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EXHIBIT (10)(e)
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this
"Agreement"), originally entered into as of July 27, 1987 and
as amended and restated effective as of July 24, 1989, by and
between The Lubrizol Corporation, an Ohio corporation (the
"Company"), and (the "Executive");
WITNESSETH:
WHEREAS, the Executive is a senior executive of the
Company and has made and is expected to continue to make major
contributions to the profitability, growth and financial
strength of the Company;
WHEREAS, the Company recognizes that, as is the case
for most publicly held companies, the possibility of a Change
in Control (as that term is hereafter defined) exists;
WHEREAS, the Company desires to assure itself of both
present and future continuity of management in the event of a
Change in Control and desires to establish certain minimum
compensation rights of its key senior executive officers,
including the Executive, applicable in the event of a Change in
Control;
WHEREAS, the Company wishes to ensure that its senior
executives are not practically disabled from discharging their
duties upon a Change in Control;
WHEREAS, this Agreement is not intended to alter
materially the compensation and benefits which the Executive
could reasonably expect to receive from the Company absent a
Change in Control and, accordingly, although effective and
binding as of the date hereof, this Agreement shall become
operative only upon the occurrence of a Change in Control; and
WHEREAS, the Executive is willing to render services
to the Company on the terms and subject to the conditions set
forth in this Agreement;
NOW, THEREFORE, the Company and the Executive agree as
follows:
1. Operation of Agreement: (a) This Agreement shall
be effective and binding immediately upon its execution, but,
anything in this Agreement to the contrary notwithstanding,
this Agreement shall not be operative unless and until there
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shall have occurred a Change in Control. For purposes of this
Agreement, a "Change in Control" shall have occurred if at any
time during the Term (as that term is hereafter defined) any of
the following events shall occur:
(i) The Company is merged, consolidated or
reorganized into or with another corporation or other
legal person, and immediately after such merger,
consolidation or reorganization less than a majority
of the combined voting power of the then-outstanding
securities of such corporation or person immediately
after such transaction are held in the aggregate by
the holders of Voting Stock (as that term is hereafter
defined) of the Company immediately prior to such
transaction;
(ii) The Company sells all or substantially all
of its assets to any other corporation or other legal
person, less than a majority of the combined voting
power of the then-outstanding securities of such
corporation or person immediately after such sale are
held in the aggregate by the holders of Voting Stock
of the Company immediately prior to such sale;
(iii) There is a report filed on Schedule 13D or
Schedule 14D-1 (or any successor schedule, form or
report), each as promulgated pursuant to the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the
term "person" is used in Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act) has become the
beneficial owner (as the term "beneficial owner, is
defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act) of
securities representing 20% or more of the combined
voting power of the then-outstanding securities
entitled to vote generally in the election of
directors of the Company ("Voting Stock");
(iv) The Company files a report or proxy
statement with the Securities and Exchange Commission
pursuant to the Exchange Act disclosing in response to
Form 8-K or Schedule 14A (or any successor schedule,
form or report or item therein) that a change in
control of the Company has or may have occurred or
will or may occur in the future pursuant to any
then-existing contract or transaction; or
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(v) If during any period of two consecutive
years, individuals who at the beginning of any such
period constitute the Directors of the Company cease
for any reason to constitute at least a majority
thereof, provided, however, that for purposes of this
clause (v), each Director who is first elected, or
first nominated for election by the Company's
stockholders by a vote of at least two-thirds of the
Directors of the Company (or a committee thereof) then
still in office who were Directors of the Company at
the beginning of any such period will be deemed to
have been a Director of the Company at the beginning
of such period.
Notwithstanding the foregoing provisions of Section l(a)(iii)
or 1(a)(iv) hereof, unless otherwise determined in a specific
case by majority vote of the Board of Directors of the Company
(the "Board"), a "Change in Control" shall not be deemed to
have occurred for purposes of this Agreement solely because
(i) the Company, (ii) an entity in which the Company directly
or indirectly beneficially owns 50% or more of the voting
securities (a "Subsidiary"), or (iii) any Company-sponsored
employee stock ownership plan or any other employee benefit
plan of the Company, either files or becomes obligated to file
a report or a proxy statement under or in response to
Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein) under the
Exchange Act, disclosing beneficial ownership by it of shares
of Voting Stock, whether in excess of 20% or otherwise, or
because the Company reports that a change in control of the
Company has or may have occurred or will or may occur in the
future by reason of such beneficial ownership.
(b) Upon the occurrence of a Change in Control at any
time during the Term, this Agreement shall become immediately
operative.
(c) The period during which this Agreement shall be
in effect (the "Term") shall commence as of the date hereof and
shall expire as of the later of (i) the close of business on
December 31, 1994 and (ii) the expiration of the Period of
Employment (as that term is hereinafter defined); provided,
however, that (A) commencing on January 1, 1990 and each
January 1 thereafter, the term of this Agreement shall
automatically be extended for an additional year unless, not
later than September 30 of the immediately preceding year, the
Company or the Executive shall have given notice that it or he,
as the case may be, does not wish to have the Term extended and
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(B) subject to Section 10 hereof, if, prior to a Change in
Control, the Executive ceases for any reason to be an employee
of the Company and any Subsidiary, thereupon the Term shall be
deemed to have expired and this Agreement shall immediately
terminate and be of no further effect.
2. Employment; Period of Employment: (a) Subject
to the terms and conditions of this Agreement, upon the
occurrence of a Change in Control, the Company shall continue
the Executive in its employ and the Executive shall remain in
the employ of the Company and/or a Subsidiary, as the case may
be, for the period set forth in Section 2(b) hereof (the
"Period of Employment"), in the position and with substantially
the same duties and responsibilities that he had immediately
prior to the Change in Control, or to which the Company and the
Executive may hereafter mutually agree in writing. Throughout
the Period of Employment, the Executive shall devote
substantially all of his time during normal business hours
(subject to vacations, sick leave and other absences in
accordance with the policies of the Company as in effect for
senior executives immediately prior to the Change in Control)
to the business and affairs of the Company, but nothing in this
Agreement shall preclude the Executive from devoting reasonable
periods of time during normal business hours to (i) serving as
a director, trustee or member of or participant in any
organization or business so long as such activity would not
constitute Competitive Activity (as that term is hereafter
defined) if conducted by the Executive after the Executive's
Termination Date (as that term is hereafter defined), (ii)
engaging in charitable and community activities, or (iii)
managing his personal investments.
(b) The Period of Employment shall commence on the
date of an occurrence of a Change in Control and, subject only
to the provisions of Section 4 hereof, shall continue until the
earliest of (i) the expiration of the third anniversary of the
occurrence of the Change in Control, (ii) the Executive's
death, or (iii) the Executive's attainment of age 65; provided,
however, that commencing on each anniversary of the Change of
Control, the Period of Employment shall automatically be
extended for an additional year unless, not later than 90
calendar days prior to such anniversary date, either the
Company or the Executive shall have given written notice to the
other that the Period of Employment shall not be so extended.
3. Compensation During Period of Employment:
(a) Upon the occurrence of a Change in Control, the Executive
shall receive during the Period of Employment (i) annual base
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salary at a rate not less than the Executive's annual fixed or
base compensation (payable monthly or otherwise as in effect
for senior executives of the Company immediately prior to the
occurrence of a Change in Control) or such higher rate as may
be determined from time to time by the Board or the
Compensation Committee thereof (which base salary at such rate
is herein referred to as "Base Pay") and (ii) an annual amount
equal to not less than the highest aggregate annual bonus,
incentive or other payments of cash compensation in addition to
the amounts referred to in clause (i) above made or to be made
in regard to services rendered in any calendar year during the
three calendar years immediately preceding the year in which
the Change in Control occurred pursuant to any bonus,
incentive, profit-sharing, performance, discretionary pay or
similar agreement, policy, plan, program or arrangement
(whether or not funded) of the Company or any successor thereto
providing benefits at least as great as the benefits payable
thereunder prior to a Change in Control ("Incentive Pay");
provided, however, that (A) with the prior written consent of
the Executive, nothing herein shall preclude a change in the
mix between Base Pay and Incentive Pay so long as that the
aggregate cash compensation received by the Executive in any
one calendar year is not reduced in connection therewith or as
a result thereof, (B) in no event shall any increase in the
Executive's aggregate cash compensation or any portion thereof
in any way diminish any other obligation of the Company under
this Agreement, and (C) no duplicate payment hereunder will be
made in respect of any amount actually paid to the Executive
pursuant to any such agreement, policy, plan, program or
arrangement.
(b) For his service pursuant to Section 2(a) hereof,
during the Period of Employment the Executive shall be a full
participant in, and shall be entitled to the perquisites,
benefits and service credit for benefits as provided under, any
and all employee retirement income and welfare benefit
policies, plans, programs or arrangements in which senior
executives of the Company participate, including without
limitation any stock option, stock purchase, stock
appreciation, savings, pension, supplemental executive
reimbursement and other employee benefit policies, plans,
programs or arrangements that may now exist or any equivalent
successor policies, plans, programs or arrangements that may be
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adopted hereafter by the Company providing perquisites,
benefits and service credit for benefits at least as great as
are payable thereunder prior to a Change in Control
(collectively, "Employee Benefits"); provided, however, that
except as expressly provided in, and subject to the terms of,
Section 3(a) hereof, the Executive's rights thereunder shall be
governed by the terms thereof and shall not be enlarged
hereunder or otherwise affected hereby. If and to the extent
such perquisites, benefits or service credit for benefits are
not payable or provided under any such policy, plan, program or
arrangement as a result of the amendment or termination
thereof, then the Company shall itself pay or provide
therefor. Nothing in this Agreement shall preclude improvement
or enhancement of any such Employee Benefits, provided that no
such improvement shall in any way diminish any other obligation
of the Company under this Agreement.
4. Termination Following a Change in Control:
(a) In the event of the occurrence of a Change in Control, the
Executive's employment may be terminated by the Company during
the Period of Employment and the Executive shall not be
entitled to the benefits provided by Sections 5 and 6 hereof
only upon the occurrence of one or more of the following events:
(i) The Executive's death;
(ii) If the Executive shall become permanently
disabled within the meaning of, and begins actually to
receive disability benefits pursuant to, the long-term
disability plan in effect for senior executives of the
Company immediately prior to the Change in Control; or
(iii) "Cause", which for purposes of this
Agreement shall mean that, prior to any termination
pursuant to Section 4(b) hereof, the Executive shall
have committed:
(A) an intentional act of fraud,
embezzlement or theft in connection with his
duties or in the course of his employment with
the Company and/or any Subsidiary;
(B) intentional wrongful damage to property
of the Company and/or any Subsidiary;
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(C) intentional wrongful disclosure of
secret processes or confidential information of
the Company and/or any Subsidiary; or
(D) intentional wrongful engagement in any
Competitive Activity;
and any such act shall have been materially harmful to
the Company. For purposes of this Agreement, no act,
or failure to act, on the part of the Executive shall
be deemed "intentional" if it was due primarily to an
error in judgment or negligence, but shall be deemed
"intentional" only if done, or omitted to be done, by
the Executive not in good faith and without reasonable
belief that his action or omission was in the best
interest of the Company. Notwithstanding the
foregoing, the Executive shall not be deemed to have
been terminated for "Cause" hereunder unless and until
there shall have been delivered to the Executive a
copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters of the Board then
in office at a meeting of the Board called and held
for such purpose (after reasonable notice to the
Executive and an opportunity for the Executive,
together with his counsel, to be heard before the
Board), finding that, in the good faith opinion of the
Board, the Executive had committed an act set forth
above in Section 4(a)(iii) and specifying the
particulars thereof in detail. Nothing herein shall
limit the right of the Executive or his beneficiaries
to contest the validity or propriety of any such
determination.
(b) In the event of the occurrence of a Change in
Control, this Agreement may be terminated by the Executive
during the Period of Employment with the right to severance
compensation as provided in Sections 5 and 6 hereof upon the
occurrence of one or more of the following events (regardless
of whether any other reason, other than Cause as hereinabove
provided, for such termination exists or has occurred,
including without limitation other employment):
(i) Any termination by the Company of the
employment of the Executive prior to the date upon
which the Executive shall have attained age 65, which
termination shall be for any reason other than for
Cause or as a result of the death of the Executive or
by reason of the Executive's disability and the actual
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receipt of disability benefits in accordance with
Section 4(a)(ii) hereof; or
(ii) Termination by the Executive of his
employment with the Company and any Subsidiary within
three years after the Change in Control upon the
occurrence of any of the following events:
(A) Failure to elect or reelect or
otherwise to maintain the Executive in the office
or the position, or a substantially equivalent
office or position, of or with the Company and/or
a Subsidiary, as the case may be, which the
Executive held immediately prior to a Change in
Control, or the removal of the Executive as a
Director of the Company (or any successor
thereto) if the Executive shall have been a
Director of the Company immediately prior to the
Change in Control;
(B) A significant adverse change in the
nature or scope of the authorities, powers,
functions, responsibilities or duties attached to
the position with the Company and any Subsidiary
which the Executive held immediately prior to the
Change in Control, a reduction in the aggregate
of the Executive's Base Pay and Incentive Pay
received from the Company and any Subsidiary, or
the termination or denial of the Executive's
rights to Employee Benefits as herein provided,
any of which is not remedied within 10 calendar
days after receipt by the Company of written
notice from the Executive of such change,
reduction or termination, as the case may be;
(C) A determination by the Executive made
in good faith that as a result of a Change in
Control and a change in circumstances thereafter
significantly affecting his position, including
without limitation a change in the scope of the
business or other activities for which he was
responsible immediately prior to a Change in
Control, he has been rendered substantially
unable to carry out, has been substantially
hindered in the performance of, or has suffered a
substantial reduction in, any of the authorities,
powers, functions, responsibilities or duties
attached to the position held by the Executive
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immediately prior to the Change in Control, which
situation is not remedied within 10 calendar days
after written notice to the Company from the
Executive of such determination;
(D) The liquidation, dissolution, merger,
consolidation or reorganization of the Company or
transfer of all or a significant portion of its
business and/or assets, unless the successor or
successors (by liquidation, merger,
consolidation, reorganization or otherwise) to
which all or a significant portion of its
business and/or assets have been transferred
(directly or by operation of law) shall have
assumed all duties and obligations of the Company
under this Agreement pursuant to Section 12
hereof;
(E) The Company shall relocate its
principal executive offices, or require the
Executive to have his principal location of work
changed, to any location which is in excess of 25
miles from the location thereof immediately prior
to the Change of Control or to travel away from
his office in the course of discharging his
responsibilities or duties hereunder
significantly more (in terms of either
consecutive days or aggregate days in any
calendar year) than was required of him prior to
the Change of Control without, in either case,
his prior written consent; or
(F) Without limiting the generality or
effect of the foregoing, any material breach of
this Agreement by the Company or any successor
thereto.
(c) A termination by the Company pursuant to
Section 4(a) hereof or by the Executive pursuant to Section
4(b) hereof shall not affect any rights which the Executive may
have pursuant to any agreement, policy, plan, program or
arrangement of the Company providing Employee Benefits (except
as provided in Section 5(a)(ii) hereof), which rights shall be
governed by the terms thereof. If this Agreement or the
employment of the Executive is terminated under circumstances
in which the Executive is not entitled to any payments under
Sections 3, 5 or 6 hereof, the Executive shall have no further
obligation or liability to the Company hereunder with respect
to his prior or any future employment by the Company.
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5. Severance Compensation: (a) If, following the
occurrence of a Change in Control, the Company shall terminate
the Executive's employment during the Period of Employment
other than pursuant to Section 4(a) hereof, or if the Executive
shall terminate his employment pursuant to Section 4(b) hereof,
the Company shall continue to provide the following benefits
and shall further pay to the Executive the following amounts
within five business days after the date (the "Termination
Date") that the Executive's employment is terminated (the
effective date of which shall be the date of termination, or
such other date that may be specified by the Executive if the
termination is pursuant to Section 4(b) hereof):
(i) In lieu of any further payments to the
Executive for periods subsequent to the Termination
Date, but without affecting the rights of the
Executive referred to in Section 5(b) hereof, a lump
sum payment (the "Severance Payment") in an amount
equal to the present value (using a discount rate
required to be utilized for purposes of computations
under Section 280G of the Code or any successor
provision thereto, or if no such rate is so required
to be used, a rate equal to the then-applicable
interest rate prescribed by the Pension Benefit
Guarantee Corporation for benefit valuations in
connection with non-multiemployer pension plan
terminations assuming the immediate commencement of
benefit payments (the "Discount Rate")) of the sum of
(A) the aggregate Base Pay (at the highest rate in
effect for any period prior to the Termination Date)
for each remaining year or partial year of the Period
of Employment which the Executive would have received
had such termination or breach not occurred, plus (B)
the aggregate Incentive Pay (determined in accordance
with the standards set forth in Section 3(a)(ii)
hereof), which the Executive would have received
pursuant to this Agreement or any agreement, policy,
plan, program or arrangement referred to therein
during the remainder of the Period of Employment had
his employment continued for the remainder of the
Period of Employment (in which event the Executive
will no longer be entitled to Incentive Pay under any
such agreement, policy, plan, program or arrangement
except for Incentive Pay to which he was entitled for
service prior to the Termination Date).
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(ii) For the remainder of the Period of
Employment, the Company shall arrange to provide the
Executive with Employee Benefits that are welfare
benefits, but not stock option, stock purchase, stock
appreciation, or similar compensatory benefits,
substantially similar to those which the Executive was
receiving or entitled to receive immediately prior to
the Termination Date (and if and to the extent that
such benefits shall not or cannot be paid or provided
under any policy, plan, program or arrangement of the
Company or any Subsidiary, as the case may be, then
the Company shall itself pay or provide for the
payment to the Executive, his dependents and
beneficiaries, such Employee Benefits). Without
otherwise limiting the purposes or effect of Section 7
hereof, Employee Benefits otherwise receivable by the
Executive pursuant to the first sentence of this
Section 5(a)(ii) shall be reduced to the extent
comparable welfare benefits are actually received by
the Executive from another employer during such period
following the Executive's Termination Date, and any
such benefits actually received by the Executive shall
be reported by the Executive to the Company.
Notwithstanding the foregoing, the remainder of the
Period of Employment shall be considered service with
the Company for the purpose of determining service
credits and benefits due and payable to the Executive
under the Company's retirement income, supplemental
executive retirement and other benefit plans of the
Company applicable to the Executive or his
beneficiaries immediately prior to the Termination
Date.
(b) Upon written notice given by the Executive to the
Company prior to the occurrence of a Change in Control, the
Executive, at his sole option, without reduction to reflect the
present value of such amounts as aforesaid, may elect to have
all or any of the Severance Payment payable pursuant to
Section 5(a)(i) hereof paid to him on a quarterly or monthly
basis during the remainder of the Period of Employment.
(c) There shall be no right of set-off or
counterclaim in respect of any claim, debt or obligation
against any payment to or benefit for the Executive provided
for in this Agreement, except as expressly provided in
Section 5(a)(ii) hereof.
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(d) Without limiting the rights of the Executive at
law or in equity, if the Company fails to make any payment
required to be made hereunder on a timely basis, the Company
shall pay interest on the amount thereof at an annualized rate
of interest equal to the then-applicable Discount Rate.
(e) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 5
will survive any termination or expiration of this Agreement or
the termination of the Executive's employment for any reason
whatsoever.
6. Certain Additional Payments by the Company: (a)
Anything in this Agreement to the contrary notwithstanding, in
the event that this Agreement shall become operative and it
shall be determined (as hereafter provided) that any payment or
distribution by the Company or any of its affiliates to or for
the benefit of the Executive, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise pursuant to or by reason of any other
agreement, policy, plan, program or arrangement, including
without limitation any stock option, stock appreciation right
or similar right, or the lapse or termination of any
restriction on or the vesting or exercisability of any of the
foregoing (individually and collectively a "Payment"), would be
subject to the excise tax imposed by Section 4999 of the Code
(or any successor provision thereto) by reason of being
considered "contingent on a change in ownership or control" of
the Company, within the meaning of Section 280G of the Code (or
any successor provision thereto), or any interest or penalties
with respect to such excise tax (such excise tax, together with
any such interest and penalties, being hereafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment or payments
(individually and collectively, a "Gross-Up Payment"). The
Gross-Up Payment shall be in an amount such that, after payment
by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including any
Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise
Tax imposed upon the Payment.
(b) Subject to the Provisions of Section 6(e) hereof,
all determinations required to be made under this Section 6,
including whether an Excise Tax is payable by the Executive and
the amount of such Excise Tax and whether a Gross-Up Payment is
required to be paid by the Company to the Executive and the
amount of such Gross-Up Payment, if any, shall be made by a
nationally recognized accounting firm (the "Accounting Firm")
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selected by the Executive in his sole discretion. The
Executive shall direct the Accounting Firm to submit its
determination and detailed supporting calculations to both the
Company and the Executive within 30 calendar days after the
Termination Date, if applicable, and any such other time or
times as may be requested by the Company or the Executive. If
the Accounting Firm determines that any Excise Tax is payable
by the Executive, the Company shall pay the required Gross-Up
Payment to the Executive within five business days after
receipt of such determination and calculations with respect to
any Payment to the Executive. The federal tax returns filed by
the Executive shall be prepared and filed on a consistent basis
with the determination of the Accounting Firm with respect to
the Excise Tax payable by the Executive. If the Accounting
Firm determines that no Excise Tax is payable by the Executive,
it shall, at the same time as it makes such determination,
furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise
Tax on his federal income tax return. As a result of the
uncertainty in the application of Section 4999 of the Code (or
any successor provision thereto) at the time of any
determination by the Accounting Firm hereunder, it is possible
that Gross-Up Payments which will not have been made by the
Company should have been made (an "Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts or fails to pursue its remedies
pursuant to Section 6(e) hereof and the Executive thereafter is
required to make a payment of any Excise Tax, the Executive
shall direct the Accounting Firm to determine the amount of the
Underpayment that has occurred and to submit its determination
and detailed supporting calculations to both the Company and
the Executive as promptly as possible. Any such Underpayment
shall be promptly paid by the Company to, or for the benefit
of, the Executive within five business days after receipt of
such determination and calculations.
(c) The Company and the Executive shall each provide
the Accounting Firm access to and copies of any books, records
and documents in the possession of the Company or the
Executive, as the case may be, reasonably requested by the
Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the
determinations and calculations contemplated by Section 6(b)
hereof.
(d) The fees and expenses of the Accounting Firm for
its services in connection with the determinations and
calculations contemplated by Section 6(b) hereof shall be borne
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by the Company. If such fees and expenses are initially paid
by the Executive, the Company shall reimburse the Executive the
full amount of such fees and expenses within five business days
after receipt from the Executive of a statement therefor and
reasonable evidence of his payment thereof.
(e) The Executive shall notify the Company in writing
of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of a
Gross-Up Payment. Such notification shall be given as promptly
as practicable but no later than 10 business days after the
Executive actually receives notice of such claim and the
Executive shall further apprise the Company of the nature of
such claim and the date on which such claim is requested to be
paid (in each case, to the extent known by the Executive). The
Executive shall not pay such claim prior to the earlier of (i)
the expiration of the 30-calendar-day period following the date
on which he gives such notice to the Company and (ii) the date
that any payment of amount with respect to such claim is due.
If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such
claim, the Executive shall:
(i) provide the Company with any written records
or documents in his possession relating to such claim
reasonably requested by the Company;
(ii) take such action in connection with
contesting such claim as the Company shall reasonably
request in writing from time to time, including
without limitation accepting legal representation with
respect to such claim by an attorney competent in
respect of the subject matter and reasonably selected
by the Company;
(iii) cooperate with the Company in good faith in
order effectively to contest such claim; and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including interest and penalties)
incurred in connection with such contest and shall indemnify
and hold harmless the Executive, on an after-tax basis, for and
against any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
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limiting the foregoing provisions of this Section 6(e), the
Company shall control all proceedings taken in connection with
the contest of any claim contemplated by this Section 6(e) and,
at its sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings and conferences
with the taxing authority in respect of such claim (provided,
however, that the Executive may participate therein at his own
cost and expense) and may, at its option, either direct the
Executive to pay the tax claimed and sue for a refund or
contest the claim in any permissible manner, and the Executive
agrees 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 Company shall
determine; provided, however, that if the Company directs the
Executive to pay the tax claimed and sue for a refund, the
Company shall advance the amount of such payment to the
Executive on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax, including interest or penalties with
respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of
limitations relating to payment of taxes for the taxable year
of the Executive with respect to which the contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of any such contested claim
shall be limited to issues with respect to which a Gross-Up
Payment would be payable hereunder and the Executive 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.
(f) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 6(e) hereof,
the Executive receives any refund with respect to such claim,
the Executive shall (subject to the Company's complying with
the requirements of Section 6(e) hereof) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after any taxes applicable thereto).
If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 6(e) hereof, a determination is
made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial or
refund prior to the expiration of 30 calendar days after such
determination, then such advance shall be forgiven and shall
not be required to be repaid and the amount of any such advance
shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid by the Company to the Executive
pursuant to this Section 6.
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7. No Mitigation Obligation: The Company hereby
acknowledges that it will be difficult, and may be impossible,
for the Executive to find reasonably comparable employment
following the Termination Date and that the noncompetition
covenant contained in Section 8 hereof will further limit the
employment opportunities for the Executive. In addition, the
Company acknowledges that its severance pay plans applicable in
general to its salaried employees do not provide for
mitigation, offset or reduction of any severance payment
received thereunder. Accordingly, the parties hereto expressly
agree that the payment of the severance compensation by the
Company to the Executive in accordance with the terms of this
Agreement will be liquidated damages, and that the Executive
shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or
otherwise, nor shall any profits, income, earnings or other
benefits from any source whatsoever create any mitigation,
offset, reduction or any other obligation on the part of the
Executive hereunder or otherwise, except as expressly provided
in Section 5(a)(ii) hereof.
8. Competitive Activity: During a period ending one
year following the Termination Date, if the Executive shall
have received or shall be receiving benefits under Section 5
hereof and, if applicable, Section 6 hereof, the Executive
shall not, without the prior written consent of the Company,
which consent shall not be unreasonably withheld, engage in any
Competitive Activity. For purposes of this Agreement, the term
"Competitive Activity" shall mean the Executive's
participation, without the written consent of an officer of the
Company, in the management of any business enterprise if such
enterprise engages in substantial and direct competition with
the Company and such enterprise's sales of any product or
service competitive with any product or service of the Company
amounted to 25% of such enterprise's net sales for its most
recently completed fiscal year and if the Company's net sales
of said product or service amounted to 25% of the Company's net
sales for its most recently completed fiscal year.
"Competitive Activity" shall not include (i) the mere ownership
of securities in any such enterprise and exercise of rights
appurtenant thereto or (ii) participation in management of any
such enterprise other than in connection with the competitive
operations of such enterprise.
9. Legal Fees and Expenses: (a) It is the intent of
the Company that the Executive not be required to incur legal
fees and the related expenses associated with the enforcement
or defense of his rights under this Agreement by litigation or
other legal action because the cost and expense thereof would
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substantially detract from the benefits intended to be extended
to the Executive hereunder. Accordingly, if it should appear
to the Executive that the Company has failed to comply with any
of its obligations under this Agreement or in the event that
the Company or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or
institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the
benefits provided or intended to be provided to the Executive
hereunder, the Company irrevocably authorizes the Executive
from time to time to retain counsel of his choice, at the
expense of the Company as hereafter provided, to represent the
Executive in connection with the initiation or defense of any
litigation or other legal action, whether by or against the
Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction.
Notwithstanding any existing or prior attorney-client
relationship between the Company and such counsel, the Company
irrevocably consents to the Executive's entering into an
attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a
confidential relationship shall exist between the Executive and
such counsel. Without respect to whether the Executive
prevails, in whole or in part, in connection with any of the
foregoing, the Company shall pay or cause to be paid and shall
be solely responsible for any and all attorneys' and related
fees and expenses incurred by the Executive in connection with
any of the foregoing.
(b) Without limiting the generality or effect of
Section 9(a) hereof, in order to ensure the benefits intended
to be provided to the Executive under Section 9(a) hereof, the
Company will promptly use its best efforts to secure an
irrevocable standby letter of credit (the "Letter of Credit"),
issued by National City Bank or another bank having combined
capital and surplus in excess of $500 million (the "Bank") for
the benefit of the Executive and certain other of the officers
of the Company and providing that the fees and expenses of
counsel selected from time to time by the Executive pursuant to
this Section 9 shall be paid, or reimbursed to the Executive if
paid by the Executive, on a regular, periodic basis upon
presentation by the Executive to the Bank of a statement or
statements prepared by such counsel in accordance with its
customary practices. The Company shall pay all amounts and
take all action necessary to maintain the Letter of Credit
during the Period of Employment and for two years thereafter
and if, notwithstanding the Company's complete discharge of
such obligations, such Letter of Credit shall be terminated or
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not renewed, the Company shall obtain a replacement irrevocable
clean letter of credit drawn upon a commercial bank selected by
the Company and reasonably acceptable to the Executive, upon
substantially the same terms and conditions as contained in the
Letter of Credit, or any similar arrangement which, in any
case, assures the Executive the benefits of this Agreement
without incurring any cost or expense in connection therewith.
(c) Notwithstanding any other provision hereof, the
parties' respective rights and obligations under this Section 9
will survive any termination or expiration of this Agreement or
the termination of the Executive's employment for any reason
whatsoever.
10. Employment Rights: Nothing expressed or implied
in this Agreement shall create any right or duty on the part of
the Company or the Executive to have the Executive remain in
the employment of the Company prior to any Change in Control;
provided, however, that any termination of employment of the
Executive or the removal of the Executive from his office or
position in the Company or any Subsidiary following the
commencement of any discussion with a third person that
ultimately results in a Change in Control shall be deemed to be
a termination or removal of the Executive after a Change in
Control for purposes of this Agreement.
11. Withholding of Taxes: The Company may withhold
from any amounts payable under this Agreement all federal,
state, city or other taxes as shall be required pursuant to any
law or government regulation or ruling.
12. Successors and Binding Agreement: (a) The
Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation, reorganization or
otherwise) to all or substantially all of the business and/or
assets of the Company, by agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent the Company would be required to perform if no such
succession had taken place. This Agreement shall be binding
upon and inure to the benefit of the Company and any successor
to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of
the business and/or assets of the Company whether by purchase,
merger, consolidation, reorganization or otherwise (and such
successor shall thereafter be deemed the "Company" for the
purposes of this Agreement), but shall not otherwise be
assignable, transferable or delegable by the Company.
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(b) This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees and/or legatees.
(c) This Agreement is personal in nature and neither
of the parties hereto shall, without the consent of the other,
assign, transfer or delegate this Agreement or any rights or
obligations hereunder except as expressly provided in
Sections 12(a) and 12(b) hereof. Without limiting the
generality of the foregoing, the Executive's right to receive
payments hereunder shall not be assignable, transferable or
delegable, whether by pledge, creation of a security interest
or otherwise, other than by a transfer by his will or by the
laws of descent and distribution and, in the event of any
attempted assignment or transfer contrary to this
Section 12(c), the Company shall have no liability to pay any
amount so attempted to be assigned, transferred or delegated.
(d) The Company and the Executive recognize that each
party will have no adequate remedy at law for breach by the
other of any of the agreements contained herein and, in the
event of any such breach, the Company and the Executive hereby
agree and consent that the other shall be entitled to a decree
of specific performance, mandamus or other appropriate remedy
to enforce performance of this Agreement.
13. Notice: For all purposes of this Agreement, all
communications including without limitation notices, consents,
requests or approvals, provided for herein shall be in writing
and shall be deemed to have been duly given when delivered or
five business days after having been mailed by United States
registered or certified mail, return receipt requested, postage
prepaid, addressed to the Company (to the attention of the
Secretary of the Company) at its principal executive office and
to the Executive at his principal residence, or to such other
address as any party may have furnished to the other in writing
and in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
14. Governing Law: The validity, interpretation,
construction and performance of this Agreement shall be
governed by the laws of the State of Ohio, without giving
effect to the principles of conflict of laws of such State.
15. Validity: If any provision of this Agreement or
the application of any provision hereof to any person or
circumstances is held invalid, unenforceable or otherwise
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illegal, the remainder of this Agreement and the application of
such provision to any other person or circumstances shall not
be affected, and the provision so held to be invalid,
unenforceable or otherwise illegal shall be reformed to the
extent (and only to the extent) necessary to make it
enforceable, valid and legal.
16. Miscellaneous: No provision of this Agreement
may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party hereto at
any time of any breach by the other party hereto 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. No agreements or
representations, oral or otherwise, expressed or implied with
respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement.
17. Counterparts: This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be
an original but all of which together will constitute one and
the same agreement.
18. Prior Agreement: This Agreement amends and
restates the Agreement, dated as of July 27, 1987 (the "Prior
Agreement"), between the Company and the Executive, which Prior
Agreement shall, without further action, be superseded as of
the date hereof.
IN WITNESS WHEREOF, the parties have caused this
Agreement to be duly executed and delivered as of the date
first above written.
THE LUBRIZOL CORPORATION
By
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