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SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT ("Agreement") is made as of this
day of December, 1996, by and between Xxxxxx X. Xxxxxxx ("Xx.
Xxxxxxx"), an individual, and Federal-Mogul Corporation ("Federal-Mogul"),
a corporation.
WHEREAS, Xx. Xxxxxxx was serving as the Chairman, Chief
Executive Officer and President of Federal-Mogul, and is currently
a member of the Board of Directors of Federal-Mogul; and
WHEREAS, Xx. Xxxxxxx and Federal-Mogul have entered into
this Agreement for the purpose of providing an orderly transition
of Xx. Xxxxxxx'x duties and responsibilities, to provide for a
severance arrangement for Xx. Xxxxxxx, and to resolve any and all
outstanding issues between them.
NOW THEREFORE, in consideration of the covenants
undertaken in this Agreement, and for other good and valuable
consideration, Xx. Xxxxxxx and Federal-Mogul hereby agree as
follows:
1. RESIGNATION AS AN OFFICER, DIRECTOR, AND EMPLOYEE:
Xx. Xxxxxxx hereby acknowledges that he resigned from his positions
as Chairman, Chief Executive Officer, and President of Federal-Mogul.
Such resignation was effective at the close of business on
September 17, 1996. Xx. Xxxxxxx also hereby resigns from his
position as a Director of Federal-Mogul, such resignation to
be effective on the earlier of the date he signs this Agreement or
October 21, 1996. Xx. Xxxxxxx also hereby resigns from any and all
other positions he holds as an employee, director, or officer of
Federal-Mogul or any of its subsidiaries, related, or affiliated
companies, such resignation to be effective at the close of
business on October 31, 1996 (the "Separation Date"). Federal-Mogul
will pay to Xx. Xxxxxxx his base salary at the annual rate of
Five Hundred Eighty Thousand Dollars and No Cents ($580,000.00),
less applicable income tax withholdings and other normal payroll
deductions, through the Separation Date, in accordance with
Federal-Mogul's regular payroll practices. Federal-Mogul will also
continue to provide employment benefits generally available to
senior executives, including medical and dental insurance, life
insurance, pension and other benefits, through the Separation Date.
2. SEVERANCE PAY AND BENEFITS: Federal-Mogul hereby
agrees that, upon approval of the entire Board of Directors of
Federal-Mogul, the following compensation and benefits will be
provided to Xx. Xxxxxxx in accordance with the terms of this
Agreement:
X. Xxxxxxxxx Payments: Federal-Mogul will make a
payment to Xx. Xxxxxxx in the sum of One Million Six Hundred
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Thousand Dollars and No Cents ($1,600,000.00), less applicable
income tax withholdings, representing severance pay, including any
amounts Xx. Xxxxxxx would normally have been granted under the
Severance Pay Plan for Salaried Employees, such payment to be made
on January 2, 1997 following the effective date of this Agreement
(the last day of the seven-day revocation period as set forth in
Paragraph 5 of this Agreement). Federal-Mogul will also make a
separate payment to Xx. Xxxxxxx of Two Hundred Thousand Dollars and
No Cents ($200,000.00), less applicable income tax withholdings in
lieu of any and all amounts that may be owed to Xx. Xxxxxxx for
accrued, unused and deferred vacation, as well as in lieu of any
and all other benefits which Xx. Xxxxxxx might otherwise be
eligible to receive (except as otherwise provided in this
Paragraph 2), including without limitation tax preparation
assistance and financial estate planning assistance for 1996, any
remaining credit for the executive supplemental medical plan,
payments for home security, and costs of his office and secretarial
support for October 1996. Such payment will be made on January 2,
1997 following the last day of the seven-day revocation period as
set forth in Paragraph 5 of this Agreement.
B. Supplemental Compensation Award: If Federal-Mogul
pays bonuses under the terms and conditions of the
Supplemental Compensation Plan for 1996 in effect as of the
Separation Date (the"SCP"), Xx. Xxxxxxx will be eligible for a
pro-rated award (calculated by taking the award he would have received
had he remained employed through December 31, 1996, based on the
terms and conditions of the SCP in effect on the Separation Date,
and multiplying it by a fraction, the numerator of which is 10 and
the denominator of which is 12). Except as otherwise provided in
this subparagraph, Xx. Xxxxxxx'x participation in the SCP shall
terminate effective on the Separation Date.
C. Executive Loan Program: Xx. Xxxxxxx hereby
agrees to repay to Federal-Mogul the sum of One Hundred Fifty
Nine Thousand Three Hundred Ninety One Dollars and No Cents
($159,391.00) in full and final settlement of his outstanding loan
under Federal-Mogul's Executive Loan Program, in accordance with
the terms of such program. Such payment shall be deducted from the
severance payment set forth in Paragraph 2(A).
D. Medical And Dental Coverage: Effective on the
Separation Date, Xx. Xxxxxxx will be eligible to participate in
Federal-Mogul's CHOICE retiree insurance coverage for medical,
dental, life, and vision, in accordance with the terms of such
plan.
E. Split Dollar Life Insurance Plan: Xx. Xxxxxxx
will continue to participate in Federal-Mogul's Split Dollar Life
Insurance Plan (the "SDLIP"), in accordance with the terms of such
plan. Federal-Mogul will pay the applicable premiums, until 2005,
for the life insurance policy presently in effect for Xx. Xxxxxxx.
Xx. Xxxxxxx will continue to pay the federal taxes and/or other
costs for which he was responsible prior to the Separation Date.
The benefit available under the plan may be reduced in accordance
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with the terms of the SDLIP.
F. Retired Officers' Lease Car Program: Effective
on the Separation Date, Xx. Xxxxxxx will be eligible to
participate in Federal-Mogul's Retired Officers' Lease Car
Program, in accordance with the terms of such program.
G. Ocean Reef Condominium: Xx. Xxxxxxx will be
eligible to use Federal-Mogul's Ocean Reef condominium from
December 21, 1996 through January 4, 1997.
H. Country Club Memberships: Federal-Mogul will
continue to pay the monthly dues of Xx. Xxxxxxx'x memberships,
through December 31, 1996, in the Oakland Hills Country Club and
Bloomfield Hills Country Club (individually and collectively the
"Country Clubs"). Effective January 1, 1997, Federal-Mogul will
award to Xx. Xxxxxxx the stock certificates applicable to the
Country Clubs. On and after January 1, 1997, Federal-Mogul will no
longer be responsible for any membership or other costs in
connection with Xx. Xxxxxxx'x memberships in the Country Clubs.
I. Retirement Plans: At Xx. Xxxxxxx'x election and
in accordance with the terms of the plans, Federal-Mogul shall
distribute to Xx. Xxxxxxx amounts due to Xx. Xxxxxxx through the
Separation Date from the Personal Retirement Account ("PRA"), the
Supplemental Executive Retirement Program (the "SERP"), and the
Thrift Plan (including the 401(k) Plan, the Salaried Employees'
Investment Program (the "XXXX"), and the Employee Stock Ownership
Plan (the "ESOP")). Except for any vested benefits in such plans,
Xx. Xxxxxxx'x participation in all such plans shall terminate
effective on the Separation Date.
J. 1984 Stock Option Plan: Federal-Mogul
acknowledges that Xx. Xxxxxxx is entitled to receive the benefit
of all awards under Federal-Mogul's 1984 Stock Option Plan
(the "1984 Plan") to which he was entitled to immediate exercise
as of the Separation Date. Xx. Xxxxxxx acknowledges that he has no
claim to any stock options under the 1984 Plan, except as follows:
i. An option for 8,000 shares of common
stock, granted on February 3, 1987, with
an exercise price of $21.7500 per share.
ii. An option for 26,500 shares of common
stock, granted on February 9, 1988, with
an exercise price of $19.0000 per share.
iii. An option for 33,000 shares of common
stock, granted on February 8, 1989, with
an exercise price of $26.1875 per share.
iv. An option for 40,000 shares of common
stock, granted on February 7, 1990, with
an exercise price of $19.6250 per share.
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The parties acknowledge and agree that Xx. Xxxxxxx may exercise the
stock options described in subparagraphs i, ii, iii, and iv of this
Paragraph 2(J) at any time before the earlier of (i) the expiration
of an option under the terms of the 1984 Plan or award agreement
applicable to such option, or (ii) five (5) years from the date of
this Agreement.
K. 1989 Performance Incentive Stock Plan: Federal-Mogul
acknowledges that Xx. Xxxxxxx is entitled to receive the
benefit of all awards under Federal-Mogul's 1989 Performance
Incentive Stock Plan (the "1989 Plan") to which he was entitled to
immediate exercise or receipt as of the Separation Date. Xx.
Xxxxxxx acknowledges that he has no claim to any restricted shares
or stock options under the 1989 Plan, except as follows:
i. An award of 24,000 restricted shares,
granted on May 24, 1989.
ii. An option for 150,000 shares of common
stock, granted on February 6, 1991, with
an exercise price of $22.00 per share;
Xx. Xxxxxxx will not receive any
proceeds with respect to the option for
the remaining 150,000 shares payable
under terms of the February 6, 1991
grant in the form of restricted shares,
the restrictions of which will not lapse
after the termination of Xx. Xxxxxxx'x
employment with Federal-Mogul.
iii. An award of 20,000 restricted shares,
granted on February 8, 1995 as a long-
term incentive grant.
iv. An award of 5,479 restricted shares,
granted on February 8, 1995.
The parties acknowledge and agree that Xx. Xxxxxxx may
exercise the stock option described in subparagraph ii of
this Paragraph 2(K) at any time before the earlier of (i)
the expiration of such option under Section 6.4(a) of the
1989 Plan or the agreement applicable to such award, or
(ii) five (5) years from the date of this Agreement. The
parties further acknowledge and agree that Xx. Xxxxxxx
will receive the restricted shares described
in subparagraphs i, iii, and iv of this Paragraph 2(K)
(but not any restricted shares from the exercise of the
options described in subparagraph ii of this Paragraph
2(K)), and the restrictions on such shares will lapse on
the Separation Date. The parties further acknowledge
and agree that Xx. Xxxxxxx is not eligible for additional
time-based or performance-based vesting of any unvested
restricted shares or stock options. The parties further
acknowledge and agree that, except as otherwise provided
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above, no other restrictions on restricted shares under
the 1989 Plan will lapse.
3. NO OTHER PAYMENTS OR BENEFITS: Except for the
payments made and benefits provided in this Agreement, Xx. Xxxxxxx
acknowledges and agrees that he is entitled to no other benefits,
compensation, or payments from Federal-Mogul, including without
limitation salary, bonus, incentive compensation, severance pay,
pension, vacation pay, life insurance or any other fringe benefits
of Federal-Mogul.
4. RELEASE OF FEDERAL-MOGUL: In consideration for the
compensation and benefits provided in this Agreement, and for all
other good and valuable consideration, Xx. Xxxxxxx hereby
knowingly, voluntarily, and willingly releases, discharges, and
covenants not to xxx Federal-Mogul and its direct and indirect
parents, subsidiaries, affiliates, and related companies, past and
present, as well as each of their directors, officers, employees,
the Board of Directors and agents thereof, representatives,
attorneys, trustees, insurers, assigns, successors, and agents,
past and present (collectively hereinafter referred to as the
"RELEASEES"), from and with respect to any and all actions,
claims, or lawsuits, whether known or unknown, suspected or
unsuspected, in law or in equity, which against the RELEASEES, Xx.
Xxxxxxx and his heirs, executors, administrators, successors,
assigns, dependents, descendants, and attorneys ever had, now have,
or hereafter can, shall, or may have arising out of or in any way
relating to Xx. Xxxxxxx'x employment by Federal-Mogul, his
separation from that employment, his separation from Federal-Mogul,
or his participation on the Board of Directors of Federal-Mogul,
including without limitation the following:
i. any and all claims arising out of or in any way
relating to breach of oral or written employment
contracts (whether such contracts were express or
implied), or any and all tort claims;
ii. any and all claims arising out of or in any way
relating to age, race, sex, religion, national
origin, disability, or other form of employment
discrimination, including without limitation any
claims under Title VII of the Civil Rights Act of
1964, as amended, the Age Discrimination in
Employment Act of 1967, as amended, the Americans
with Disabilities Act of 1990, the Employee
Retirement Income Security Act of 1974, as
amended, the Michigan Civil Rights Act, or any
other federal, state or local law, statute,
ordinance, or administrative regulation; or
iii. any and all claims for salary, bonus, severance
pay, pension, vacation pay, life insurance, health
or medical insurance, or any other fringe
benefits, workers' compensation or disability,
other than the payments and benefits provided for
in this Agreement; provided, however, that Mr.
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Xxxxxxx is not releasing any claims he may have
under any pension plan of Federal-Mogul in which
he participated during his employment with
Federal-Mogul.
It is the express intention of Xx. Xxxxxxx and Federal-Mogul that
this Agreement constitutes a full and comprehensive release of all
claims and potential claims, to the fullest extent permitted by
law. Xx. Xxxxxxx acknowledges that he may hereafter discover
claims or facts in addition to or different from those which he now
knows or believes to exist with respect to the subject matter of
this Agreement and which, if known or suspected at the time of
executing this Agreement, may have materially affected this
Agreement or his decision to enter into it. Nevertheless,
Xx. Xxxxxxx hereby waives any right, claim or cause of action
that might arise as a result of such different or additional claims
or facts.
5. ADEA WAIVER OF CLAIMS: Xx. Xxxxxxx expressly
acknowledges and agrees that his release and waiver of rights
and claims is knowing and voluntary, that by this Agreement he will
receive compensation beyond that which he was already entitled to
receive before entering into this Agreement, that he has been given
a period of twenty-one (21) days within which to consider this
Agreement, and that he elects to execute this Agreement on this
date. Xx. Xxxxxxx shall have seven (7) days following the
execution of this Agreement within which he may revoke this
Agreement, and this Agreement shall not become effective or
enforceable until such seven-day revocation period has expired.
To be effective, such revocation must be in writing and delivered
to counsel for Federal-Mogul on or before the last day of the
seven-day revocation period. Xx. Xxxxxxx certifies that he
understands and agrees to all of the terms of this Agreement, and
has had an opportunity to discuss these terms with an attorney of
his own choosing. Xx. Xxxxxxx further acknowledges that he has
been advised previously by Federal-Mogul, and by this writing is
again advised by Federal-Mogul, to consult with an attorney prior
to executing this Agreement and regarding his release of claims
herein, including without limitation the release of claims under
the Age Discrimination in Employment Act of 1967, as amended.
6. ORDERLY TRANSFER OF DUTIES: Xx. Xxxxxxx agrees to
assist Federal-Mogul in an orderly transfer of his duties, and to
that end shall make himself available by telephone from time to
time until December 31, 1996, to provide, upon request by the Board
of Directors of Federal-Mogul, information and reasonable
assistance to Federal-Mogul with respect to transition issues.
Federal-Mogul agrees that it will give Xx. Xxxxxxx reasonable
prior notice of its need for his assistance or provision of
information, and will make a reasonable effort to set all telephone
calls at times convenient to Xx. Xxxxxxx'x schedule.
7. CONFIDENTIALITY: Xx. Xxxxxxx agrees that he shall
keep this Agreement, and the terms and conditions of this
Agreement, confidential. Xx. Xxxxxxx shall not in any manner or
for any reason disclose this Agreement, or the terms hereof,
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without the express prior written consent of Federal-Mogul, except
(i) to members of his family, his attorneys, and his accountants on
a "need to know" basis, (ii) to the Internal Revenue Service, and
(iii) as otherwise required by law.
8. ADDITIONAL PROVISIONS: The following additional
terms and conditions shall apply to this Agreement:
A. No Claim Filed And No Assignment of Claims:
Xx. Xxxxxxx represents and warrants that neither he nor any of his
representatives have filed, or will file, any complaints, charges
or lawsuits with any court or government agency arising out of or
relating to any claims being released by Xx. Xxxxxxx in this
Agreement. Xx. Xxxxxxx further represents and warrants that
neither he nor any of his representatives have assigned or
transferred, or will assign or transfer, to any other person other
than Federal-Mogul any of the released matters set forth in this
Agreement, and that he shall defend, indemnify and hold harmless
Federal-Mogul from and against any claim (including the payment of
attorneys' fees and costs actually incurred whether or
not litigation is commenced) based on or in connection with or
arising out of any such assignment or transfer.
B. Severability of Provisions: If any of the
provisions, terms, or clauses of this Agreement are held invalid,
illegal, unenforceable or ineffective, such provisions, terms and
clauses shall be deemed severable such that all other provisions,
terms, and clauses of this Agreement shall remain valid and binding
upon the parties.
C. Choice of Law: This Agreement and the rights
and obligations of the parties hereunder shall be governed by and
construed and enforced in accordance with the laws of the State of
Michigan, without regard to principles of conflict of laws.
D. Arbitration: Any and all controversies, claims
or disputes arising out of or in any way relating to this Agreement
shall be resolved by final and binding arbitration in Detroit,
Michigan before a single arbitrator licensed to practice law and
in accordance with the Commercial Arbitration Rules of the American
Arbitration Association (the "AAA"). The arbitration shall be
commenced by filing a demand for arbitration with the AAA within
sixty (60) days after the occurrence of the facts giving rise to
any such controversy, claim or dispute. The arbitrator shall
decide all issues relating to arbitrability. The costs of
such arbitration, including the arbitrator's fees, shall be split
between the parties to the arbitration. Each party shall be
responsible to pay its own attorneys' fees.
E. Entire Agreement: This Agreement is an
integrated document and constitutes and contains the complete
understanding and agreement of the parties with respect to the
subject matter addressed herein, and supersedes and replaces all
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prior negotiations and agreements, whether written or oral,
including without limitation the Employment Agreement dated as of
August 1, 1995, concerning the subject matter hereof. No provision
of this Agreement may be amended or waived except by written
agreement signed by the parties hereto.
F. No Waiver of Breach: No waiver of any breach
of any term or provision of this Agreement shall be construed to
be, or shall be, a waiver of any other breach of this Agreement.
No waiver shall be binding unless in writing and signed by the
party waiving the breach.
G. Representation: Xx. Xxxxxxx and Federal-Mogul
each represent and agree that they have carefully read and
understand this Agreement, and agree that neither they nor any of
Federal-Mogul's officers, agents, directors, or employees have made
any representations other than those contained herein. Further,
the parties each expressly agree that they have entered into this
Agreement freely and voluntarily and without pressure or coercion
from anyone.
H. Captions: The captions of this Agreement are
for descriptive purposes only and are not part of the provisions
hereof and shall have no force or effect.
I. Counterparts: This Agreement may be executed
in counterparts, and each counterpart, when executed, shall have
the effect of a signed original. Photographic copies of such
signed counterparts may be used in lieu of the original for any
purpose.
IN WITNESS WHEREOF, Xx. Xxxxxxx and Federal-Mogul,
intending to be legally bound, have executed this Agreement as
of the date first written above.
XXXXXX X. XXXXXXX
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Date:------------------------
FEDERAL-MOGUL CORPORATION
By:--------------------------
Date:------------------------
