (the "Tax
Adjustment") calculated to reimburse Executive for any local,
state or Federal income, employment or other taxes which he
may be liable as a result of receiving the insurance policy or
policies and the Tax Adjustment amount.
d. At Executive's option and as soon, as practicable after his
request, the Corporation shall pay Executive a sum of money
equal to the value of Executive's accrued balance of the BE
Plan.
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e. For three years from the Date of Termination, the
Corporation shall continue to make available to Executive all
Company Perquisites, or, in the alternative, the Corporation
shall pay to Executive as soon as practicable after the Date
of Termination a sum of money reasonably approximating the
cash value of the Company Perquisites. Additionally, Executive
shall, subject to Section 6.9, be allowed to participate in
all applicable group, life, health, disability and accident
insurance plans and programs as well as any other applicable
Corporation benefit plans and programs (including, but not
limited to the 1992 Stock Option and Incentive Plan) as if he
were an active employee (limited, in the case of coverage
under life insurance plans, to the level of coverage that the
Corporation is able to obtain on Executive's behalf based upon
the annual premium cost of providing Executive with life
insurance during Executive's last twelve months of employment
with the Corporation), in which Executive was participating 30
days prior to the time Notice of Termination is given or
comparable plans substituted therefor; provided, however, that
if Executive is ineligible (e.g., by operation of law or the
terms of the applicable plan) to continue to participate in
any such plan, the Corporation will provide Executive with a
comparable level of compensation or benefit.
f. For purposes of Section 6.7(e), Executive's participation
in respect to the Corporation's 1994 Long Term Incentive Plan
(the "LTIP") shall be as follows (the defined terms within
this section and not otherwise defined within this Agreement
being the same as defined in the LTIP as in effect on the date
hereof):
i. all of the Executive's Restricted Shares previously
issued under the LTIP and not yet vested by the Date
of Termination shall become 100% vested,
nonforfeitable and fully transferable as of such
date; and
ii. the Corporation will pay the Executive as soon as
practicable following the Date of Termination an
amount in cash equal to three times the product of
(x) the number of Performance Units previously
granted under the LTIP to the Executive and still
outstanding, times (y) the Award Value at the
Threshold Target level.
iii. in the event that the independent accountants of the
Corporation shall determine that if the payment of
the LTIP Payout is made entirely in cash it shall
prevent the Corporation from consummating any
business combination approved by the Board of
Directors which combination is intended to be
accounted for under the pooling of interests method
of accounting ("Pooling"), then the LTIP Payout shall
be made 2/3 in cash and 1/3 in the Corporation's
Common Stock (the "Share Portion"). If a merger or
acquisition of the Corporation has taken place prior
to the time that the Executive
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has given Notice of Termination setting forth his
intent to terminate his employment for Good Reason
and the Common Stock of the Corporation is no longer
traded on a national securities exchange then the
Share Portion of the LTIP Payout shall be made in the
common stock of the Corporation's parent or successor
corporation (collectively, a "Successor"), which
stock is traded on a national securities exchange or
on an over the counter securities market. The number
of shares payable in respect to the Share Portion
shall be determined by dividing the dollar value of
the Share Portion by the price of a share of the
Common Stock of the Corporation, or a Successor, as
the case may be, on the last business day immediately
preceding the date of the Notice of Termination.
g. For purposes of Section 6.7(e), Executive's benefits with
respect to the Pension Plans and the Welfare Benefit Plans,
the contemplated continued participation shall require the
Corporation to pay or provide the Executive with the benefits,
earnings credits for benefits and service credits for
benefits, and where applicable, any increases in benefits as a
result of increasing age, which the Executive would have
received under the Pension Plans and Welfare Benefit Plans if
(x) the Executive's employment and his coverage under the
Pension Plans and the Welfare Benefit Plans had continued for
an additional three year period, and (y) the compensation
described in Section 6.7(b) which would have been credited
under the Pension Plans and/or the Welfare Plans were paid to
the Executive ratably over a three year period.
h. All restrictions, if any, on shares of restricted stock
previously granted to Executive shall immediately lapse as of
the Date of Termination, and Executive shall be entitled to
the possession of the shares of such stock as of such date
upon the payment of any applicable withholding taxes.
i. If Executive's employment by the Corporation shall have
been terminated by the Corporation for other than Cause at any
time during a Pending Change-of-Control Period, and if
Executive shall have received any payments or benefits
pursuant to Section 6.6, then Executive shall be entitled to
receive such additional payments and benefits as he would have
received if his employment was terminated and he was entitled
to receive payments or benefits pursuant to this Section 6.7.
j. If at any time within two years following a
Change-of-Control, Executive shall, at the request of the
Corporation, relocate his principal place of personal
residence or employment and if Executive shall become entitled
to receive payments or benefits pursuant to this Section 6.7,
then Executive shall also be entitled, at his option, to
relocate his personal residence one time during the four year
period following the Date of Termination to any location
within the continental United States, in which
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event the Corporation will reimburse the Executive for all
relocation and home purchase and sale assistance costs
associated with such move in accordance with the Corporation's
policy and practice for its Executive Officers in effect at
the time of the execution of this Agreement.
6.8 In addition to the benefits set forth in Sections 6.6 and 6.7, in
the event that Executive's employment shall be terminated (1) by the
Corporation for other than Cause, (2) by Executive for Good Reason
other than Section 6.7 Good Reason, or (3) by Executive for Section 6.7
Good Reason then:
a. The Company shall also pay to Executive all reasonable
legal fees and expenses incurred by Executive as a result of
such termination (including all such fees and expenses, if
any, incurred in contesting or disputing any such termination
(including cost associated with legal consultation even if no
actual contest or dispute results) or in seeking to obtain or
enforce any right or benefit provided by this Agreement or in
connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), to any
payment or benefit provided hereunder), except any such fees
or expenses incurred by Executive in seeking to enforce a
claim which is determined by an arbitrator, pursuant to
Section 14 below, to have been frivolous in nature or not
brought or pursued in good faith.
b. In the event that Executive becomes entitled to any
payments or benefits from the Corporation (whether or not
provided under this Agreement) (the "Severance Payments") that
will be subject to the tax (the "Excise Tax") imposed by
Section 4999 of the Code, the Corporation shall pay to
Executive at the time or times specified in Paragraph (h)
below, an additional amount (the "Gross-Up Payment") such that
the net amount retained by Executive, after deduction of (I)
any additional Excise Tax payable by Executive as a result of
Executive's receipt of the Severance Payments, and (ii) any
additional Federal, state and local income and employment
taxes and Excise tax payable by Executive as a result of
Executive's receipt of the Gross-Up Payments shall be equal to
the Severance Payments. For purposes of determining whether
any of the Severance Payments will be subject to the Excise
Tax and the amount of such Excise Tax, (i) the Severance
Payments, payments provided for in this paragraph and any
other payments or benefits received or to be received by
Executive in connection with a change-in-control of the
Corporation (as defined in Section 280G of the Code) or
Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or
agreement with the Corporation, any person whose actions
result in a Change-in-Control or any person affiliated with
the Corporation or such person) shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the
Code, and all "excess parachute payments" within the meaning
of Section 280G(b)(1) shall be treated as subject to the
Excise Tax, unless and to the extent that in the opinion of
tax counsel selected by the Corporation's
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independent auditors and acceptable to Executive, such other
payments or benefits (in whole or in part) do not constitute
parachute payments, or such excess parachute payments (in
whole or in part) and represent reasonable compensation for
services actually rendered within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within
the meaning of Section 280G(b)(3) of the Code, or are
otherwise not subject to the Excise Tax, (ii) the amount of
the Severance Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of (x) the total
amount of the Severance Payments or (y) the amount of excess
parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (i) above), (iii) any payment pursuant
to this Paragraph shall be treated as subject to the Excise
Tax in its entirety and (iv) the value of any non-cash
benefits or any deferred payment of benefit shall be
determined by the Corporation's independent auditors in
accordance with the principles of Sections 280G(d)(3)and (4)
of the Code. For purposes of determining the amount of the
Gross-Up Payment, Executive shall be deemed to pay federal
income taxes at the highest marginal rate of Federal income
taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of
Executive residence on the Date of Termination, not of the
maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes. In the
event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time
of termination of Executive's employment, Executive shall
repay to the Corporation at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of
the Gross-Up Payment attributable to such reduction (plus the
portion of the Gross-Up Payment attributable to the Excise Tax
and federal and state and local income tax imposed on the
Gross-Up Payment being repaid by Executive) plus interest
accrued from the date such Gross-Up Payment is made to
Executive to the date of such repayment on the amount of such
repayment at the rate provided in Section 1274(b)(2)(B) of
the Code. In the event that the Excise Tax is determined to
exceed the amount taken into account hereunder at the time of
the termination of Executive's employment (including by reason
of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Corporation shall make an additional gross-up payment in
respect of such excess (plus any interest payable with respect
to such excess) at the time that the amount of such excess is
finally determined.
c. The payments provided for in Paragraph (b) above shall be
made at any time during the 90-day period preceding each due
date for making payment of such Excise Taxes to the
appropriate taxing authority; provided, however, that if the
amounts of such payments cannot be finally determined on or
before each such date, the Corporation shall pay to Executive
on such date an estimate, as determined in good faith by the
Corporation, of the minimum amount of such payments and shall
pay the
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remainder of such payments then due as soon as the amount
thereof can be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Corporation to Executive on the fifth day after demand by the
Corporation (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
6.9 Upon receipt of written notice from Executive that Executive has
been reemployed by another company or entity on a full-time basis,
benefits otherwise receivable by Executive pursuant to Subsections
6.6(d) or 6.7(e) related solely to life, health disability and accident
insurance plans and programs and other similar benefits (but not
Incentive Compensation , LTIP, Pension Plans or other similar plans and
programs) shall be reduced to the extent comparable benefits are made
available to Executive at his new employment and any such benefits
actually received by Executive shall be reported to the Corporation.
Nothing herein contained shall obligate Executive to accept employment
elsewhere.
6.10. Any stock of the Corporation, which is delivered to the Executive
pursuant to Subsection 6.6 or 6.7, shall be delivered to him fully
registered for immediate sale to the public under all applicable
securities laws.
7. Successors; Binding Agreement
The Corporation 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 Corporation 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 no such succession had taken place. Failure of the
Corporation to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall entitle Executive to terminate this Agreement for
Good Reason. As used in this Agreement, "Corporation" shall mean the
Corporation and any successor to its business and or assets as
aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
8. Notice
For the purpose 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
registered mail, return receipt requested, postage prepaid, addressed
to the Executive's most recent home address on file with the
Corporation, and to the Corporation at 3 Coliseum Centre, 2550 West
Tyvola Road, Charlotte, NC 28217 to the attention of the Chairman of
the Board of Directors with a copy to the Secretary of the Corporation
or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change
of address shall be effective only upon receipt.
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9. Modification - Waiver
No provision of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
and signed by Executive and such officer of the Corporation 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 condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time. In the event that the independent accountants of the Corporation
shall determine that anything contained herein shall prevent the
Corporation from consummating any business combination approved by the
Board of Directors which combination is intended to be accounted for as
a Pooling, then Executive agrees to negotiate in good faith concerning
amendments to such portions of this Agreement as may be requested by
the Corporation so as to allow such business combination to be
accounted for as a Pooling; provided, however, that any such amendment
shall: (a) be as limited in scope as is absolutely necessary in the
opinion of the Corporation's advisors to allow the business combination
to be accounted for as a Pooling, and (b) be designed to have as
minimal an economic detriment to the Executive as is possible while
still allowing the business combination to be accounted for as a
Pooling.
10. Non-competition
10.1 Until the Date of Termination, Executive agrees not to enter into
competitive endeavors and not to undertake any commercial activity
which is contrary to the best interests of the Corporation or its
affiliates, including becoming an employee, owner (except for passive
investments of not more than three percent of the outstanding shares
of, or any other equity interest in, any company or entity listed or
traded on a national securities exchange or in an over-the-counter
securities market), officer, agent or director of (a) any firm or
person engaged in the operation of a business engaged in the
acquisition of industrial businesses or (b) any firm or person which
either directly competes with a line or lines of business of the
Corporation accounting for five percent (5%) or more of the
Corporation's gross revenues or earnings before taxes or derives five
percent (5%) or more of such firm's or person's gross revenues or
earnings before taxes from a line or lines of business which directly
compete with the Corporation. Notwithstanding any provision of this
Agreement to the contrary, Executive agrees that his breach of the
provisions of this Section 10.1 shall permit the Corporation to
terminate Executive's employment for Cause in accordance with Section
5.l(b) hereof.
10.2 After the Date of Termination and for a period of time equal in
years to the multiple of annual salary received by Executive pursuant
to either Sections 6.6(b) or 6.7(b) (the "Non-Competition Period"),
Executive agrees not to become an employee, owner (except for passive
investments of not more than three percent of the outstanding shares
of, or any other equity interest in, any company or entity listed or
traded on a national securities exchange or in an over-the-counter
securities market), officer, agent or director of any firm or person
which
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directly and substantially competes with a business of the Corporation
accounting for five percent (5%) or more of the Corporation's gross
revenues or earnings before taxes. During the Non-Competition Period,
Executive will be available to answer questions and provide advice to
the Corporation; provided, however, that such requirement shall not
unreasonably interfere with any other of Executive's activities which
Executive is then pursuing and which are not otherwise prohibited by
this Section 10. Also, during the Non-Competition Period, Executive
will retain in confidence any and all confidential information known to
him concerning the Corporation and its business and shall not use or
disclose such information without the approval of the Corporation
except to the extent such information becomes public or as may be
required by law.
10.3 Executive acknowledges and agrees that damages for breach of the
covenant not to compete in this Section 10 will be difficult to
determine and will not afford a full and adequate remedy, and therefore
Executive agrees that the Corporation, in addition to seeking actual
damages pursuant to the procedures set forth in Section 13 below, may
seek specific enforcement of the covenant not to compete in any court
of competent jurisdiction, including, without limitation, by the
issuance of a temporary or permanent injunction, without the necessity
of a bond. Executive and the Corporation agree that the provisions of
this covenant not to compete are reasonable. However, should any court
or arbitrator determine that any provision of this covenant not to
compete is unreasonable, either in period of time, geographical area,
or otherwise, the parties agree that this covenant not to compete
should be interpreted and enforced to the maximum extent which such
court or arbitrator deems reasonable.
11. Validity
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
12. Counterparts
This Agreement may be executed in several counterparts, each of which
shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. Arbitration
Except as contemplated by Section 10.3 of this Agreement, any dispute
or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in Charlotte, NC or such other
location mutually agreed upon by the parties to the arbitration, in
accordance with rules of the American Arbitration Association, and
judgment upon such award rendered by the arbitrator may be entered in
any court having jurisdiction over such proceeding.
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14. Governing Law
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of North Carolina.
15. Entire Agreement; Survival of Certain Provisions
15.1 This Agreement constitutes the whole agreement of the Corporation
and the Executive. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter of this
Agreement have been made by either party which are not expressly set
forth in this Agreement. This Agreement supercedes and replaces all
prior Employment Agreements, Restated Employment Agreements and or
Change-of-Control Agreements, if any, between the Corporation and the
Executive, each of which is hereby expressly terminated.
15.2 The obligations of the Corporation under Section 6.8 above and the
Executive's obligations under Section 10 above shall survive the
expiration of the term of this Agreement.
16. Withholding
Any payments made to Executive under this Agreement shall be paid net
of any applicable withholding required under Federal, state or local
law.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the Effective Date.
COLTEC INDUSTRIES INC
By /s/ Robert J. Tubbs
-----------------------------
/s/ Laurence H. Polsky
-----------------------------
EXECUTIVE
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