Exhibit 10.27
EMPLOYMENT AGREEMENT
AGREEMENT by and between Federal-Mogul Corporation, a Michigan
corporation (the "Company"), and Charles McClure (the "Executive"), dated as of
the 10th day of January, 2001 (this "Agreement").
The Board of Directors of the Company (the "Board") has determined
that it is in the best interests of the Company and its shareholders to assure
that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company. The Board believes it is imperative to diminish
the inevitable distraction of the Executive by virtue of the personal
uncertainties and risks created by a pending or threatened Change of Control and
to encourage the Executive's full attention and dedication to the Company
currently and in the event of any threatened or pending Change of Control, and
to provide the Executive with compensation and benefits arrangements upon a
Change of Control which ensure that the compensation and benefits expectations
of the Executive will be satisfied and which are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Certain Definitions. (a) The "Effective Date" shall mean the
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first date during the Change of Control Period (as defined in Section l(b)) on
which a Change of Control (as defined in Section 2) occurs. Anything in this
Agreement to the contrary notwithstanding, if a Change of Control occurs and if
the Executive's employment with the Company is terminated prior to the date on
which the Change of Control occurs, and if it is reasonably demonstrated by the
Executive that such termination of employment (i) was at the request of a third
party who has taken steps reasonably calculated to effect a Change of Control or
(ii) otherwise arose in connection with or anticipation of a Change of Control,
then for all purposes of this Agreement the "Effective Date" shall mean the date
immediately prior to the date of such termination of employment.
(b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on the third anniversary of the date hereof;
provided, however, that commencing on the date one year after the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"),
unless previously terminated, the Change of Control Period shall be
automatically extended so as to terminate three years from such Renewal Date,
unless at least 60 days prior to the Renewal Date the Company shall give notice
to the Executive that the Change of Control Period shall not be so extended.
2. Change of Control. For the purpose of this Agreement, a "Change
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of Control" shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated
under the Exchange Act) of 20% or more of either (i) the then outstanding shares
of common stock of the Company (the "Outstanding Company Common Stock") or (ii)
the combined voting power of the then outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for purposes
of this subsection (a), the following acquisitions shall not constitute a Change
of Control: (A) any acquisition directly from the Company, (B) any acquisition
by the Company, (C) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any corporation controlled by
the Company or (D) any acquisition by any corporation pursuant to a transaction
which complies with clauses (i), (ii) and (iii) of subsection (c) of this
Section 2; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by the Company's
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the election
or removal of directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(c) Consummation of a reorganization, merger or consolidation or sale
or other disposition of all or substantially all of the assets of the Company (a
"Business Combination"), in each case, unless, following such Business
Combination, (i) all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more than 50% of,
respectively, the then outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation which as a result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding Company Common
Stock and Outstanding Company Voting Securities, as the case may be, (ii) no
Person (excluding any corporation resulting from such Business Combination or
any employee benefit plan (or related trust) of the Company or such corporation
resulting from such Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding shares of common
stock of the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to the
Business Combination and (iii) at least a majority of the members of the board
of directors of the corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of the initial
agreement, or of the action of the Board, providing for such Business
Combination; or
(d) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
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3. Employment Period. The Company hereby agrees to continue the
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Executive in its employ, and the Executive hereby agrees to remain in the employ
of the Company subject to the terms and conditions of this Agreement, for the
period commencing on the Effective Date and ending on the third anniversary of
such date (the "Employment Period").
4. Terms of Employment. (a) Position and Duties. (i) During the
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Employment Period, (A) the Executive's position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be at least commensurate in all material respects with the most significant of
those held, exercised and assigned at any time during the 120-day period
immediately preceding the Effective Date and (B) the Executive's services shall
be performed at the location where the Executive was employed immediately
preceding the Effective Date or any office or location less than 35 miles from
such location.
(ii) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive agrees
to devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the Executive's
reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation of
this Agreement for the Executive to (A) serve on corporate, civic or charitable
boards or committees, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive's
responsibilities to the Company.
(b) Compensation. (i) Base Salary. During the Employment Period,
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the Executive shall receive an annual base salary ("Annual Base Salary"), which
shall be paid at an annual rate at least equal to twelve times the highest
monthly base salary paid or payable, including any base salary which has been
earned but deferred, to the Executive by the Company and its affiliated
companies in respect of the twelve-month period immediately preceding the month
in which the Effective Date occurs. During the Employment Period, the Annual
Base Salary shall be reviewed no more than 12 months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
least annually. Any increase in Annual Base Salary shall not serve to limit or
reduce any other obligation to the Executive under this Agreement. Annual Base
Salary shall not be reduced after any such increase and the term Annual Base
Salary as utilized in this Agreement shall refer to Annual Base Salary as so
increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.
(ii) Annual Bonus. In addition to Annual Base Salary, the Executive
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shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the "Annual Bonus") in cash at least equal to the Executive's
highest bonus, including any bonus or portion thereof which has been earned but
deferred, under the Company's 1997 Supplemental
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Compensation Plan, as amended and restated, or any comparable bonus under any
predecessor or successor plan, for the last three full fiscal years prior to the
Effective Date (annualized in the event that the Executive was not employed by
the Company for the whole of such fiscal year); provided, that if the
Executive's highest bonus for one or more of such fiscal years is determined
pursuant to the terms of the Company's Economic Value Added (EVA) Plan (the "EVA
Plan"), and the Executive's bonus declared pursuant to the EVA Plan for such
fiscal year is higher than the Executive's bonus paid pursuant to the EVA Plan
for such fiscal year, the Executive's highest bonus for such fiscal year shall
be the Executive's bonus declared for such fiscal year. The Executive's highest
bonus for the last three full fiscal years prior to the Effective Date, as
determined (and annualized, if applicable) pursuant to this Section 4(b)(ii), is
hereinafter referred to as the "Recent Annual Bonus"). Each such Annual Bonus
shall be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.
(iii) Incentive, Savings and Retirement Plans. During the Employment
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Period, the Executive shall be entitled to participate in all incentive, savings
and retirement plans, practices, policies and programs applicable generally to
other peer executives of the Company and its affiliated companies, but in no
event shall such plans, practices, policies and programs provide the Executive
with incentive opportunities (measured with respect to both regular and special
incentive opportunities, to the extent, if any, that such distinction is
applicable), savings opportunities and retirement benefit opportunities, in each
case, less favorable, in the aggregate, than the most favorable of those
provided by the Company and its affiliated companies for the Executive under
such plans, practices, policies and programs as in effect at any time during the
120-day period immediately preceding the Effective Date or if more favorable to
the Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and its affiliated companies. Without
limiting the generality of the foregoing, the Executive shall be entitled to the
retirement benefits set forth in Section 3(g) of the Employment Agreement dated
as of January 10, 2001 between the Company and the Executive, which benefits
shall be benefits pursuant to a retirement plan of the Company for all purposes
of this Agreement.
(iv) Welfare Benefit Plans. During the Employment Period, the
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Executive and/or the Executive's family, as the case may be, shall be eligible
for participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and its affiliated
companies (including, without limitation, medical, prescription, dental,
disability, employee life, group life, accidental death and travel accident
insurance plans and programs) to the extent applicable generally to other peer
executives of the Company and its affiliated companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
which are less favorable, in the aggregate, than the most favorable of such
plans, practices, policies and programs in effect for the Executive at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.
(v) Expenses. During the Employment Period, the Executive shall be
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entitled to receive prompt reimbursement for all reasonable expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its
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affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vi) Fringe Benefits. During the Employment Period, the Executive
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shall be entitled to fringe benefits, including, without limitation, tax and
financial planning services, payment of club dues, and, if applicable, use of an
automobile and payment of related expenses, in accordance with the most
favorable plans, practices, programs and policies of the Company and its
affiliated companies in effect for the Executive at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.
(vii) Office and Support Staff. During the Employment Period, the
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Executive shall be entitled to an office or offices of a size and with
furnishings and other appointments, and to exclusive personal secretarial and
other assistance, at least equal to the most favorable of the foregoing provided
to the Executive by the Company and its affiliated companies at any time during
the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, as provided generally at any time thereafter with
respect to other peer executives of the Company and its affiliated companies.
(viii) Vacation. During the Employment Period, the Executive shall
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be entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and its affiliated companies as
in effect for the Executive at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies.
5. Termination of Employment. (a) Death or Disability. The
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Executive's employment shall terminate automatically upon the Executive's death
during the Employment Period. If the Company determines in good faith that the
Disability of the Executive has occurred during the Employment Period (pursuant
to the definition of Disability set forth below), it may give to the Executive
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative.
(b) Cause. The Company may terminate the Executive's employment
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during the Employment Period for Cause. For purposes of this Agreement, "Cause"
shall mean:
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(i) the willful and continued failure of the Executive to perform
substantially the Executive's duties with the Company or one of its
affiliates (other than any such failure resulting from incapacity due to
physical or mental illness), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company which specifically identifies the manner
in which the Board or Chief Executive Officer believes that the Executive
has not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Company.
For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
a senior officer of the Company or based upon the advice of counsel for the
Company shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company. The cessation
of employment of the Executive shall not be deemed to be for Cause 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
entire membership of the Board at a meeting of the Board called and held for
such purpose (after reasonable notice is provided to the Executive and the
Executive is given an opportunity, together with counsel, to be heard before the
Board), finding that, in the good faith opinion of the Board, the Executive is
guilty of the conduct described in subparagraph (i) or (ii) above, and
specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
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Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:
(i) the assignment to the Executive of any duties inconsistent in any
respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities as
contemplated by Section 4(a) of this Agreement, or any other action by the
Company which results in a diminution in such position, authority, duties
or responsibilities, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
(ii) any failure by the Company to comply with any of the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial
and inadvertent failure not occurring in bad faith and which is remedied by
the Company promptly after receipt of notice thereof given by the
Executive;
(iii) the Company's requiring the Executive to be based at any office
or location other than as provided in Section 4(a)(i)(B) hereof or the
Company's requiring the Executive to travel on Company business to a
substantially greater extent than required immediately prior to the
Effective Date;
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(iv) any purported termination by the Company of the Executive's
employment otherwise than as expressly permitted by this Agreement; or
(v) any failure by the Company to comply with and satisfy Section
11(c) of this Agreement.
For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.
(d) Notice of Termination. Any termination by the Company for Cause,
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or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than thirty
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Executive or the Company, respectively, hereunder or preclude the Executive
or the Company, respectively, from asserting such fact or circumstance in
enforcing the Executive's or the Company's rights hereunder.
(e) Date of Termination. "Date of Termination" means (i) if the
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Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
6. Obligations of the Company upon Termination. (a) Good Reason:
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Other Than for Cause, Death or Disability. If, during the Employment Period,
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the Company shall terminate the Executive's employment other than for Cause or
Disability or the Executive shall terminate employment for Good Reason:
(i) the Company shall pay to the Executive in a lump sum in cash
within 30 days after the Date of Termination the aggregate of the following
amounts:
(A) the sum of (1) the Executive's Annual Base Salary through
the Date of Termination to the extent not theretofore paid, (2) the
product of (x) the higher of (I) the Recent Annual Bonus and (II) the
"Highest Annual Bonus," as such term is defined in the last sentence
of Section 6(a) hereof, and (y) a fraction, the numerator of which is
the number of days in the current fiscal year through the Date of
Termination, and the denominator of which is 365 and (3) any
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compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) and any accrued and banked
vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1), (2), and (3) shall be
hereinafter referred to as the "Accrued Obligations"); and
(B) the amount equal to the product of (1) three and (2) the sum
of (x) the Executive's Annual Base Salary and (y) the "Highest Annual
Bonus," as such term is defined in the last sentence of Section 6(a)
hereof; and
(C) an amount equal to the excess of (a) the actuarial
equivalent of the benefit under the Company's Personal Retirement
Account (the "PRA") (utilizing actuarial assumptions no less favorable
to the Executive than those in effect under the Company's PRA
immediately prior to the Effective Date) and Supplemental Executive
Retirement Program (the "SERP") which the Executive would receive if
the Executive's employment continued for three years after the Date of
Termination assuming for this purpose that all accrued benefits are
fully vested, and, assuming that the Executive's compensation in each
of the three years is that required by Section 4(b)(i) and Section
4(b)(ii), over (b) the actuarial equivalent of the Executive's actual
benefit (paid or payable), if any, under the PRA and the SERP as of
the Date of Termination;
(ii) for three years after the Executive's Date of Termination, or
such longer period as may be provided by the terms of the appropriate plan,
program, practice or policy, the Company shall continue benefits to the
Executive and/or the Executive's family at least equal to those which would
have been provided to them in accordance with the plans, programs,
practices and policies described in Section 4(b)(iv) of this Agreement if
the Executive's employment had not been terminated or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect
to other peer executives of the Company and its affiliated companies and
their families, provided, however, that if the Executive becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer provided plan, the medical and other
welfare benefits described herein shall be secondary to those provided
under such other plan during such applicable period of eligibility. For
purposes of determining eligibility (but not the time of commencement of
benefits) of the Executive for retiree benefits pursuant to such plans,
practices, programs and policies, the Executive shall be considered to have
remained employed until three years after the Date of Termination and to
have retired on the last day of such period;
(iii) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which shall
be selected by the Executive in his sole discretion; and
(iv) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any other amounts or benefits
required to be paid or provided or which the Executive is eligible to
receive under any plan, program, policy or practice
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or contract or agreement of the Company and its affiliated companies (such
other amounts and benefits shall be hereinafter referred to as the "Other
Benefits").
For purposes of this Agreement, "Highest Annual Bonus" shall mean the Annual
Bonus paid or payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which the Executive was employed for less than
twelve full months), for the most recently completed fiscal year during the
Employment Period, if any; provided, that if the Annual Bonus for such fiscal
year is determined pursuant to the terms of the EVA Plan, and the Executive's
bonus declared pursuant to the EVA Plan for such fiscal year is higher than the
Executive's bonus paid pursuant to the EVA Plan for such fiscal year, the Annual
Bonus for such fiscal year shall be the Executive's bonus declared for such
fiscal year.
(b) Death. If the Executive's employment is terminated by reason of
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the Executive's death during the Employment Period, this Agreement shall
terminate without further obligations to the Executive's legal representatives
under this Agreement, other than for payment of Accrued Obligations and the
timely payment or provision of Other Benefits. Accrued Obligations shall be
paid to the Executive's estate or beneficiary, as applicable, in a lump sum in
cash within 30 days of the Date of Termination. With respect to the provision
of Other Benefits, the term Other Benefits as utilized in this Section 6(b)
shall include, without limitation, and the Executive's estate and/or
beneficiaries shall be entitled to receive, benefits at least equal to the most
favorable benefits provided by the Company and affiliated companies to the
estates and beneficiaries of peer executives of the Company and such affiliated
companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive's estate and/or the
Executive's beneficiaries, as in effect on the date of the Executive's death
with respect to other peer executives of the Company and its affiliated
companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by
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reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further obligations to the Executive, other
than for payment of Accrued Obligations and the timely payment or provision of
Other Benefits. Accrued Obligations shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination. With respect to the
provision of Other Benefits, the term Other Benefits as utilized in this Section
6(c) shall include, and the Executive shall be entitled after the Disability
Effective Date to receive, disability and other benefits at least equal to the
most favorable of those generally provided by the Company and its affiliated
companies to disabled executives and/or their families in accordance with such
plans, programs, practices and policies relating to disability, if any, as in
effect generally with respect to other peer executives and their families at any
time during the 120-day period immediately preceding the Effective Date or, if
more favorable to the Executive and/or the Executive's family, as in effect at
any time thereafter generally with respect to other peer executives of the
Company and its affiliated companies and their families.
(d) Cause; Other than for Good Reason. If the Executive's employment
---------------------------------
shall be terminated for Cause during the Employment Period, this Agreement shall
terminate without further obligations to the Executive other than the obligation
to pay to the Executive (i) his
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Annual Base Salary through the Date of Termination, (ii) the amount of any
compensation previously deferred by the Executive, and (iii) Other Benefits, in
each case to the extent theretofore unpaid. If the Executive voluntarily
terminates employment during the Employment Period, excluding a termination for
Good Reason, this Agreement shall terminate without further obligations to the
Executive, other than for Accrued Obligations and the timely payment or
provision of Other Benefits. In such case, all Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.
7. Non-exclusivity of Rights. Nothing in this Agreement shall
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prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor, subject to Section
12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any contract or agreement with the Company or any of its
affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or
agreement except as explicitly modified by this Agreement.
8. Full Settlement. The Company's obligation to make the payments
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provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Executive under any of the provisions of this Agreement and such amounts
shall not be reduced whether or not the Executive obtains other employment. The
Company agrees to pay as incurred, to the full extent permitted by law, all
legal fees and expenses which the Executive may reasonably incur as a result of
any contest (regardless of the outcome thereof) by the Company, the Executive or
others of the validity or enforceability of, or liability under, any provision
of this Agreement or any guarantee of performance thereof (including as a result
of any contest by the Executive about the amount of any payment pursuant to this
Agreement), plus in each case interest on any delayed payment at the applicable
Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code
of 1986, as amended (the "Code").
9. Certain Additional Payments by the Company.
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(a) Anything in this Agreement to the contrary notwithstanding and
except as set forth below, in the event it shall be determined that any payment
or distribution by the Company 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, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties are incurred by
the Executive with respect to such excise tax (such excise tax, together with
any such interest and penalties, are hereinafter collectively referred to as the
"Excise Tax"), then the Executive shall be entitled to receive an additional
payment (a "Gross-Up Payment") 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, without limitation, any income taxes (and any
interest and penalties
10
imposed with respect thereto) and 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 Payments. Notwithstanding the foregoing provisions of this
Section 9(a), if it shall be determined that the Executive is entitled to a
Gross-Up Payment, but that the Executive, after taking into account the Payments
and the Gross-Up Payment, would not receive a net after-tax benefit of at least
$550,000 (taking into account both income taxes and any Excise Tax) as compared
to the net after-tax proceeds to the Executive resulting from an elimination of
the Gross-Up Payment and a reduction of the Payments, in the aggregate, to an
amount (the "Reduced Amount") such that the receipt of Payments would not give
rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive
and the Payments, in the aggregate, shall be reduced to the Reduced Amount.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when a Gross-Up
Payment is required and the amount of such Gross-Up Payment and the assumptions
to be utilized in arriving at such determination, shall be made by Ernst & Young
LLP or such other certified public accounting firm as may be designated by the
Executive (the "Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment, or such
earlier time as is requested by the Company. In the event that the Accounting
Firm is serving as accountant or auditor for the individual, entity or group
effecting the Change of Control, the Executive shall appoint another nationally
recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder).
All fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall
be paid by the Company to the Executive within five days of the receipt of the
Accounting Firm's determination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result of the uncertainty
in the application of Section 4999 of the Code at the time of the initial
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
("Underpayment"), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
Section 9(c) and the Executive thereafter is required to make a payment of any
Excise Tax, the Accounting Firm shall determine the amount of the Underpayment
that has occurred and any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Executive.
(c) 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 the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes 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:
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(i) give the Company any information reasonably requested by the
Company relating to such claim,
(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 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 additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for 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 limitation on the foregoing provisions
of this Section 9(c), the Company 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 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
such claim 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 or with respect to any imputed income with respect to such advance;
and further provided that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest 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.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 9(c), the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 9(c)) promptly pay to the
Company the amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by the Executive
of an amount advanced by the Company pursuant to Section 9(c), 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 of refund prior to the expiration of 30 days after
such determination, then such advance shall be forgiven and shall not
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be required to be repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be paid.
10. Confidential Information. The Executive shall hold in a
------------------------
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 10 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement.
11. Successors. (a) This Agreement is personal to the Executive and
----------
without the prior written consent of the Company shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
12. Miscellaneous. (a) This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Michigan, without
reference to principles of conflict of laws. The captions of this Agreement are
not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified otherwise than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
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If to the Executive:
--------------------
Charles McClure
55 Cabot Place
Bloomfield Hills, Michigan 48105
If to the Company:
------------------
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: Chairman of the Compensation
Committee of the Board of Directors
Federal-Mogul Corporation
26555 Northwestern Highway
Southfield, Michigan 48034
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(d) The Company may withhold from any amounts payable under this
Agreement such Federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(f) The Executive and the Company acknowledge that, except as may
otherwise be provided under any other written agreement between the Executive
and the Company, the employment of the Executive by the Company is "at will"
and, subject to Section l(a) hereof, prior to the Effective Date, the
Executive's employment and/or this Agreement may be terminated by either the
Executive or the Company at any time prior to the Effective Date, in which case
the Executive shall have no further rights under this Agreement. From and after
the Effective Date this Agreement shall supersede any other agreement between
the parties with respect to the subject matter hereof.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization from its Board of Directors, the Company
has caused these presents to be executed in its name on its behalf, all as of
the day and year first above written.
FEDERAL-MOGUL CORPORATION
By: /s/ Richard P. Randazzo
----------------------------------------
CHARLES MCCLURE
By: /s/ Charles McClure
------------------------------------------
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