AGREEMENT, dated as of the 11th day of May, 2000 (this "Agreement"), by
and among Lilly Industries, Inc., a Canadian corporation organized under the
laws of the Province of Ontario ("Lilly Canada"), Lilly Industries, Inc., an
Indiana corporation (the "Company"), and Alain DeBlandre (the "Executive").
WHEREAS, 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 and Lilly Canada will have the continued dedication
of the Executive, notwithstanding the possibility, threat or occurrence of a
Change of Control (as defined herein). 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 current
Company 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 that ensure that the compensation and benefits expectations of the
Executive will be satisfied and that are competitive with those of other
corporations. Therefore, in order to accomplish these objectives, the Board has
caused the Company and Lilly Canada to enter into this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
Section 1. Certain Definitions. (a) "Effective Date" means the first
date during the Change of Control Period (as defined herein) on which a Change
of Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change of Control occurs and if the Executive's employment with the Company
and Lilly Canada 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 (1) was at the request of a third party that has taken
steps reasonably calculated to effect a Change of Control or (2) otherwise arose
in connection with or anticipation of a Change of Control, then "Effective Date"
means the date immediately prior to the date of such termination of employment.
(b) "Change of Control Period" means 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, 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) "Affiliated Company" means any company controlled by, controlling
or under common control with the Company, including without limitation Lilly
Canada.
(d) "Change of Control" means:
(1) 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 (A) the then-outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) 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 Section 1(d), 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 Affiliated Company or (iv) any acquisition by
any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C).
(2) 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.
(3) Consummation of a reorganization, merger, 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, (A) all or substantially all of the individuals and entities that
were the beneficial owners of the Outstanding Company Common Stock and the
Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 60% of 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 that, 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 the Outstanding Company
Voting Securities, as the case may be, (B) 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 (C) 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
(4) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Section 2. Employment Period. The Company and Lilly Canada hereby agree
to continue the Executive in the employ of either the Company or Lilly Canada,
subject to the terms and conditions of this Agreement, for the period commencing
on the Effective Date and ending on the third anniversary of the Effective Date
(the "Employment Period"). The Employment Period shall terminate upon the
Executive's termination of employment for any reason.
Section 3. Terms of Employment. (a) Position and Duties. (1) During the
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 office where the Executive was employed immediately
preceding the Effective Date or at any other location less than 35 miles from
such office.
(2) 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 Lilly Canada 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 or
Lilly Canada, as applicable, 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 and Lilly Canada.
(b) Compensation. (1) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (the "Annual Base Salary") at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the 12-month
period immediately preceding the month in which the Effective Date occurs. The
Annual Base Salary shall be paid at such intervals as the Company or Lilly
Canada, as applicable, pays executive salaries generally. During the Employment
Period, the Annual Base Salary shall be reviewed at least annually, beginning no
more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date. Any increase in the Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. The Annual Base Salary shall not be reduced after any such increase
and the term "Annual Base Salary" shall refer to the Annual Base Salary as so
increased.
(2) Annual Bonus. In addition to the Annual Base Salary, the Executive
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
target bonus most recently established before the Effective Date under the
Company's Variable Compensation Plan, or under any successor plan (the "Target
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.
(3) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all cash incentive,
equity incentive, savings and retirement plans, practices, policies, and
programs applicable generally to other peer executives of the Company and the
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 the 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 the Affiliated
Companies.
(4) Welfare Benefit Plans. During the Employment 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 the 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 the Affiliated Companies, but in no event shall
such plans, practices, policies and programs provide the Executive with benefits
that 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 the Affiliated
Companies.
(5) Expenses. During the Employment Period, the 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 the 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 the
Affiliated Companies.
(6) Fringe Benefits. During the Employment Period, the Executive shall
be entitled to fringe benefits, including, without limitation, tax and financial
planning services, executive physicals, and, if applicable, payment of club
dues, use of an automobile and payment of related expenses, in accordance with
the most favorable plans, practices, programs and policies of the Company and
the 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 the Affiliated Companies.
(7) Office and Support Staff. During the Employment 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 the 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 the Affiliated Companies.
(8) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans, policies,
programs and practices of the Company and the 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 the Affiliated Companies.
Section 4. Termination of Employment. (a) Death or Disability. The
Executive's employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of "Disability"), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive's employment. In such event, the Executive's
employment with the Company or Lilly Canada, as applicable, 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. "Disability" means the absence of the Executive from the
Executive's duties with the Company and Lilly Canada on a full-time basis for
180 consecutive business days as a result of incapacity due to mental or
physical illness that 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 during
the Employment Period for Cause. "Cause" means:
(1) the willful and continued failure of the Executive to
perform substantially the Executive's duties (as contemplated by
Section 3(a)(1)(A)) with the Company or any Affiliated Company (other
than any such failure resulting from incapacity due to physical or
mental illness or following the Executive's delivery of a Notice of
Termination for Good Reason), after a written demand for substantial
performance is delivered to the Executive by the Board or the Chief
Executive Officer of the Company that specifically identifies the
manner in which the Board or the Chief Executive Officer of the Company
believes that the Executive has not substantially performed the
Executive's duties, or
(2) the willful engaging by the Executive in illegal conduct
or gross misconduct that is materially and demonstrably injurious to
the Company or Lilly Canada.
For purposes of this Section 4(b), 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 and
Lilly Canada. 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 of the Company 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 (excluding the
Executive, if the Executive is a member 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 for
the Executive, 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
Section 4(b)(1) or 4(b)(2), and specifying the particulars thereof in detail.
(c) Good Reason. The Executive's employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good Reason.
"Good Reason" means:
(1) 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 3(a), or any other
diminution in such position, authority, duties or responsibilities
(whether or not occurring solely as a result of the Company's ceasing
to be a publicly traded entity), excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith
and that is remedied by the Company or Lilly Canada, as applicable,
promptly after receipt of notice thereof given by the Executive;
(2) any failure by the Company or Lilly Canada to comply with
any of the provisions of Section 3(b), other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and
that is remedied by the Company or Lilly Canada, as applicable,
promptly after receipt of notice thereof given by the Executive;
(3) the Company's or Lilly Canada's requiring the Executive
(i) to be based at any office or location other than as provided in
Section 3(a)(1)(B), (ii) to be based at a location other than the
principal executive offices of the Company or Lilly Canada, as
applicable, if the Executive was employed at such location immediately
preceding the Effective Date, or (iii) to travel on Company or Lilly
Canada business to a substantially greater extent than required
immediately prior to the Effective Date;
(4) any purported termination by the Company or Lilly Canada
of the Executive's employment otherwise than as expressly permitted by
this Agreement; or
(5) any failure by the Company or Lilly Canada to comply with
and satisfy Section 10(c).
For purposes of this Section 4(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 pursuant
to a Notice of Termination given during the 30-day period immediately following
the first anniversary of the Effective Date shall be deemed to be a termination
for Good Reason for all purposes of this Agreement. The Executive's mental or
physical incapacity following the occurrence of an event described above in
clauses (1) through (5) shall not affect the Executive's ability to terminate
employment for Good Reason.
(d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination
to the Executive or The Company, as applicable, given in accordance with Section
11(b). "Notice of Termination" means a written notice that (1) indicates the
specific termination provision in this Agreement relied upon, (2) 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 (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 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 that 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 respective rights hereunder.
(e) Date of Termination. "Date of Termination" means (1) if 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 in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) 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 (3) 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.
Section 5. Obligations of the Company upon Termination. (a) Good
Reason; Other Than for Cause, Death or Disability. If, during the Employment
Period, the Company terminates the Executive's employment other than for Cause
or Disability or the Executive terminates employment for Good Reason:
(1) the Company or Lilly Canada 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 (i) the Executive's Annual Base Salary
through the Date of Termination to the extent not theretofore
paid, (ii) the product of (x) the higher of (I) the Target
Bonus and (II) the Annual Bonus actually paid or payable,
including any bonus or portion thereof that has been earned
but deferred (and annualized for any fiscal year consisting of
less than 12 full months or during which the Executive was
employed for less than 12 full months), for the most recently
completed fiscal year before the Date of Termination, if any
(such higher amount, 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 (iii) any accrued vacation
pay, in each case, to the extent not theretofore paid (the sum
of the amounts described in subclauses (i), (ii) and (iii),
the "Accrued Obligations");
(B) the amount equal to the product of (i) two and
(ii) the sum of (x) the Executive's Annual Base Salary, (y)
the Highest Annual Bonus and (z) the average employer
contributions credited to the Executive's accounts in the
Company's Employee 401(k) Savings Plan, Defined Contribution
Plan and Employee Stock Purchase Plan, the defined
contribution portion of the Company's Replacement Plan, and
any other or successor defined contribution pension plans in
which the Executive participates, for the three most recent
plan years ended before the Effective Date or, if higher, for
the three most recent plan years ended before the Date of
Termination; and
(C) an amount equal to the excess of (i) the
actuarial present value of the benefit under the Company's
qualified defined benefit retirement plan, if any, and any
nonqualified defined benefit pension plan in which the
Executive participates (collectively, the "Retirement Plans")
that the Executive would receive if the Executive's employment
continued for two 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 Sections 3(b)(1) and
3(b)(2), over (ii) the actuarial present value of the
Executive's actual benefit (paid or payable), if any, under
the Retirement Plans as of the Date of Termination, including
without limitation any amounts paid in connection with or as a
result of the occurrence of the Change of Control, with such
actuarial present values in each case being determined in
accordance with Schedule I hereto;
(2) for two 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 or Lilly Canada shall continue medical and
welfare benefits to the Executive and/or the Executive's family, and tax and
financial planning services and executive physicals for the Executive, at least
equal to those that would have been provided to them in accordance with the
plans, programs, practices and policies described in Section 3(b)(4) and Section
3(b)(6), as applicable, 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 the
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; and
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; and provided, further, that the period
of the continuation coverage required by Section 4980B of the Code, if
applicable to the Executive, shall run concurrently with the continued coverage
under this Section 5(a)(2);
(3) the Company shall cause all stock options that the Executive then
holds (whether or not such stock options are otherwise exercisable) ("Options")
to be exercisable from the Date of Termination through the 90th day thereafter;
provided, that any tax benefit provisions with respect to any Options shall
apply; and provided, further, that if as a result of such acceleration, any
Options that were incentive stock options within the meaning of Section 422 of
the Code cease to qualify as incentive stock options, such Options shall be
treated as non-qualified stock options, and the Company shall pay to the
Executive, upon exercise of such Options, an additional cash payment equal to
the tax benefit to be received by the Company attributable to its federal income
tax deduction resulting from the exercise of such Options; and
(4) to the extent not theretofore paid or provided, the Company or
Lilly Canada shall timely pay or provide to the Executive any other amounts or
benefits required to be paid or provided or that the Executive is eligible to
receive under any plan, program, policy or practice or contract or agreement of
the Company and the Affiliated Companies (such other amounts and benefits, the
"Other Benefits").
(b) Death. If the Executive's employment is terminated by reason of the
Executive's death during the Employment Period, the Company or Lilly Canada
shall provide the Executive's estate or beneficiaries with the Accrued
Obligations and the timely payment or delivery of the Other Benefits, and shall
have no other severance obligations under this Agreement. The 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 the Other Benefits, the term "Other Benefits"
as utilized in this Section 5(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 the
Affiliated Companies to the estates and beneficiaries of peer executives of the
Company and the 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 the Affiliated Companies and their beneficiaries.
(c) Disability. If the Executive's employment is terminated by reason
of the Executive's Disability during the Employment Period, the Company or Lilly
Canada shall provide the Executive with the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other severance
obligations under this Agreement. The 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 the 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
the 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 the Affiliated Companies and their families.
(d) Cause; Other Than for Good Reason. If the Executive's employment is
terminated for Cause during the Employment Period, the Company or Lilly Canada
shall provide to the Executive (1) the Executive's Annual Base Salary through
the Date of Termination, (2) the amount of any compensation previously deferred
by the Executive, and (3) the Other Benefits, in each case, to the extent
theretofore unpaid, and shall have no other severance obligations under this
Agreement. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, the Company or Lilly
Canada shall provide to the Executive the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other severance
obligations under this Agreement. In such case, all the Accrued Obligations
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination.
Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or the Affiliated Companies
and for which the Executive may qualify, nor, subject to Section 11(f), shall
anything herein limit or otherwise affect such rights as the Executive may have
under any other contract or agreement with the Company or the Affiliated
Companies. Amounts that are vested benefits or that the Executive is otherwise
entitled to receive under any plan, policy, practice or program of or any
contract or agreement with the Company or the 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, if the Executive
receives payments and benefits pursuant to Section 5(a) of this Agreement, the
Executive shall not be entitled to any severance pay or benefits under any
severance plan, program or policy of the Company and the Affiliated Companies,
unless otherwise specifically provided therein in a specific reference to this
Agreement, and such payments and benefits are inclusive of the Executive's
entitlement to termination pay and settlement pay under the Employment Standards
Act, R.S.O. 1990, E.14, as amended.
Section 7. Full Settlement. The Company's and Lilly Canada'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 that the Company or Lilly
Canada 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
(within 10 days following the Company's receipt of an invoice from the
Executive), to the full extent permitted by law, all legal fees and expenses
that 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").
Section 8. 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
would be subject to the Excise Tax, then the Executive shall be entitled to
receive an additional payment (the "Gross-Up Payment") in an amount such that,
after payment by the Executive of all taxes (and 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 upon the Payments.
Notwithstanding the foregoing provisions of this Section 8(a), if it shall be
determined that the Executive is entitled to the Gross-Up Payment, but that the
Parachute Value of all Payments do not exceed 110% of the Safe Harbor Amount,
then no Gross-Up Payment shall be made to the Executive and the amounts payable
under this Agreement shall be reduced so that the Parachute Value of all
Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the
amounts payable hereunder, if applicable, shall be made by first reducing the
payments under Section 5(a)(1)(B), unless an alternative method of reduction is
elected by the Executive, and in any event shall be made in such a manner as to
maximize the Value of all Payments actually made to the Executive. For purposes
of reducing the Payments to the Safe Harbor Amount, only amounts payable under
this Agreement (and no other Payments) shall be reduced. If the reduction of the
amount payable under this Agreement would not result in a reduction of the
Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable
under the Agreement shall be reduced pursuant to this Section 8(a). The
Company's obligation to make Gross-Up Payments under this Section 8 shall not be
conditioned upon the Executive's termination of employment.
(b) Subject to the provisions of Section 8(c), all determinations
required to be made under this Section 8, including whether and when a Gross-Up
Payment is required, 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 nationally recognized certified public accounting firm as may
be designated by the Executive (the "Accounting Firm"). The Accounting Firm
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 may 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 8, shall be paid by the Company to the Executive within
5 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 that will not have been made by the Company
should have been made (the "Underpayment"), consistent with the calculations
required to be made hereunder. In the event the Company exhausts its remedies
pursuant to Section 8(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 10 business days after the Executive is informed
in writing of such claim. The Executive 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 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 the Company desires to contest such claim,
the Executive shall:
(1) give the Company any information reasonably requested by
the Company relating to such claim,
(2) 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,
(3) cooperate with the Company in good faith in order
effectively to contest such claim, and
(4) 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) imposed as a result of such representation and payment of costs and
expenses. Without limitation on the foregoing provisions of this Section 8(c),
the Company shall control all proceedings taken in connection with such contest,
and, at its sole discretion, may pursue or forgo any and all administrative
appeals, proceedings, hearings and conferences with the applicable taxing
authority in respect of such claim and may, at its sole discretion, 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) imposed with respect to such
advance or with respect to any imputed income in connection with such advance;
and provided, further, 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 the 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 8(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 8(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 8(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.
(e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of the Gross-Up Payment, and the Executive hereby
consents to such withholding.
(f) Definitions. The following terms shall have the following meanings
for purposes of this Section 8.
(i) "Excise Tax" shall mean the excise tax imposed by Section 4999 of
the Code, together with any interest or penalties imposed with respect to such
excise tax.
(ii) The "Net After-Tax Amount" of a Payment shall mean the Value of a
Payment net of all taxes imposed on the Executive with respect thereto under
Sections 1 and 4999 of the Code and applicable state and local law, determined
by applying the highest marginal rates that are expected to apply to the
Executive's taxable income for the taxable year in which the Payment is made.
(iii) "Parachute Value" of a Payment shall mean the present value as of
the date of the change of control for purposes of Section 280G of the Code of
the portion of such Payment that constitutes a "parachute payment" under Section
280G(b)(2), as determined by the Accounting Firm for purposes of determining
whether and to what extent the Excise Tax will apply to such Payment.
(iv) A "Payment" shall mean any payment or distribution in the nature
of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for
the benefit of the Executive, whether paid or payable pursuant to this Agreement
or otherwise.
(v) The "Safe Harbor Amount" means the maximum Parachute Value of all
Payments that the Executive can receive without any Payments being subject to
the Excise Tax.
(vi) "Value" of a Payment shall mean the economic present value of a
Payment as of the date of the change of control for purposes of Section 280G of
the Code, as determined by the Accounting Firm using the discount rate required
by Section 280G(d)(4) of the Code.
Section 9. Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company and Lilly Canada all secret or
confidential information, knowledge or data relating to the Company or the
Affiliated Companies, and their respective businesses, which information,
knowledge or data shall have been obtained by the Executive during the
Executive's employment by the Company or the Affiliated Companies and which
information, knowledge or data 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 and Lilly Canada, 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 persons designated by the Company. In no event shall
an asserted violation of the provisions of this Section 9 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
Section 10. 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 other 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, Lilly Canada, and their respective successors and assigns. Except
as provided in Section 10(c) or 10(d), without the prior written consent of the
Executive this Agreement shall not be assignable by the Company or Lilly Canada.
(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.
"Company" means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law or otherwise. The Company and Lilly Canada 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 Lilly Canada to assume and expressly agree to perform this Agreement
in the same manner and to the same extent that Lilly Canada would be required to
perform it if no such succession had taken place. "Lilly Canada" means Lilly
Canada as hereinbefore defined and any successor to its business and/or assets
as aforesaid that assumes and agrees to perform this Agreement by operation of
law or otherwise.
Section 11. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of Indiana, U.S.A., 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 other 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:
if to the Executive:
Alain DeBlandre
0000 Xxxxxx Xxxxxx
Xxxxxx XX Xxxxxx X0X0X0
if to the Company:
Lilly Industries, Inc.
000 Xxxx 000xx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Chief Executive Officer
if to Lilly Canada:
Lilly Industries, Inc.
00 Xxxx Xxxxxx
Xxxxxx, Xxxxxxx
Attention:
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 United States or Canadian federal, state or local taxes 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 Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a waiver
of such provision or right or any other provision or right of this Agreement.
(f) This Agreement, upon its execution by both parties hereto,
supersedes the Change in Control Agreement among Lilly Canada, the Company and
the Executive dated as of February 3, 2000. The Executive, the Company and Lilly
Canada acknowledge that, except as may otherwise be provided under any other
written agreement between the Executive and the Company and/or Lilly Canada, the
employment of the Executive by the Company and Lilly Canada is "at will" and,
subject to Section 1(a), prior to the Effective Date, the Executive's employment
may be terminated by the Executive, the Company or Lilly Canada 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, except as
specifically provided herein, this Agreement shall supersede any other agreement
between the parties with respect to the subject matter hereof.
Section 12. Guarantee. The Company guarantees the obligations and
performance of Lilly Canada under this Agreement.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from the Board, 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.
Alain DeBlandre
--------------------------------------
LILLY INDUSTRIES, INC., an Indiana
corporation
By
Name:
Title:
LILLY INDUSTRIES, INC., an Indiana
corporation
By
Name:
Title:
Schedule I
Present values shall be determined using (i) a discount factor equal to
the interest rate for the most recently issued ten-year U.S. Treasury Notes
outstanding on the Date of Termination and (ii) the 1983 Group Annuity Marketing
Table for Males.
