Exhibit 10.1
Form of Severance Compensation
Agreement
Albemarle
Corporation
330 South Fourth
Street
Richmond, VA 23219
, 2006
[Insert Name]
[Insert home address]
Dear
:
The Board of Directors (the
“Board”) of Albemarle Corporation (the
“Corporation”) recognizes that the possibility of a
Change in Control of the Corporation exists, and the uncertainty
and questions which it may raise among management may result in the
departure or distraction of management personnel to the detriment
of the Corporation.
The Board has determined that
appropriate steps should be taken to reinforce and encourage the
continued attention and dedication of members of the
Corporation’s management, including yourself, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from a possible Change in Control
of the Corporation.
In order to induce you to remain in
the employ of the Corporation and in consideration of your
continued service to the Corporation, the Corporation agrees that
you shall receive certain benefits in the event of a Change in
Control and certain severance benefits in the event your employment
with the Corporation is terminated subsequent to a Change in
Control, as set forth in this Severance Compensation Agreement
(“Agreement”).
a. “ Change in Control
” means the occurrence of any of the following
events:
|
|
(i)
|
any Person, or
“group” as defined in section 13(d)(3) of the
Securities Exchange Act of 1934 (excluding Floyd D. Gottwald,
members of his family and any Affiliate), becomes, directly or
indirectly, the Beneficial Owner of 20% or more of the combined
voting power of the then outstanding securities of the Corporation
that are entitled to vote generally for the election of the
Corporation’s directors (the “Voting Securities”)
(other than as a result of an issuance of securities by the
Corporation approved by Continuing Directors, or open market
purchases approved by Continuing Directors at the time the
purchases are made). However, if any such Person or
“group” becomes the Beneficial Owner of 20% or more,
and less than 30%, of the Voting Securities, the Continuing
Directors may determine, by a vote of at least two-thirds of the
Continuing Directors, that the same does not constitute a Change in
Control;
|
|
|
(ii)
|
as the direct
or indirect result of, or in connection with, a reorganization,
merger, share exchange or consolidation (a “Business
Combination”), a contested election of directors, or any
combination of these transactions, Continuing Directors cease to
constitute a majority of the Corporation’s board of
directors, or any successor’s board of directors, within two
years of the last of such transactions;
|
|
|
(iii)
|
the
shareholders of the Corporation approve a Business Combination,
unless immediately following such Business Combination,
(1) all or substantially all of the Persons who were the
Beneficial Owners of the Voting Securities outstanding immediately
prior to such Business Combination Beneficially Own more than 60%
of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors
of the Corporation resulting from such Business Combination
(including, without limitation, a company which as a result of such
transaction owns the Corporation through one or more Subsidiaries)
in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Voting
Securities, (ii) no Person (excluding Floyd D. Gottwald,
members of his family and any Affiliate and any employee benefit
plan or related trust of the Corporation or the Corporation
resulting from such Business Combination) Beneficially Owns 30% or
more of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors
of the Corporation resulting from such Business Combination, and
(iii) at least a majority of the members of the board of
directors of the Corporation resulting from such Business
Combination are Continuing Directors.
|
For purposes of this paragraph 1.a.
and other provisions of this Agreement, the following terms shall
have the meanings set forth below:
(A) Affiliate and Associate
shall have the respective meanings ascribed to such terms in Rule
12b-2 of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended and as in effect on the date of
this Agreement (the “Exchange Act”).
(B) Beneficial Owner means
that a Person shall be deemed the “Beneficial Owner”
and shall be deemed to “beneficially own,” any
securities:
(i) that such Person or any of such
Person’s Affiliates or Associates owns, directly or
indirectly;
2
(ii) that such Person or any of such
Person’s Affiliates or Associates, directly or indirectly,
has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any
agreement, arrangement or understanding (whether or not in writing)
or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that, a
Person shall not be deemed to be the “Beneficial Owner”
of, or to “beneficially own,” securities tendered
pursuant to a tender or exchange offer made by such Person or any
such Person’s Affiliates or Associates until such tendered
securities are accepted for purchase or exchange;
(iii) that such Person or any of
such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote, including pursuant to any
agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the
“Beneficial Owner” of, or to “beneficially
own,” any security under this subsection as a result of an
agreement, arrangement or understanding to vote such security if
such agreement, arrangement or understanding: (1) arises
solely from a revocable proxy given in response to a public proxy
solicitation made pursuant to, and in accordance with the
applicable provisions of the General Rules and Regulations under
the Exchange Act and (2) is not also then reportable by such
Person on Schedule 13D under the Exchange Act (or any comparable or
successor report); or
(iv) that are beneficially owned,
directly or indirectly, by any other Person (or any Affiliate or
Associates thereof) with which such Person (or any of such
Person’s Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the
purpose of acquiring, holding, voting (except pursuant to a
revocable proxy as described in ‘the proviso to subsection
(iii) of this definition) or disposing of any voting
securities of the Corporation provided, however, that
notwithstanding any provision of this definition, any Person
engaged in business as an underwriter of securities who acquires
any securities of the Corporation through such Person’s
participation in good faith in a firm commitment underwriting
registered under the Securities Act of 1933, shall not be deemed
the “Beneficial Owner” of, or to “beneficially
own,” such securities until the expiration of forty days
after the date of acquisition; and provided, further, that in no
case shall an officer or director of the Corporation be deemed
(1) the beneficial owner of any securities beneficially owned
by another officer or director of the Corporation solely by reason
of actions undertaken by such persons in their capacity as officers
or directors of the Corporation; or (2) the beneficial owner
of securities held of record by the trustee of any employee benefit
plan of the Corporation or any Subsidiary of the Corporation for
the benefit of any employee of the Corporation or any Subsidiary of
the Corporation, other than the officer or director, by reason of
any influences that such officer or director may have over the
voting of the securities held in the trust.
3
(C) Continuing Directors
means any member of the Corporation’s Board, while a member
of that Board, and (i) who was a member of the
Corporation’s Board prior to December 13, 2006, or
(ii) whose subsequent nomination for election or election to
the Corporation’s Board was recommended or approved by a
majority of the Continuing Directors.
(D) Person means any
individual, firm, company, partnership or other entity.
(E) Subsidiary means, with
references to any Person, any company or other entity of which an
amount of voting securities sufficient to elect a majority of the
directors or Persons having similar authority of such company or
other entity is beneficially owned, directly or indirectly, by such
Person, or otherwise controlled by such Person.
b. “ Code ” shall
mean the Internal Revenue Code of 1986, as amended.
c. “ Date of
Termination ” shall mean:
|
|
(i)
|
in case your
employment is terminated for Total Disability, thirty
(30) days after Notice of Termination is given (provided that
you shall not have returned to the full-time performance of your
duties during such thirty (30) day period), and
|
|
|
(ii)
|
in all other
cases, the date specified in the Notice of Termination (which shall
not be less than thirty (30) nor more than sixty
(60) days, respectively, from the date such Notice of
Termination is given).
|
d. “ Good Reason for
Resignation ” shall mean, without your express written
consent, any of the following:
|
|
(i)
|
a change in
your position with the Corporation which in your reasonable
judgment does not represent a promotion from your status or
position immediately prior to the Change in Control or the
assignment to you of any duties or responsibilities or diminution
of duties or responsibilities which in your reasonable judgment are
inconsistent with your position with the Corporation in effect
immediately prior to the Change in Control, it being understood
that any of the foregoing in connection with termination of your
employment for Cause, Retirement, or Total Disability shall not
constitute Good Reason for Resignation;
|
|
|
(ii)
|
a reduction by
the Corporation in the annual rate of your base salary as in effect
immediately prior to the date of a Change in Control;
|
4
|
|
(iii)
|
the
Corporation’s requiring your office nearest to your principal
residence to be located at a different place which is more than
thirty-five (35) miles from where such office is located
immediately prior to a Change in Control;
|
|
|
(iv)
|
the failure by
the Corporation to continue in effect compensation or benefit plans
in which you participate, which in the aggregate provide you
compensation and benefits substantially equivalent to those prior
to a Change in Control;
|
|
|
(v)
|
the failure of
the Corporation to obtain a satisfactory agreement from any
Successor (as defined in Paragraph 5a hereof) to assume and agree
to perform this Agreement, as contemplated in Paragraph 5a
hereof;
|
|
|
(vi)
|
any purported
termination of your employment which is not effected pursuant to a
Notice of Termination satisfying the requirements hereof; for
purposes of this Agreement, no such purported termination shall be
effective for any purpose except to constitute a Good Reason for
Resignation.
|
e. “ Incentive Compensation
Award ” shall mean payment or payments under Incentive
Compensation Plans.
f. “ Incentive Compensation
Plans ” shall mean any variable compensation or other
incentive compensation plans maintained by the Corporation, in
which awards are paid in cash, stock or other property including,
but not limited to: (i) the Albemarle Corporation 2003
Incentive Plan, as amended (ii) any variable compensation
plan, (iii) or any successor plan thereto.
g. “ Normal Retirement
Date ” shall have the meaning set forth in
Section 3.01 of the Pension Plan.
h. “ Notice of
Termination ” shall mean a written notice as provided in
Paragraph 14 hereof.
i. “ Pension Plan
” shall mean the Albemarle Corporation Pension Plan, as it
may be amended prior to a Change in Control.
j. “ Pension Program
” shall mean the Pension Plan, the Albemarle Corporation
Supplemental Executive Retirement Plan (as amended prior to a
Change in Control), plus any other excess or supplemental pension
plans maintained by the Corporation.
k. “ Retirement ”
shall mean (1) voluntary retirement before your mandatory
retirement age, if any, (termination of your employment by you
before your mandatory retirement age, if any, with Good Reason for
Resignation shall not be deemed a Retirement for purposes of this
Agreement) or (2) termination in accordance with any
retirement arrangement other than under the Pension Program, which
is established with your consent with respect to you or
(3) mandatory retirement as set forth under the policy of the
Corporation as it existed prior to the Change in Control or as
agreed to by you following a Change in Control.
5
l. “ Termination for
Cause ” shall mean termination of your employment upon
your willfully engaging in conduct demonstrably and materially
injurious to the Corporation, monetarily or otherwise, provided
that there shall have been delivered to you a copy of a resolution
duly adopted by the unanimous affirmative vote of the entire
membership of the Board at a meeting of the Board called and held
for such purpose (after reasonable notice to you and an opportunity
for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty
of the conduct set forth and specifying the particulars thereof in
detail.
For purposes of this Paragraph L, no
act, or failure to act, on your part shall be deemed
“willful” unless done, or omitted to be done, by you
not in good faith and without reasonable belief that your action or
omission was in the best interest of the Corporation. Any act or
failure to act based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the advice of counsel for
the Corporation shall be conclusively presumed to be done or
omitted to be done by you in good faith and in the best interests
of the Corporation.
m. “ Severance Multiple
” shall mean the lesser of (a) two (2), and (b) the
number obtained by multiplying two (2) by a fraction, the
numerator of which is the number of days from the Date of
Termination to your Normal Retirement Date and the denominator of
which is 730 but such number under this clause (m) shall not
be less than one (1).
n. “ Total Disability
” shall mean total physical or mental disability rendering
you unable to perform the duties of your employment for a
continuous period of six (6) months. Any question as to the
existence of your Total Disability upon which you and the
Corporation cannot agree shall be determined by a qualified
physician not employed by the Corporation and selected by you (or,
if you are unable to make such selection, it shall be made by any
adult member of your immediate family), and approved by the
Corporation. The determination of such physician made in writing to
the Corporation and to you shall be final and conclusive for all
purposes of this Agreement.
2. Compensation Upon Termination
or While Disabled . Following a Change in Control, you shall be
entitled to the following benefits:
a. Termination Benefits . If
your employment by the Corporation shall be terminated subsequent
to the Change in Control and during the term of this Agreement
(a) by reason of your death after you have received a Notice
of Termination, (b) by the Corporation other than for Cause,
or (c) by you for Good Reason for Resignation, then you shall
be entitled to the benefits provided below, without regard to any
contrary provision of any plan:
|
|
(i)
|
Accrued
Salary . The Corporation
shall pay you, not later than the fifth (5 th ) day following the Date of
Termination, your full base salary and vacation pay accrued through
the Date of Termination at the rate in effect at the time the
Notice of Termination is given (or at the rate in effect
immediately prior to a Change in Control, if such amounts were
higher).
|
6
|
|
(ii)
|
Accrued
Incentive Compensation .
The Corporation shall pay you, not later than five (5) days
following your Date of Termination, the amount of your accrued
Incentive Compensation which consists of the annual cash bonus. If
the Date of Termination is after the end of a Variable Compensation
Year, but before such Incentive Compensation for said Variable
Compensation Year has been determined, the Corporation shall pay
you as such Incentive Compensation for that Variable Compensation
Year the greater of the amount of your target variable compensation
for such Variable Compensation Year and the amount of your actual
variable compensation for the last Variable Compensation Year
preceding the year in which the Change in Control occurs for which
such Incentive Compensation had been determined.
|
In addition, if the Date of
Termination is other than the first day of a Variable Compensation
Year, the Corporation shall pay you, as such cash Incentive
Compensation for the Variable Compensation Year in which the Date
of Termination occurs, the greater of your target variable
compensation for the year in which the Change in Control occurs and
your actual variable compensation for the Variable Compensation
Year preceding the year in which the Change in Control occurs,
multiplied by a fraction, the numerator of which is the total
number of days which have elapsed in the current Variable
Compensation Year to the Date of Termination, and the denominator
of which is three hundred sixty-five (365). Payments under this
clause (ii) shall be made to you not later than five
(5) days after the Date of Termination.
If there is more than one Incentive
Compensation Program, your accrued Incentive Compensation shall be
calculated separately for each Program.
For the purpose of determining the
amount of your accrued Incentive Compensation under this Paragraph
2a(ii), you will be deemed to have been paid the full amount of all
prior variable and incentive compensation, whether or not such
award was includible in your gross income for Federal Income tax
purposes.
For the purpose of this Paragraph
2a(ii), “Incentive Compensation Program” means any of
the Incentive Compensation Plans defined in Paragraph 1f and any
other plan or program for the payment of incentive compensation,
variable compensation, bonus, benefits or awards for which you
were, or your position was, eligible to participate;
“Incentive Compensation” means any compensation,
variable compensation, bonus, benefit or award paid or payable
under an Incentive Compensation Program; and “Variable
Compensation Year” means a calendar or fiscal plan year of an
Incentive Compensation Program.
7
|
|
(iii)
|
Insurance
Coverage . The
Corporation shall arrange to provide you (and your dependents, if
applicable) with the following:
|
(a) If you are eligible, you shall
participate in the Corporation’s retiree medical benefit
plans as if you retired from the Corporation on your Date of
Termination, except that the Corporation shall provide such medical
coverage at no cost to you for two (2) years following your
Date of Termination and thereafter, you shall participate therein
on the same terms as other retired employees;
(b) If you are not eligible for the
retiree medical plans, you will no longer continue to participate
in the Corporation’s medical benefit plans, except for COBRA,
and (i) the Corporation shall provide you with a cash payment
in an amount equal to the amount required by you to pay for
coverage under COBRA for the first eighteen (18) months
following your loss of medical coverage, and thereafter,
(ii) the Corporation shall, for the subsequent six
(6) months, purchase for you, at its cost, a policy of medical
insurance providing benefits substantially similar to the benefits
you would have received under the Corporation’s medical
benefit plans.
|
|
(iv)
|
Retirement
Benefits . The
calculation of the Short Service Benefits provided to you pursuant
to Section 3.01(b) of the Albemarle Corporation Supplemental
Executive Retirement Plan (“SERP”) shall be determined
without regard to the benefit offsets provided for in
Section 3.01(b)(i)(B) of the SERP.
|
|
|
(v)
|
Outplacement
Counseling . The
Corporation shall make available to you, at the Corporation’s
expense, outplacement counseling. You may select the organization
that will provide the outplacement counseling, however, the
Corporation’s obligation to provide you benefits under this
subsection (v) shall be limited to $25,000.
|
|
|
(vi)
|
Financial
Counseling . Following
your Date of Termination, the Corporation shall make available to
you, financial counseling services with a nationally recognized
financial counseling firm. The financial counseling firm may also
provide you with tax counseling and tax preparation services. You
may select the organization that will provide the financial and tax
counseling, however, the Corporation’s obligation to provide
you benefits under this subsection (vi) shall be limited to
$10,000.
|
|
|
(vii)
|
Severance
Payment . The Corporation
shall pay as severance pay to you, not later than the fifth
(5 th ) day following the Date of
Termination, a lump sum severance payment (the “Severance
Payment”) equal to the Severance Multiple times the
following:
|
(a) the greater of your annual base
compensation which was payable to you by the Corporation
immediately prior to the Date of Termination and your annual base
compensation which was payable to you by the Corporation
immediately prior to a Change in Control, whether or not such
annual base compensation was includible in your gross income for
federal income tax purposes; plus
8
(b) the greater of the amount of
your actual annual variable compensation payment you received for
the year preceding the date on which the Change in Control occurs
and your target variable compensation for the year in which the
Change in Control occurs, (whether or not such award was includible
in your gross income for federal i
