Exhibit 10
EMPLOYMENT AGREEMENT
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AGREEMENT by and between Solutia Inc., a Delaware
corporation (the "Company"), and Xxxxxx X. Xxxxx (the "Executive"), dated as
of the 26th day of February, 2003.
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
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the first date during the Change of Control Period (as defined in Section
1(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 by the
Company 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.
(c) An "Alternative Change of Control" shall mean a Change of
Control as defined in Section 2, except that the references in such definition
to "20%" shall be deemed to be references to "50%."
2. Change of Control. For the purpose of this Agreement, a
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"Change 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: (i) any acquisition directly from the Company,
(ii) any acquisition by the Company, (iii) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by
the Company or any corporation controlled by the Company or (iv) 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 by the Company of a reorganization, merger
or consolidation or sale or other disposition of all
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or substantially all of the assets of the Company or the acquisition
of assets or stock of another corporation (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 60% 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.
3. Employment Period. The Company hereby agrees to continue
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the 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 (the "Employment Period") commencing on the Effective Date and
ending on the earlier of the third anniversary of such date and the first day
of the month following the month in which the executive attains age 65 (the
Executive's "Normal Retirement Date").
4. Terms of Employment. (a) Position and Duties. (i) During
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the Employment Period, (A) the Executive's position
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(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 to
the Executive 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, unless
the Executive is on international assignment on the Effective Date and is
relocated as a result of the Executive's being repatriated pursuant to the
terms of his international assignment agreement as in effect before the
Effective Date.
(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
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Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid at a monthly 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
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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) Bonuses. In addition to Annual Base Salary, the
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Executive shall be awarded the following bonuses. For each fiscal year ending
during the Employment Period, the Executive shall be awarded an annual bonus
(the "Annual Bonus") in cash at least equal to the higher of (i) the average
of the Executive's bonuses under the Company's Annual Incentive Program, or
any comparable bonus under any predecessor or successor plan(s), for the last
three full fiscal years prior to the Effective Date, or such shorter period as
the Executive has been employed by the Company (and annualizing the amount of
any such bonus for a fiscal year during which the Executive was employed by
the Company for only a portion of such fiscal year) and (ii) the Executive's
target bonus as most recently established before the Effective Date (such
higher amount, 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. In addition,
during the Employment Period, the Executive shall be entitled to participate
in all long-term and other incentive 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) 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.
(iii) Savings and Retirement Plans. During the
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Employment Period, the Executive shall be entitled to participate in all
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 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
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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 Company and its affiliated companies shall continue to honor
any individual agreements between any of them and the Executive regarding the
provision of supplemental retirement benefits such as (but not limited to)
post-retirement income and/or welfare benefits (each of which is hereafter
referred to as an "Individual SERP").
(iv) Welfare Benefit Plans. During the Employment
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Period, the 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, salary continuance, 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
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Executive shall be 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 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
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Executive 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
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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
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Period, the 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
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Executive shall 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 Executive's
long-term disability for purposes of any reasonable occupation as determined
under the Company's disability plan that is applicable to the Executive.
(b) Cause. The Company may terminate the Executive's
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employment during the Employment Period for Cause. For purposes of this
Agreement, "Cause" shall mean:
(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
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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
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terminated by the 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;
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(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, unless the Executive is on international
assignment on the Effective Date and the relocation is as a result of
the Executive's being repatriated pursuant to the terms of his
international assignment agreement as in effect before the Effective
Date;
(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. Anything in this Agreement
to the contrary notwithstanding, a termination by the Executive for any reason
during the 30-day period immediately following the first anniversary of an
Alternative Change of Control shall be deemed to be a termination for Good
Reason for all purposes of this Agreement.
(d) Notice of Termination. Any termination by the Company
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for Cause, 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
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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
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the 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
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Reason; Other Than for Cause, Death or Disability. If, during the Employment
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Period, 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 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 (such higher amount being
referred to as the "Highest Annual Bonus") 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 accrued
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) the
lesser of three and the number of years and fractions
thereof remaining between the Date of Termination and the
Executive's Normal Retirement Date (such lesser
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number, the "Multiplier") and (2) the sum of (x) the
Executive's Annual Base Salary and (y) the Highest Annual
Bonus; and
C. an amount equal to the difference between
(a) the aggregate benefit under the Monsanto Pension Plan
and any successor thereto, and any other qualified defined
benefit retirement plans of the Company and its affiliated
companies in which the Executive participates (collectively,
the "Retirement Plan") and the Monsanto Company ERISA Parity
Pension Plan, the Monsanto Company Supplemental Retirement
Plan, and any successors thereto, any other "top hat,"
excess or supplemental defined benefit retirement plans of
the Company and its affiliated companies in which the
Executive participates, and any Individual SERP
(collectively, the "SERP") which the Executive would have
accrued (whether or not vested) if the Executive's
employment had continued for a number of years after the
Date of Termination equal to the Multiplier, and (b) the
actual vested benefit, if any, of the Executive under the
Retirement Plan and the SERP, determined as of the Date of
Termination (with the foregoing amounts to be computed on an
actuarial present value basis, based on the assumption that
the Executive's compensation during such period of deemed
continued employment after the Date of Termination was that
required by Section 4(b)(i) and Section 4(b)(ii), and using
actuarial assumptions no less favorable to the Executive
than the most favorable of those in effect for purposes of
computing benefit entitlements under the Retirement Plan and
the SERP at any time from the day before the Effective Date)
through the Date of Termination;
(ii) for a number of years after the Executive's Date of
Termination equal to the Multiplier, 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
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shall be secondary to those provided under such other plan during
such applicable period of eligibility; and for purposes of
determining eligibility of the Executive for retiree benefits
pursuant to such plans, practices, programs and policies, the
Executive shall be considered to have remained employed until the end
of a number of years after the Date of Termination equal to the
Multiplier 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 the
Executive's 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 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").
(b) Death. If the Executive's employment is terminated by
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reason of 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
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by reason of the Executive's Disability during the Employment Period, this
Agreement shall terminate without further
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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
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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 (x) the Annual Base Salary through
the Date of Termination, (y) the amount of any compensation previously
deferred by the Executive, and (z) 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
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shall 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 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. Notwithstanding
the foregoing, from and after the Effective Time, the compensation and
benefits provided for pursuant to Sections
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6, 8 and 9 hereof shall be in lieu of any severance or separation pay or
benefits to which the Executive might otherwise be entitled under any plan,
program, policy or arrangement of the Company and its affiliates.
8. Full Settlement; Legal Fees. The Company's obligation to
---------------------------
make the payments 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 except as specifically provided in Section 6(a)(ii), 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
(whether such contest is between the Company and the Executive or between
either of them and any third party, and 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.
------------------------------------------
(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 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
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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 Payments do not exceed 110% of the greatest amount (the
"Reduced Amount") that could be paid to the Executive 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
15
paid. The Executive shall not pay such claim prior to the expiration of the
30-day period following the date on which the Executive 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:
(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 xxx 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 xxx 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
16
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 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. As used herein, "Confidential
------------------------
Information" means all technical and business information of the Company and
its Subsidiaries, whether patentable or not, which is of a confidential, trade
secret and/or proprietary character and which is either developed by the
Executive (alone or with others) or to which the Executive has had access
during the Executive's employment. "Confidential Information" shall also
include confidential evaluations of, and the confidential use or non-use by
the Company or any Subsidiary of, technical or business information in the
public domain.
The Executive shall use the Executive's best efforts and
diligence both during and after employment by the Company to protect the
confidential, trade secret and/or proprietary character of all Confidential
Information. The Executive shall not, directly or indirectly, use (for the
Executive or another) or disclose any Confidential Information, for so long as
it shall remain proprietary or protectible as confidential or trade secret
information, except as may be necessary for the performance of the Executive's
duties with the Company.
The Executive shall deliver promptly to the Company, at the
termination of the Executive's employment, or at any other time at the
Company's request, without retaining any copies, all
17
documents and other material in the Executive's possession relating, directly
or indirectly, to any Confidential Information.
Each of the Executive's obligations in this Section shall
also apply to the confidential, trade secret and proprietary information
learned or acquired by the Executive during the Executive's employment from
others with whom the Company or any Subsidiary has a business relationship.
The Executive understands that the Executive is not to
disclose to the Company or any Subsidiary, or use for its benefit, any of the
confidential, trade secret or proprietary information of others, including any
of the Executive's former employers. 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 Delaware, 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
18
other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:
If to the Executive:
-------------------
Xxxxxx X. Xxxxx
000 Xxxxxxxxxx Xxxxx
Xx. Xxxxx, XX 00000
If to the Company:
-----------------
000 Xxxxxxxxx Xxxxxx Xxxxx
P. O. Xxx 00000
Xx. Xxxxx, XX 00000-0000
Attention: Chief Executive Officer
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 1(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
19
this Agreement. From and after the Effective Date, this Agreement shall
supersede any other prior employment agreement between the Company and the
Executive; provided, that this Agreement shall have no effect on any
--------
Individual SERP or on the Executive's rights under any plan, program, policy
or practice provided by the Company or any of its affiliated companies except
as specifically provided in Section 7 above.
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.
/s/ Xxxxxx X. Xxxxx
---------------------------------------
Xxxxxx X. Xxxxx
SOLUTIA INC.
By /s/ Xxxx X. Xxxxxx III
-------------------------------------
Xxxx X. Xxxxxx III
Chairman, President and
Chief Executive Officer
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