EXHIBIT 10.6
CHANGE IN CONTROL
AGREEMENT
THIS AGREEMENT, dated July 1,
2008, between QUAKER CHEMICAL CORPORATION, a Pennsylvania
corporation (the “Company”), and Michael F. Barry (the
“Executive”),
W I T N E S S E T
H T H A T
WHEREAS, the Executive and the
Company entered into a change in control agreement dated
August 5, 2004 (the “Prior Agreement”);
and
WHEREAS, the Executive and the
Company wish to enter into a new Change in Control Agreement
effective July 1, 2008 (the “Agreement”) which
supersedes the Prior Agreement and reflects additional duties
assigned by the Board of Directors of the Company effective
July 1, 2008, Executive’s appointment as Chief Executive
Officer and President of the Company effective October 4,
2008, and changes required to comply with section 409A of the
Internal Revenue Code of 1986;
NOW, THEREFORE, IN CONSIDERATION of
the mutual obligations and agreements contained herein and
intending to be legally bound hereby, the Executive and the Company
agree as follows:
This Agreement shall become
effective on July 1, 2008 (the “Effective Date”),
and shall continue in effect through December 31, 2009;
provided, however, that the term of this Agreement shall
automatically be extended for one additional year beyond
December 31, 2009, and successive one-year periods thereafter,
unless, not later than eighteen (18) months (sixteen
(16) months with respect to the automatic extension that would
otherwise begin on January 1, 2010) preceding the calendar
year for which the term would otherwise automatically extend, the
Company shall have given written notice to the Executive of
intention not to extend this Agreement for an additional year, in
which event this Agreement shall continue in effect until
December 31 of the calendar year immediately preceding the
calendar year for which the term would have otherwise automatically
extended. Notwithstanding any such notice not to extend, if a
Change in Control (as defined in Section 2) occurs during the
original or extended term of this Agreement, this Agreement shall
remain in effect after a Change in Control until all obligations of
the parties hereto under this Agreement shall have been
satisfied.
As used in this Agreement, a
“Change in Control” of the Company shall be deemed to
have occurred if:
(a) Any person (a
“Person”), as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”) (other than (i) the Company and/or
its wholly owned subsidiaries; (ii) any ESOP or other employee
benefit plan of the Company and any trustee or other fiduciary in
such capacity holding securities under such plan;
(iii) any corporation owned, directly or
indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company; or
(iv) any other Person who, within the one year prior to the
event which would otherwise be a Change in Control, is an executive
officer of the Company or any group of Persons of which he
voluntarily is a part), is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing
30% or more of the combined voting power of the Company’s
then outstanding securities or such lesser percentage of voting
power, but not less than 15%, as determined by the members of the
Board of Directors of the Company who are independent directors (as
defined in the New York Stock Exchange, Inc. Listed Company
Manual); provided, however, that a Change in Control shall not be
deemed to have occurred under the provisions of this subsection
(a) by reason of the beneficial ownership of voting securities
by members of the Benoliel family (as defined below) unless and
until the beneficial ownership of all members of the Benoliel
family (including any other individuals or entities who or which,
together with any member or members of the Benoliel family, are
deemed under Sections 13(d) or 14(d) of the Exchange Act to
constitute a single Person) exceeds 50% of the combined voting
power of the Company’s then outstanding
securities;
(b) During any two-year period after
the Effective Date, Directors of the Company in office at the
beginning of such period plus any new Director (other than a
Director designated by a Person who has entered into an agreement
with the Company to effect a transaction within the purview of
subsections (a) or (c)) whose election by the Board of
Directors of the Company or whose nomination for election by the
Company’s shareholders was approved by a vote of at least
two-thirds of the Directors then still in office who either were
Directors at the beginning of the period or whose election or
nomination for election was previously so approved shall cease for
any reason to constitute at least a majority of the
Board;
(c) The consummation of (i) any
consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which the
Company’s voting common shares (the “Common
Shares”) would be converted into cash, securities, and/or
other property, other than a merger of the Company in which holders
of Common Shares immediately prior to the merger have the same
proportionate ownership of voting shares of the surviving
corporation immediately after the merger as they had in the Common
Shares immediately before; or (ii) any sale, lease, exchange,
or other transfer (in one transaction or a series of related
transactions) of all or substantially all the assets or earning
power of the Company; or
(d) The Company’s shareholders
or the Company’s Board of Directors shall approve the
liquidation or dissolution of the Company.
As used in this Agreement,
“members of the Benoliel family” shall mean Peter A.
Benoliel, his wife and children and their respective spouses and
children, and all trusts created by or for the benefit of any of
them.
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3.
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Entitlement to Change in Control Benefits;
Certain Definitions .
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The Executive shall be entitled to
the benefits provided in this Agreement in the event the Executive
has a Separation from Service under the circumstances described in
(a) below (a “Covered Termination”), provided the
Executive executes and does not revoke a Release (as defined
below), if any, provided by the Company.
(a) A Covered Termination shall have
occurred in the event the Executive’s employment with the
Company or its affiliates is terminated within two (2) years
following a Change in Control by:
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(i)
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The Company or
its affiliates without Cause (as defined below); or
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(ii)
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Resignation of
the Executive for Good Reason (as defined below).
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The Executive shall have no rights
to any payments or benefits under this Agreement in the event the
Executive’s employment with the Company and its affiliates is
terminated (i) as a result of death or Disability (as defined
below), or (ii) by the Company or its affiliates for Cause. In
the event the Executive’s employment is terminated for any
reason prior to a Change in Control, the Executive shall have no
rights to any payments or benefits under this Agreement and, after
any such termination, this Agreement shall be of no further force
or effect.
“ Cause ” shall
mean (i) the Executive’s willful and material breach of
the employment agreement between the Executive and the Company
(after having received notice thereof and a reasonable opportunity
to cure or correct), (ii) dishonesty, fraud, willful
malfeasance, gross negligence, or other gross misconduct, in each
case relating to the performance of the Executive’s
employment with the Company or its affiliates which is materially
injurious to the Company, or (iii) conviction of or plea of
guilty to a felony, such Cause to be determined, in each case, by a
resolution approved by at least two-thirds of the Directors of the
Company after having afforded the Executive a reasonable
opportunity to appear before the Board of Directors of the Company
and present his position.
“ Code ” shall
mean the Internal Revenue Code of 1986, as amended, together with
any applicable regulations thereunder.
“ Disability ”
shall mean covered total and permanent disability as defined in the
long-term disability plan maintained by the Company for employees
generally or, if the Company does not maintain such a plan, the
long-term disability plan most recently maintained by the Company
for employees generally.
“ Good Reason ”
shall mean any of the following actions without the
Executive’s consent, other than due to the Executive’s
death or Disability: (i) any reduction in the
Executive’s base salary from that provided immediately before
the Covered Termination or, if higher, immediately before the
Change in Control; (ii) any reduction in the Executive’s
bonus opportunity (including cash and noncash incentives) or
increase in the goals or standards required to accrue that
opportunity, as compared to the opportunity and goals or standards
in effect immediately before the Change in Control; (iii) a
material adverse change in the nature or scope of the
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Executive’s authorities, powers,
functions, or duties from those in effect immediately before the
Change in Control; (iv) a reduction in the Executive’s
benefits from those provided immediately before the Change in
Control, disregarding any reduction under a plan or program
covering employees generally that applies to all employees covered
by the plan or program; (v) if a Change in Control occurs
prior to October 4, 2008, the failure of Executive to be
appointed or elected as Chief Executive Officer and President of
the Company within ninety (90) days of such Change in Control;
or (vi) the Executive being required to accept a primary
employment location which is more than twenty-five (25) miles
from the location at which he primarily was employed during the
ninety (90) day period prior to a Change in
Control.
“ Payment
Date ” shall mean the 60 th day after the Executive’s
Separation from Service, subject to Section 10.
“ Release ” shall
mean a release (in a form satisfactory to the Company) of any and
all claims against the Company and all related parties with respect
to all matters arising out of the Executive’s employment by
the Company and its affiliates, or the termination thereof (other
than claims for any entitlements under the terms of this Agreement,
under the employment agreement between the Executive and the
Company, or under any plans or programs of the Company under which
the Executive has accrued a benefit) that the Company provides to
the Executive no later than three days after the date of the
Executive’s Covered Termination. Notwithstanding any
provision of this Agreement to the contrary, if the Company
provides a Release to the Executive, the Executive shall not be
entitled to any payments or benefits under this Agreement unless
the Executive executes the Release within 45 days of the later of
the date he receives the Release or the date of his Covered
Termination, and the Executive does not revoke the
Release.
“ Separation from
Service ” shall mean the Executive’s separation
from service with the Company and its affiliates within the meaning
of Treas. Reg. §1.409A-1(h) or any successor
thereto.
“ Specified Employee
” shall mean the Executive if he is a specified employee as
defined in Section 409A of the Code as of the date of his
Separation from Service.
(a) Amount of Severance
Allowance . In the event of a Covered Termination, the Company
shall pay or cause to be paid to the Executive in cash a severance
allowance (the “Severance Allowance”) equal to two
times the sum of the amounts determined in accordance with the
following paragraphs (i) and (ii):
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(i)
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An amount
equivalent to the highest annualized base salary which the
Executive was entitled to receive from the Company and its
subsidiaries at any time during his employment prior to the Covered
Termination; and
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(ii)
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An amount equal to the average of
the aggregate annual amounts paid to the Executive in the
Applicable Three-Year Period under all applicable annual incentive
compensation plans maintained by the Company and its affiliates
(other than compensation relating to relocation expense; the grant,
exercise, or settlement of stock options, restricted
stock
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or performance incentive units or
the sale or other disposition of shares received upon exercise or
settlement of such awards); provided, however, that (x) in
determining the average amount paid under the annual incentive plan
during the Applicable Three-Year Period there shall be excluded any
year in which no amounts were paid to the Executive under that
plan; (y) there shall be excluded from such calculation any
amounts paid to the Executive under any such incentive compensation
plan as a result of the acceleration of such payments under such
plan due to termination of the plan, a Change in Control, or a
similar occurrence; and (z) in no event shall the amount under
this paragraph (ii) be less than the amount of the mid/target
bonus which would otherwise have been payable to the Executive
under the annual incentive compensation plans for the calendar year
in which the Change in Control occurred. The Applicable Three-Year
Period shall be (A) if the Executive has received an annual
incentive compensation plan payment in the calendar year of his
Covered Termination, the calendar year in which such Covered
Termination occurs and the two preceding calendar years, or
(B) in any other case, the three calendar years preceding the
calendar year in which the Executive’s Covered Termination
occurs; provided, however, that the Applicable Three-Year Period
shall be determined by substituting “ Change In
Control” for “Covered Termination” if such
substitution results in a higher amount under this subsection
(ii).
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In no event shall any retention
bonus or change in control or success fee be taken into account
when determining the amount of the Severance Allowance
hereunder.
(b) Payment of Severance
Allowance . The Severance Allowance shall be paid to the
Executive in a lump sum on the Payment Date if the applicable
Change in Control is also a change in control event as defined in
Treas. Reg. §1.409A-3(i)(5) (or any successor thereto). In any
other case, the Severance Allowance shall be paid in twenty-four
monthly installments commencing on the Payment Date, each of which
is equal to one-twenty-fourth (1/24th) of the amount of the
Severance Allowance determined under Section 4(a), which are
treated as a right to a series of separate payments for purposes of
Section 409A of the Code.
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5.
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Enhanced
SRIP Benefit .
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In the event of a Covered
Termination, for purposes of determining the Executive’s
benefit under the Quaker Chemical Corporation Supplemental
Retirement Income Program, as amended and restated effective
January 1, 2005 and as amended from time to time thereafter
(to the extent amendment is permitted under the terms of such
Program) (the “SRIP”):
(a) The Severance Allowance shall be
taken into account in determining the Executive’s salary plus
bonus under the Prior SRIP, Compensation and Average Annual
Compensation (as such terms are defined in the SRIP) as if such
Severance Allowance were paid in 24 monthly installments commencing
as of the first day of the month following the Executive’s
Covered Termination;
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(b) For purposes of determining the
Executive’s years of employment under the Prior SRIP and
Years of Service (as such terms are defined in the SRIP) the
Executive shall be treated as if he were employed 24 months before
his actual date of hire; and
(c) For purposes of determining the
Executive’s age under the SRIP (including the Prior SRIP),
two (2) years shall be added to the Executive’s actual
age.
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6.
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Outplacement and Welfare Benefits
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(a) Outplacement . Subject to
Section 7, for a period of one year following a Covered
Termination of
