EXHIBIT 10.69
December 15, 2003
Ms. Susan Allene Kovach
3965 East Loch Alpine Drive
Ann Arbor, MI 48103
Dear Susan,
Libbey Inc. (the "Corporation") considers it essential to the best interests of
its shareholders to foster the continuous employment of key management
personnel. In connection with this, the Corporation's Board of Directors (the
"Board") recognizes that, as is the case with many publicly held corporations,
the possibility of a change in control of the Corporation may exist and that the
uncertainty and questions that it may raise among management could result in the
departure or distraction of management personnel to the detriment of the
Corporation and its shareholders.
The Board has decided to reinforce and encourage the continued attention and
dedication of members of the Corporation's management, including yourself, to
their assigned duties without the distraction arising from the possibility of a
change in control of the Corporation.
In order to induce you to remain in its employ, the Corporation hereby agrees
that after this letter agreement (this "Agreement") has been fully executed, you
shall receive the severance benefits set forth in this Agreement in the event
your employment with the Corporation is terminated under the circumstances
described below subsequent to a Change in Control (as defined in Section 2).
1. Term of Agreement. This Agreement shall commence on the date hereof and shall
continue in effect through December 31, 2003; provided, however, that commencing
on January 1, 2004 and on each January 1 thereafter, the term of this Agreement
shall automatically be extended for one additional year unless, not later than
September 30 of the preceding year, the Corporation shall have given notice that
it does not wish to extend this Agreement; provided, further, that if a Change
in Control (as defined in Section 2), occurs during the original or any extended
term of this Agreement, the term of this Agreement shall continue in effect for
a period of not less than thirty-six (36) months beyond the month in which such
Change in Control occurred.
2. Change in Control. No benefits shall be payable hereunder unless there has
been a Change in Control. For purposes of this Agreement, a Change in Control
shall be deemed to occur if:
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(a) any Person (as defined below) is or becomes the Beneficial
Owner (as defined below), directly or indirectly, of securities of the
Corporation representing twenty percent (20%) or more of the combined voting
power of the Corporation's then outstanding securities. For purposes of this
Agreement, the term "Person" is used as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act");
provided, however, that the term shall not include the Corporation, any trustee
or other fiduciary holding securities under an employee benefit plan of the
Corporation, and any corporation owned, directly or indirectly, by the
shareholders of the Corporation, in substantially the same proportions as their
ownership of stock of the Corporation, and provided further that for purposes of
this subsection (a) the term person shall not apply to Baron Capital Group,
Inc., BAMCO, Inc., Baron Capital Management, Inc., Baron Asset Fund or Ronald
Baron (collectively the "Baron Group"), by virtue of their individual or
collective beneficial ownership of securities of the Corporation's outstanding
securities as of the date of this letter so long as the Baron Group does not
individually or collectively, beneficially own, or increase such beneficial
ownership to, twenty-five percent (25%) or more of the combined voting power of
the corporation's then outstanding securities. For purposes of this Agreement,
the term "Beneficial Owner" shall have the meaning given to such term in Rule
13d-3 under the Exchange Act;
(b) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board, and any new director
(other than a director designated by a person who has entered into an agreement
with the Corporation to effect a transaction described in Sections 2(a), (c) or
(d)) whose election by the Board or nomination for election by the Corporation's
shareholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved
(hereinafter referred to as "Continuing Directors"), cease for any reason to
constitute at least a majority thereof;
(c) the shareholders of the Corporation approve a merger or
consolidation of the Corporation with any other corporation (or other entity),
other than a merger or consolidation which would result in the voting securities
of the Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) more than 66 2/3% of the combined voting power of the
voting securities of the Corporation or such surviving entity outstanding
immediately after such merger or consolidation;
(d) the shareholders of the Corporation approve a plan of
complete liquidation of the Corporation or an agreement for the sale or
disposition by the Corporation of all or substantially all of the Corporation's
assets; or
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(e) any Person is or becomes the Beneficial Owner, directly or indirectly, of
securities of the Corporation representing ten percent (10%) or more of the
combined voting power of the Corporation's then outstanding securities (a "10%
Owner") and (A) the identity of the Chief Executive Officer of the Corporation
is changed during the period beginning sixty (60) days before the attainment of
the ten percent (10%) beneficial ownership and ending two (2) years thereafter,
or (B) individuals constituting at least one-third (1/3) of the members of the
Board at the beginning of such period shall cease for any reason to serve on the
Board during the period beginning sixty (60) days before the attainment of the
ten percent (10%) beneficial ownership and ending two (2) years thereafter;
provided, however, (i) that this subsection (e) shall not apply to (i) any
Person who is a 10% Owner as of the date hereof so long as such Person does not
increase such beneficial ownership by five percent (5%) or more over the
percentage so owned by such Person as of the date hereof; (ii) that this
subsection (e) shall not apply to the Baron Group by virtue of their individual
or collective beneficial ownership of securities of the Corporation's
outstanding securities as of the date of this letter so long as the Baron Group
does not individually or collectively, beneficially own, or increase such
beneficial ownership to, twenty-five percent (25%) or more of the combined
voting power of the corporation's then outstanding securities, and (iii) that
this subsection (e) shall not apply to Ariel Capital Management ("Ariel") by
virtue of its beneficial ownership of the Corporation's outstanding securities
as of the date of this Agreement so long as Ariel does not beneficially own, or
increase such beneficial ownership to, twenty percent (20%) or more of the
combined voting power of the Corporation's then outstanding securities.
3. Termination Following Change in Control.
(i) General. During the term of this Agreement, if any of the events
described in Section 2 constituting a Change in Control shall have occurred, you
shall be entitled to the benefits provided in Section 4(ii) upon the subsequent
termination of your employment, provided that such termination occurs during the
term of this Agreement and within the two (2) year period immediately following
the date of such Change in Control, unless such termination is (a) because of
your death or Disability (as defined in Section 3(ii)), (b) by the Corporation
for Cause (as defined in Section 3(iii)), or (c) by you other than (1) for Good
Reason (as defined in Section 3(iv)), or (2) in a Covered Resignation (as
defined in Section 3(v)). In the event that you are entitled to such benefits,
such benefits shall be paid notwithstanding the subsequent expiration of the
term of this Agreement. In the event your employment with the Corporation is
terminated for any reason and subsequently a Change in Control occurs, you shall
not be entitled to any benefits hereunder.
(ii) Disability. If, as a result of your incapacity due to physical
or mental illness, you shall have been absent from the full-time performance of
your duties with the Corporation for six (6) consecutive months, and within
thirty (30) days after written notice of termination is given you shall not have
returned to the full-time performance of your duties, your employment may be
terminated for "Disability."
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(iii) Cause. Termination by the Corporation of your employment for
"Cause" shall mean termination (a) upon your willful and continued failure to
substantially perform your duties with the Corporation (other than any such
failure resulting from your incapacity due to physical or mental illness or any
such actual or anticipated failure after your issuance of a Notice of
Termination (as defined in Section 3(vi)) either (x) for Good Reason, or (y) in
connection with a Covered Resignation, after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, (b) upon your willful and continued failure
to substantially follow and comply with the specific and lawful directives of
the Board, as reasonably determined by the Board (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after your issuance of a Notice of Termination for
Good Reason or in connection with a Covered Resignation), after a written demand
for substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (c) upon your willful commission of an act
of fraud or dishonesty resulting in material economic or financial injury to the
Corporation, or (d) upon your willful engagement in illegal conduct or gross
misconduct, in each case which is materially and demonstrably injurious to the
Corporation. For purposes of this Section 3(iii), no act, or failure to act, on
your part shall be deemed "willful" unless done, or omitted to be done, by you
not in good faith. Notwithstanding the foregoing, you shall not be deemed
terminated for Cause pursuant to Sections 3(iii)(a), (b) or (d) hereof 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 (3/4) of the
entire membership of the Board at a meeting of the Board (after reasonable
notice to you, an opportunity for you, together with your counsel, to be heard
before the Board and a reasonable opportunity to cure), finding that in the
Board's good faith opinion you were guilty of conduct set forth above in this
Section 3(iii) and specifying the particulars thereof in reasonable detail.
(iv) Good Reason. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, the occurrence after a Change in Control
of any of the following circumstances unless, in the case of Sections 3(iv)(a),
(e), (f), (g), (h) or (i), such circumstances
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are fully corrected (provided such circumstances are capable of correction)
prior to the Date of Termination (as defined in Section 3(vii)) specified in the
Notice of Termination given in respect thereof:
(a) the assignment to you of any duties inconsistent with the
position in the Corporation that you held immediately prior to the Change in
Control, a significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from those in effect
immediately prior to such Change in Control, including by virtue of the
Corporation ceasing to be a publicly-held corporation, or any other action by
the Corporation that results in a material diminution in your position,
authority, duties or responsibilities;
(b) the Corporation's reduction of your annual base salary as
in effect on the date hereof or as the same may be increased from time to time;
(c) the relocation of the Corporation's offices at which you
are principally employed immediately prior to the date of the Change in Control
(your "Principal Location") to a location more than thirty (30) miles from such
location, or the Corporation's requiring you, without your written consent, to
be based anywhere other than your Principal Location, except for required travel
on the Corporation's business to an extent substantially consistent with your
present business travel obligations;
(d) the Corporation's failure to pay to you any portion of
your current compensation or to pay to you any portion of an installment of
deferred compensation under any deferred compensation program of the Corporation
within seven (7) days of the date such compensation is due;
(e) the Corporation's failure to continue in effect any
material compensation or benefit plan or practice in which you participate
immediately prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the Corporation's failure to continue your
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as existed at
the time of the Change in Control;
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(f) the Corporation's failure to continue to provide you with
benefits substantially similar in the aggregate to those enjoyed by you under
any of the Corporation's life insurance, medical, health and accident,
disability, pension, retirement, or other benefit plans or practices in which
you and your eligible family members were participating at the time of the
Change in Control, the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits, or the failure by
the Corporation to provide you with the number of paid vacation days to which
you are entitled on the basis of years of service with the Corporation in
accordance with the Corporation's normal vacation policy in effect at the time
of the Change in Control;
(g) the Corporation's failure to obtain a satisfactory
agreement from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof;
(h) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
Section 3(vi) hereof (and, if applicable, the requirements of Section 3(iii)
hereof), which purported termination shall not be effective for purposes of this
Agreement; or
(i) the continuation or repetition, after written notice of
objection from you, of harassing or denigrating treatment of you inconsistent
with your position with the Corporation.
Your right to terminate your employment pursuant to this Section 3(iv) shall not
be affected by your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason hereunder.
(v) Voluntary Termination and Covered Resignation. You shall be
entitled to voluntarily terminate your employment for any reason or no reason at
any time after a Change in Control. Any such termination which occurs within the
thirty (30) day period following the first anniversary of the occurrence of a
Change in Control shall constitute a resignation which entitles you to receive
benefits under this Agreement (a "Covered Resignation").
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(vi) Notice of Termination. Any purported termination of your
employment by the Corporation or by you (other than termination due to death
which shall terminate your employment automatically) shall be communicated by
written Notice of Termination to the other party hereto in accordance with
Section 7. "Notice of Termination" shall mean a notice that 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.
(vii) Date of Termination, Etc. "Date of Termination" shall mean (a)
if your employment is terminated due to your death, the date of your death; (b)
if your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(c) if your employment is terminated pursuant to Section 3(iii), Section 3(iv)
or Section 3(v) or for any other reason (other than death or Disability), the
date specified in the Notice of Termination (which, in the case of a termination
for Cause shall not be less than thirty (30) days from the date such Notice of
Termination is given, and in the case of a termination for Good Reason or in
connection with a Covered Resignation shall not be less than fifteen (15) nor
more than sixty (60) days from the date such Notice of Termination is given).
Notwithstanding anything to the contrary contained in this Section 3(vii), if
within fifteen (15) days after any Notice of Termination is given, the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, then the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, or otherwise; provided, however, that the Date of
Termination shall be extended by a notice of dispute only if such notice is
given in good faith and the party giving such notice pursues the resolution of
such dispute with reasonable diligence.
4. Compensation Upon Termination.
Following a Change in Control during the term of this Agreement, you
shall be entitled to the benefits described below upon termination of your
employment, provided that such termination occurs during the term of this
Agreement and within the two (2) year period immediately following the date of
such Change in Control. The benefits to which you are entitled, subject to the
terms and conditions of this Agreement, are:
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(i) If your employment shall be terminated by the Corporation for
Cause or by you other than (x) for Good Reason or (y) pursuant to a Covered
Resignation, the Corporation shall pay you your full base salary, when due,
through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled under any
compensation plan or practice of the Corporation at the time such payments are
due, and the Corporation shall have no further obligations to you under this
Agreement.
(ii) If your employment by the Corporation shall be terminated by
you (x) for Good Reason or (y) pursuant to a Covered Resignation, or by the
Corporation other than for Cause or Disability, then you shall be entitled to
the benefits provided below:
(a) the Corporation shall pay to you your full base salary,
when due, through the Date of Termination at the rate in effect at the time
Notice of Termination is given, at the time specified in Section 4(iii), plus
all other amounts to which you are entitled under any compensation plan or
practice of the Corporation at the time such payments are due;
(b) in lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as severance
pay to you, at the time specified in Section 4(iii), a lump-sum severance
payment (together with the payments provided in Section 4(ii)(c) below, the
"Severance Payments") equal to the sum of the following:
(A) three (3) times your annual base salary as in
effect as of the Date of Termination or
immediately prior to the Change in Control,
whichever is greater; and
(B) three (3) times the greater of (x) your targeted
annual bonus as in effect as of the Date of
Termination or immediately prior to the Change in
Control, whichever is greater, or (y) your annual
bonus for the year immediately preceding the Date
of Termination;
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(c) notwithstanding any provisions of the Corporation's stock
option plans, incentive plans, or other similar plans, the restricted period
with respect to any restricted stock granted to you thereunder shall lapse and
such shares shall be distributed to you at the time specified in Section 4(iii);
(d) for a period of one (1) year following the Date of
Termination, the Corporation shall, at its sole expense as incurred, provide you
with financial planning services of substantially the same type and scope as
those which the Corporation was providing to you immediately prior to the Date
of Termination, or, if more favorable to you, the date of the Change in Control;
(e) for a period of two (2) years following the Date of
Termination, the Corporation shall, at its sole expense as incurred, provide you
with outplacement services, the scope and provider of which shall be selected by
you in your sole discretion;
(f) for a thirty-six (36) month period after such termination,
the Corporation shall continue to provide you and your eligible family members,
based on the cost sharing arrangement between you and the Corporation on the
date of the Change in Control, with medical and dental health benefits at least
equal to those which would have been provided to you and them if your employment
had not been terminated or, if more favorable to you, as in effect generally at
any time thereafter; provided, however, that if you become re-employed with
another employer and are eligible to receive medical and dental health benefits
under another employer's plans, the Corporation's obligations under this Section
4(ii)(f) shall be reduced to the extent comparable benefits are actually
received by you during the thirty-six (36) month period following your
termination, and any such benefits actually received by you shall be reported to
the Corporation. In the event you are ineligible under the terms of such benefit
plans or programs to continue to be so covered, the Corporation shall provide
you with substantially equivalent coverage through other sources or will provide
you with a lump-sum payment in such amount that, after all taxes on that amount,
shall be equal to the cost to you of providing yourself such benefit coverage.
At the termination of the benefits coverage under the second preceding sentence,
you, your spouse and your dependents shall be entitled to continuation coverage
pursuant to section 4980B of the Internal Revenue Code of 1986, as amended (the
"Code"), sections 601-608 of the Employee Retirement Income Security Act of
1974, as
Page Ten
amended, and under any other applicable law, to the extent required by such
laws, as if you had terminated employment with the Corporation on the date such
benefits coverage terminates. The lump-sum shall be determined on a present
value basis using the interest rate provided in section 1274(b)(2)(B) of the
Code on the Date of Termination.
(g) (1) anything in this Agreement to the contrary notwithstanding,
if it shall be determined that any payment or distribution to you or for your
benefit (whether paid or payable or distributed or distributable) pursuant to
the terms of this Agreement or otherwise (the "Payment") would be subject to the
excise tax imposed by section 4999 of the Code (the "Excise Tax"), then you
shall be entitled to receive from the Corporation an additional payment (the
"Gross-Up Payment") in an amount such that the net amount of the Payment and the
Gross-Up Payment retained by you after the calculation and deduction of all
Excise Taxes (including any interest or penalties imposed with respect to such
taxes) on the payment and all federal, state and local income tax, employment
tax and Excise Tax (including any interest or penalties imposed with respect to
such taxes) on the Gross-Up Payment provided for in this Section 4(ii)(g), and
taking into account any lost or reduced tax deductions on account of the
Gross-Up Payment, shall be equal to the Payment;
(2) all determinations required to be made under this Section
4(ii)(g), including whether and when the Gross-Up Payment is required and the
amount of such Gross-Up Payment, and the assumptions to be utilized in arriving
at such determinations shall be made by the Accountants (as defined below) which
shall provide you and the Corporation with detailed supporting calculations with
respect to such Gross-Up Payment within fifteen (15) business days of the
receipt of notice from you or the Corporation that you have received or will
receive a Payment. For the purposes of this Section 4(ii)(g), the "Accountants"
shall mean the Corporation's independent certified public accountants serving
immediately prior to the Change in Control. In the event that the Accountants
are also serving as accountant or auditor for the individual, entity or group
effecting the Change in Control, you shall appoint another nationally recognized
public accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accountants hereunder). All
fees and expenses of the Accountants shall be borne solely by the Corporation.
For the purposes of determining whether any of the Payments will be subject to
the Excise Tax and the amount of such Excise Tax, such Payments will be treated
as "parachute payments" within the meaning of section 280G of
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the Code, and all "parachute payments" in excess of the "base amount" (as
defined under section 280G(b)(3) of the Code) shall be treated as subject to the
Excise Tax, unless and except to the extent that in the opinion of the
Accountants such Payments (in whole or in part) either do not constitute
"parachute payments" or represent reasonable compensation for services actually
rendered (within the meaning of section 280G(b)(4) of the Code) in excess of the
"base amount," or such "parachute payments" are otherwise not subject to such
Excise Tax. For purposes of determining the amount of the Gross-Up Payment, you
shall be deemed to pay Federal income taxes at the highest applicable marginal
rate of Federal income taxation for the calendar year in which the Gross-Up
Payment is to be made and to pay any applicable state and local income taxes at
the highest applicable marginal rate of taxation for the calendar year in which
the Gross-Up Payment is to be made, net of the maximum reduction in Federal
income taxes which could be obtained from the deduction of such state or local
taxes if paid in such year (determined without regard to limitations on
deductions based upon the amount of your adjusted gross income), and to have
otherwise allowable deductions for Federal, state and local income tax purposes
at least equal to those disallowed because of the inclusion of the Gross-Up
Payment in your adjusted gross income. To the extent practicable, any Gross-Up
Payment with respect to any Payment shall be paid by the Corporation at the time
you are entitled to receive the Payment and in no event will any Gross-Up
Payment be paid later than five days after the receipt by you of the
Accountant's determination. Any determination by the Accountants shall be
binding upon the Corporation and you. As a result of uncertainty in the
application of section 4999 of the Code at the time of the initial determination
by the Accountants hereunder, it is possible that the Gross-Up Payment made will
have been an amount less than the Corporation should have paid pursuant to this
Section 4(ii)(g) (the "Underpayment"). In the event that the Corporation
exhausts its remedies pursuant to Section 4(ii)(g)(3) and you are required to
make a payment of any Excise Tax, the Underpayment shall be promptly paid by the
Corporation to or for your benefit; and
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(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 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 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, interest and/or penalties 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 reasonably requested
by the Corporation relating to such claim;
(B) take such action in connection with contesting such claim
as the Corporation 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 to
effectively contest such claim; and
(D) permit the Corporation to participate in any proceedings
relating to such claims;
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 you for and hold you harmless
from, on an after-tax basis, any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such representation
and payment of all related costs and expenses. Without limiting the foregoing
provisions of this Section 4(ii)(g), 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,
Page Thirteen
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 you for and hold you harmless from, on an after-tax
basis, any Excise 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 (including as a result of any
forgiveness by the Corporation of such advance); provided, further, that any
extension of the statute of limitations relating to the payment of taxes for the
taxable year of you 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 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;
(h) in any situation where under applicable law the Corporation has
the power to indemnify (or advance expenses to) you in respect of any judgments,
fines, settlements, loss, cost or expense (including attorneys' fees) of any
nature related to or arising out of your activities as an agent, employee,
officer or director of the Corporation or in any other capacity on behalf of or
at the request of the Corporation, the Corporation shall promptly on written
request, indemnify (and advance expenses to) you to the fullest extent permitted
by applicable law, including but not limited to making such findings and
determinations and taking any and all such actions as the Corporation may, under
applicable law, be permitted to have the discretion to take so as to effectuate
such indemnification or advancement. Such agreement by the Corporation shall not
be deemed to impair any other obligation of the Corporation respecting your
indemnification otherwise arising out of this or any other agreement or promise
of the Corporation or under any statute;
(i) the Corporation shall furnish you for six (6) years following
the Date of Termination (without reference to whether the term of this Agreement
continues in effect) with directors' and officers' liability insurance insuring
you against insurable events which occur or have occurred while you were a
director or officer of the
Page Fourteen
Corporation, such insurance to have policy limits aggregating not less than the
amount in effect immediately prior to the Change in Control, and otherwise to be
in substantially the same form and to contain substantially the same terms,
conditions and exceptions as the liability issuance policies provided for
officers and directors of the Corporation in force from time to time, provided,
however, that such terms, conditions and exceptions shall not be, in the
aggregate, materially less favorable to you than those in effect on the date
hereof; provided, further, that if the aggregate annual premiums for such
insurance at any time during such period exceed one hundred and fifty percent
(150%) of the per annum rate of premium currently paid by the Corporation for
such insurance, then the Corporation shall provide the maximum coverage that
will then be available at an annual premium equal to one hundred and fifty
percent (150%) of such rate; and
(j) you shall be fully vested in your accrued benefits under any
qualified or nonqualified pension, profit sharing, deferred compensation or
supplemental plans maintained by the Corporation for your benefit, and the
Corporation shall provide you with additional fully vested benefits under such
plans in an amount equal to the benefits which you would have accrued had you
continued your employment with the Corporation for three (3) additional years
following your Date of Termination; provided, however, that to the extent that
the acceleration of vesting or enhanced accrual of such benefits would violate
any applicable law or require the Corporation to accelerate the vesting of the
accrued benefits of all participants in such plan or plans or to provide
additional benefit accruals to such participants, the Corporation shall pay you
a lump-sum payment at the time specified in Section 4(iii) in an amount equal to
the value of such benefits; provided, further, that to the extent that the
present value of all benefits payable to you under this Section 4(ii)(j) is less
than $250,000, the Corporation shall pay you a lump-sum payment at the time
specified in Section 4(iii) in an amount equal to the difference between
$250,000 and the amount of such benefits which are otherwise payable to you
under this Section 4(ii)(j); provided, further, that if you are eligible to
receive grandfathered benefits under the Corporation's pension plan, the
provisions of this Section 4(ii)(j) shall apply to such grandfathered benefits,
without reduction for age, in addition to any other benefits to which you are
entitled under this Section 4(ii)(j).
Page Fifteen
(iii) The payments provided for in Sections 4(ii)(a), (b), (c), (d)
and (j) shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments cannot be
finally determined on or before such day, the Corporation shall pay to you on
such day an estimate, as determined in good faith by the Corporation, of the
minimum amount of such payments and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth day after the Date of Termination. 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 you, payable 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).
(iv) You shall not be required to mitigate the amount of any payment
provided for in this Section 4 by seeking other employment or otherwise nor,
except as provided in Section 4(ii)(f), shall the amount of any payment or
benefit provided for in this Section 4 be reduced by any compensation earned by
you as the result of employment by another employer or self-employment, by
retirement benefits, by offset against any amount claimed to be owed by you to
the Corporation, or otherwise.
5. Acceleration of Vesting of Options. Notwithstanding anything contained
herein, in the event of a Change in Control during the term of this Agreement,
all outstanding options ("Options"), if any, granted to you under any of the
Corporation's stock option plans, incentive plans or other similar plans (or
options substituted therefor covering the stock of a successor corporation)
shall, effective immediately prior to such Change in Control, become fully
vested and exercisable as to all shares of stock covered thereby.
6. Successors; Binding Agreement.
(i) The Corporation shall 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 you to terminate your employment and
receive compensation from the Corporation in the same amount and on the same
terms to which you would be entitled hereunder if you terminate your employment
for Good Reason following a Change in Control, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be
Page Sixteen
deemed the Date of Termination. Unless expressly provided otherwise,
"Corporation" as used herein shall mean the Corporation as defined in this
Agreement and any successor to its business and/or assets as aforesaid.
(ii) This Agreement shall inure to the benefit of and be enforceable
by you and your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while
any amount would still be payable to you hereunder had you continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to your devisee, legatee or other designee or,
if there is no such designee, to your estate.
7. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered 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 shall be directed to the
attention of the Board 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.
8. Non- Compete, Confidentiality and Non-Solicitation Covenants.
(i) Non-Compete. In consideration of and in connection with the
benefits provided to you under this Agreement, and in order to protect the
goodwill of the Corporation, you hereby agree that, if your employment is
terminated pursuant to a Covered Resignation, then, for a period of twelve (12)
months commencing on the Date of Termination, you shall not, directly or
indirectly, own, manage, operate, join, control or participate in the ownership,
management, operation or control of, or be connected as a director, officer,
employee, partner, consultant or otherwise with any of the following entities
(or any subsidiary of any such entity) other than as a shareholder or beneficial
owner owning 5% or less of the outstanding securities of a public company:
Durand International, the Anchor Hocking unit of Newell Co., Cardinal
International, Inc., the Indiana Glass unit of Lancaster Colony Corporation,
Oneida LTD or any glass tableware manufacturer, seller or importer for Bormioli
Rocco Casa SpA, for the Kedaung group of companies of Indonesia or for the
Sisecam group of companies of Turkey including Pasabahce.
Page Seventeen
(ii) Confidentiality. You hereby agree that, for the period
commencing on the Date of Termination and terminating on the third anniversary
thereof, you shall not, directly or indirectly, disclose or make available to
any person, firm, corporation, association or other entity for any reason or
purpose whatsoever, any Confidential Information (as defined below). You agree
that, upon termination of your employment with the Corporation, all Confidential
Information in your possession that is in written or other tangible form
(together with all copies or duplicates thereof, including computer files) shall
be returned to the Corporation and shall not be retained by you or furnished to
any third party, in any form except as provided herein; provided, however, that
you shall not be obligated to treat as confidential, or return to the
(iii) Corporation copies of any Confidential Information that (i)
was publicly known at the time of disclosure to you, (ii) becomes publicly known
or available thereafter other than by any means in violation of this Agreement
or any other duty owed to the Corporation by any person or entity, or (iii) is
lawfully disclosed to you by a third party. As used in this Agreement, the term
"Confidential Information" means: information disclosed to you or known by you
as a consequence of or through your relationship with the Corporation, about the
customers, employees, business methods, public relations methods, organization,
procedures or finances, including, without limitation, information of or
relating to customer lists, of the Corporation and its affiliates.
(iv) Non-Solicitation. You hereby agree that, for the period
commencing on the Date of Termination and terminating on the third anniversary
thereof, you shall not, either on your own account or jointly with or as a
manager, agent, officer, employee, consultant, partner, joint venturer, owner or
shareholder or otherwise on behalf of any other person, firm or corporation,
directly or indirectly solicit or attempt to solicit away from the Corporation
any of its officers or employees or offer employment to any person who, on or
during the six (6) months immediately preceding the date of such solicitation or
offer, is or was an officer or employee of the Corporation; provided, however,
that a general advertisement to which an employee of the Corporation responds
shall in no event be deemed to result in a breach of this Section 8(iii).
9. Funding of Obligations. Within a reasonable time following the execution and
delivery of this Agreement by you and the Corporation, the Corporation shall
partially fund its obligations to provide benefits hereunder (including, without
limitation, its obligations under Section 4(ii)(g)) by establishing and
irrevocably partially funding a trust for your benefit and the benefit of other
executives of the Corporation with whom
Page Eighteen
the Corporation has entered into agreements similar to this Agreement. The
Corporation shall initially contribute $1000 to such trust. Such trust shall be
a grantor trust described in section 671 of the Code. Upon the occurrence of a
Potential Change in Control (as defined below), the Corporation shall fully fund
its obligations to provide benefits hereunder (including, without limitation,
its obligations under Section 4(ii)(g)) by irrevocably contributing funds to
such trust on your behalf. The amount of such contribution shall equal the then
present value of the Corporation's obligations under Section 4 hereof as
determined by the firms serving as the Corporation's actuaries and accountants
immediately prior to the Change in Control. Such actuaries and accountants shall
be paid by the Corporation. The establishment and funding of such trust shall
not affect the obligation of the Corporation to provide benefits under the terms
of this Agreement. For purposes of this Agreement a "Potential Change in
Control" shall be deemed to occur if:
(a) the Corporation enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(b) any Person (including the Corporation) publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(c) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Corporation representing ten
percent (10%) or more of the combined voting power of the Corporation's then
outstanding securities, increases such Person's beneficial ownership of such
securities by five percent (5%) or more of the Corporation's then outstanding
securities over the percentage so owned by such Person on the date hereof
provided however, (i) that this subsection (c) shall not apply to the Baron
Group by virtue of their individual or collective beneficial ownership of
securities of the Corporation's outstanding securities as of the date of this
letter so long as the Baron Group does not individually or collectively,
beneficially own, or increase such beneficial ownership to, twenty-five percent
(25%) or more of the combined voting power of the corporation's then outstanding
securities, and (ii) that this subsection (c) shall not apply to Ariel by virtue
of its beneficial ownership of the Corporation's outstanding securities as of
the date of this Agreement so long as Ariel does not beneficially own, or
increase such beneficial ownership to, twenty percent (20%) or more of the
combined voting power of the Corporation's then outstanding securities; or
(d) the Board adopts a resolution to the effect that, for purposes
of this Agreement, a Potential Change in Control has occurred.
10. Miscellaneous. 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 you and such officer 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
Page Nineteen
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. No agreements or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of Ohio
without regard to its conflicts of law principles. All references to sections of
the Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Except as provided in Section 4(ii)(g) hereunder,
any payments provided for hereunder shall be paid net of any applicable
withholding required under federal, state or local law. The obligations of the
Corporation under Section 4 shall survive the expiration of the term of this
Agreement. The section headings contained in this Agreement are for convenience
only, and shall not affect the interpretation of this Agreement.
11. Severability. 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 shall
constitute one and the same instrument.
13. Suits, Actions, Proceedings, Etc..
(i) Jurisdiction and Venue. No suit, action or proceeding with
respect to this Agreement, nor any judgment entered by any court in respect
thereof, may be brought in any court, domestic or foreign, or before any similar
domestic or foreign authority, other than in a court of competent jurisdiction
in the State of Ohio, and you and the Corporation hereby irrevocably waive any
right which you or the Corporation, as applicable, may otherwise have had to
bring such a suit, action, proceeding or judgment in any other court, domestic
or foreign, or before any similar domestic or foreign authority. You and the
Corporation hereby submit to the exclusive jurisdictions of such courts for the
purpose of any such suit, action, proceeding or judgment. By your execution and
delivery of this Agreement, you appoint the Secretary of the Corporation, at the
Corporation's office in Toledo, Ohio, as your agent upon which process may be
served in any such suit, action or proceeding; and by its execution and delivery
of this Agreement, the Corporation appoints the Secretary of the Corporation, at
its office in Toledo, Ohio, as its agent upon which process may be served in any
such suit, action or proceeding. Service of process upon such applicable agent,
together
Page Twenty
with actual notice of such service given to you or the Corporation, as
applicable, in the manner provided in Section 7 hereof, shall be deemed in every
respect effective service of process upon the applicable party in any suit,
action, proceeding or judgment. Nothing herein shall be deemed to limit the
ability of you or the Corporation to serve any such writs, process or summonses
in any other manner permitted by applicable law. You and the Corporation hereby
irrevocably waive any objections which you or the Corporation, as applicable,
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement brought in any court of
competent jurisdiction in the State of Ohio, and hereby further irrevocably
waive any claim that any such suit, action or proceeding brought in any such
court has been brought in an inconvenient forum. Notwithstanding the foregoing,
in the event that no court of competent jurisdiction in the State of Ohio will
accept such jurisdiction and venue, then any suit, action or proceeding with
respect to this Agreement, or any judgment entered by any court in respect
thereof, may be brought in any court of competent jurisdiction in the
continental United States which has jurisdiction over such suit, proceeding or
action and the parties thereto.
(ii) Compensation During Dispute, Etc.. Your compensation during any
disagreement, dispute, controversy, claim, suit, action or proceeding
(collectively, a "Dispute") arising out of or relating to this Agreement or the
interpretation of this Agreement shall be as follows:
If there is a termination by you or the Corporation followed by a
Dispute as to whether you are entitled to the payments and other benefits
provided under this Agreement, then, during the period of that Dispute the
Corporation shall pay you fifty percent (50%) of the amount specified in
Sections 4(ii)(a) and 4(ii)(b) hereof, and the Corporation shall provide you
with the other benefits provided in Section 4(ii) of this Agreement, if, but
only if, you agree in writing that if the Dispute is resolved against you, you
shall promptly refund to the Corporation all payments you receive under Sections
4(ii)(a) and 4(ii)(b) of this Agreement plus interest at the rate provided in
Section 1274(d) of the Code, compounded quarterly. If the Dispute is resolved in
your favor, promptly after resolution of the dispute the Corporation shall pay
you the sum that was withheld during the period of the Dispute plus interest at
the rate provided in Section 1274(d) of the Code, compounded quarterly.
(iii) Legal Fees. The Corporation shall pay to you all legal fees
and expenses incurred by you in connection with any Dispute arising out of or
relating to this Agreement or the interpretation thereof (including, without
limitation, all such fees
Page Twenty-One
and expenses, if any, incurred in contesting or disputing any termination of
your employment 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 Code to any
payment or benefit provided hereunder).
14. Entire Agreement. This Agreement sets forth the entire agreement of the
parties hereto in respect of the subject matter contained herein and supersedes
all prior agreements, promises, covenants, arrangements, communications,
representations or warranties, whether oral or written, by any officer, employee
or representative of any party hereto; and any prior agreement of the parties
hereto in respect of the subject matter contained herein, including, without
limitation, any prior severance agreements, is hereby terminated and cancelled;
provided, however, that the Employment Agreement, dated as of December 15, 2003
by and between you and the Corporation, as amended, shall remain in full force
and effect and shall, pursuant to the terms and conditions thereof, provide
certain severance benefits to you upon certain terminations of employment. Any
of your rights hereunder shall be in addition to any rights you may otherwise
have under benefit plans or agreements of the Corporation to which you are a
party or in which you are a participant, including, but not limited to, any
Corporation sponsored employee benefit plans and stock options plans. Provisions
of this Agreement shall not in any way abrogate your rights under such other
plans and agreements.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter, which shall then constitute our agreement on this subject.
Sincerely,
LIBBEY INC.
By: /s/ Arthur H. Smith
------------------------------
Its:Vice President and Secretary
Agreed and Accepted as of the,
15th day of December, 2003
/s/ Susan Allene Kovach
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Susan Allene Kovach