EXHIBIT 10.3

 

EMPLOYEE MATTERS AGREEMENT

 

by and between

 

WESTROCK COMPANY

 

and

 

INGEVITY CORPORATION

 

Dated as of May 14, 2016

 

 

 

 

TABLE OF CONTENTS

 

  Page ARTICLE I DEFINITIONS 1     ARTICLE II GENERAL PRINCIPLES 8     2.1
Employment of SpinCo Employees 8 2.2 Assumption and Retention of Liabilities;
Related Assets 8 2.3 SpinCo Participation in Parent Benefit Plans 9 2.4 Terms of
Participation by SpinCo Employees in SpinCo Benefit Plans 9 2.5 Commercially
Reasonable Efforts 9 2.6 Regulatory Compliance 9 2.7 Approval by Parent as Sole
Stockholder 9 2.8 No Change in Control 10       ARTICLE III DEFINED CONTRIBUTION
PLANS; DEFINED BENEFIT PLANS 10     3.1 Defined Contribution Plans 10 3.2
Defined Benefit Plans 11       ARTICLE IV HEALTH AND WELFARE PLANS 13     4.1
U.S. Health and Welfare Plans 13 4.2 Non-U.S. Health and Welfare Plans 15 4.3
Retention of Sponsorship and Liabilities 15 4.4 Workers’ Compensation
Liabilities 16 4.5 Payroll Taxes and Reporting of Compensation 16       ARTICLE
V EXECUTIVE BENEFITS AND OTHER BENEFITS 16     5.1 Assumption of Executive
Benefit Plan Obligations 16 5.2 Short-Term Incentive Awards 17 5.3 Parent Equity
and Long-Term Incentive Awards 17 5.4 Employment Agreements 20 5.5 Parent
Executive DC Plans 20 5.6 Severance 21       ARTICLE VI LABOR MATTERS 21     6.1
Works Councils; Employee Notices 21 6.2 Collective Bargaining Agreements 22 6.3
Reinstatements 22       ARTICLE VII GENERAL AND ADMINISTRATIVE 22     7.1
Sharing of Participant Information 22 7.2 Reasonable Efforts/Cooperation 23 7.3
No Third-Party Beneficiaries 23 7.4 Fiduciary Matters 23 7.5 Consent of Third
Parties 23       ARTICLE VII MISCELLANEOUS 24     8.1 Effect If Effective Time
Does Not Occur 24 8.2 Relationship of Parties 24 8.3 Affiliates 24 8.4 Notices
24 8.5 Incorporation of Separation and Distribution Agreement Provisions 24

 

 

 

 

 

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EMPLOYEE MATTERS AGREEMENT

 

This Employee Matters Agreement (this “Agreement”), dated as of May 14, 2016,
with effect as of the Effective Time (as defined below), is entered into by and
between WestRock Company, a Delaware corporation (“Parent”), and Ingevity
Corporation, a Delaware corporation (“SpinCo,” and together with Parent, the
“Parties”).

 

RECITALS:

 

WHEREAS, Parent and SpinCo have entered into a Separation and Distribution
Agreement pursuant to which the Parties have set out the terms on which, and the
conditions subject to which, they wish to implement the Separation (as defined
in the Separation and Distribution Agreement) (such agreement, as amended,
restated or modified from time to time, the “Separation and Distribution
Agreement”).

 

WHEREAS, in connection therewith, Parent and SpinCo have agreed to enter into
this Agreement to allocate between them assets, liabilities and responsibilities
with respect to certain employee compensation, pension and benefit plans,
programs and arrangements and certain employment matters.

 

NOW THEREFORE, in consideration of the mutual agreements, covenants and other
provisions set forth in this Agreement, the Parties hereby agree as follows:

 

ARTICLE I
DEFINITIONS

 

Unless otherwise defined in this Agreement, capitalized words and expressions
and variations thereof used in this Agreement have the meanings set forth below.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Separation and Distribution Agreement.

 

1.1         “Accrued Union Hourly DB Benefit” has the meaning set forth in
Section 3.2(b).

 

1.2         “Affiliate” has the meaning given that term in the Separation and
Distribution Agreement.

 

1.3         “Agreement” means this Employee Matters Agreement, including all the
Schedules hereto.

 

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1.4         “Ancillary Agreements” has the meaning given that term in the
Separation and Distribution Agreement.

 

1.5         “Approved Leave of Absence” means an absence from active service
pursuant to an approved leave policy with a guaranteed right of reinstatement.

 

1.6         “Benefit Agreement” means each employment, consulting, bonus,
incentive, deferred compensation, equity or equity-based compensation, change in
control, retention, severance, termination, restrictive covenant or other
compensatory Contract between any Parent Entity or SpinCo Entity, on the one
hand, and any current or former employee or service provider of any Parent
Entity or SpinCo Entity (as applicable), on the other hand.

 

1.7         “Benefit Plan” means, with respect to an entity or any of its
Subsidiaries, (a) each “employee welfare benefit plan” (as defined in Section
3(1) of ERISA) and all other employee benefits arrangements, plans, policies or
payroll practices (including severance pay, sick leave, vacation pay, salary
continuation, disability, retirement, deferred compensation, bonus, stock option
or other equity-based compensation, hospitalization, medical insurance or life
insurance) sponsored or maintained by such entity or by any of its Subsidiaries
(or to which such entity or any of its Subsidiaries contributes or is required
to contribute) and (b) all “employee pension benefit plans” (as defined in
Section 3(2) of ERISA), occupational pension plan or arrangement or other
pension arrangements sponsored, maintained or contributed to by such entity or
any of its Subsidiaries (or to which such entity or any of its Subsidiaries
contributes or is required to contribute). For the avoidance of doubt, “Benefit
Plans” includes Health and Welfare Plans, Parent Executive DB Plans, and SpinCo
Executive Benefit Plans. When immediately preceded by “Parent,” Benefit Plan
means any Benefit Plan sponsored, maintained or contributed to by Parent or a
Parent Entity or any Benefit Plan with respect to which Parent or a Parent
Entity is a party and when immediately preceded by “SpinCo,” Benefit Plan means
any Benefit Plan sponsored, maintained or contributed to by SpinCo or any SpinCo
Entity or any Benefit Plan with respect to which SpinCo or a SpinCo Entity is a
party, as in effect as of the time relevant to the applicable provision of this
Agreement; provided however, a Benefit Plan sponsored or maintained by Parent or
a Parent Entity shall not be a SpinCo Benefit Plan (regardless of whether such
Benefit Plan is contributed to by SpinCo or a SpinCo Entity), and a Benefit Plan
sponsored or maintained by SpinCo or a SpinCo Entity shall not be a Parent
Benefit Plan (regardless of whether such Benefit Plan is contributed to by
Parent or a Parent Entity).

 

1.8         “Cash LTI Award” means a cash-based long-term incentive award
granted under any Parent Long-Term Incentive Plan.  

 

1.9         “COBRA” means the continuation coverage requirements for “group
health plans” under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended, and as codified in Code § 4980B and ERISA §§ 601
through 608.

 

1.10       “Code” means the Internal Revenue Code of 1986, as amended, or any
successor U.S. federal income tax law. Reference to a specific Code provision
also includes any proposed, temporary or final regulation in force under that
provision.

 

1.11       “Collective Bargaining Agreement” has the meaning set forth in
Section 6.2.

 

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1.12       “Committee” has the meaning set forth in Section 5.3(a).

 

1.13       “Contract” has the meaning given that term in the Separation and
Distribution Agreement.

 

1.14       “Distribution Date” has the meaning given that term in the Separation
and Distribution Agreement.

 

1.15       “Effective Time” has the meaning given that term in the Separation
and Distribution Agreement.

 

1.16       “ERISA” means the Employee Retirement Income Security Act of 1974, as
amended. Reference to a specific provision of ERISA also includes any proposed,
temporary or final regulation in force under that provision.

 

1.17       “Former Parent Employee” means any individual who is a former
employee of the Parent Group or the SpinCo Group and who has not resumed
employment with the Parent Group, in each case, other than any SpinCo Employee
or Former SpinCo Employee.

 

1.18       “Former SpinCo Employee” means any individual who becomes a former
employee of the SpinCo Group on or after January 1, 2016 and who has not resumed
employment with the SpinCo Group as of the Effective Time.

 

1.19       “Former SpinCo Non-U.S. Employee” means a Former SpinCo Employee
whose principal place of employment or engagement was outside of the United
States at the time such employee ceased to be a SpinCo Employee.

 

1.20       “Former SpinCo U.S. Employee” means a Former SpinCo Employee whose
principal place of employment or engagement was in the United States at the time
such employee ceased to be a SpinCo Employee.

 

1.21       “Health and Welfare Plans” means any plan, fund or program which was
established or is maintained for the purpose of providing for its participants
or their dependents and beneficiaries, through the purchase of insurance or
otherwise, medical (including PPO, EPO and HDHP coverages), dental,
prescription, vision, short-term disability, long-term disability, life and
AD&D, employee assistance, group legal services, wellness, cafeteria (including
premium payment, health flexible spending account and dependent care flexible
spending account components), travel reimbursement, transportation, or other
benefits in the event of sickness, accident, disability, death or unemployment,
or vacation benefits, apprenticeship or other training programs or day care
centers, scholarship funds, or prepaid legal services, including any such plan,
fund or program as defined in Section 3(1) of ERISA.

 

1.22       “HIPAA” means the health insurance portability and accountability
requirements for “group health plans” under the Health Insurance Portability and
Accountability Act of 1996, as amended.

 

1.23       “Liability” has the meaning given that term in the Separation and
Distribution Agreement.

 

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1.24       “MeadWestvaco Long-Term Incentive Plans” means the MeadWestvaco
Corporation 2005 Performance Incentive Plan, the 2009 Compensation Plan for
Non-Employee Directors, the 1996 Stock Option Plan, each as amended and restated
and any other plan providing for the grant of equity-based compensation or
cash-based long-term incentive awards maintained by MeadWestvaco Corporation on
or prior to July 1, 2015.

 

1.25       “Non-U.S. Health and Welfare Plan” means any Health and Welfare Plan
that is not a U.S. Health and Welfare Plan.

 

1.26       “NYSE” has the meaning given that term in the Separation and
Distribution Agreement.  

 

1.27        “Option” (a) when immediately preceded by “Parent” means an option
(either nonqualified or incentive) to purchase shares of Parent Common Stock
granted under any Parent Long-Term Incentive Plan and (b) when immediately
preceded by “SpinCo,” Option means an option (either nonqualified or incentive)
to purchase shares of SpinCo Common Stock following the Effective Time granted
(or deemed to be granted) under the SpinCo Long-Term Incentive Plan.  If not
immediately preceded by “Parent” or “SpinCo”, Option means Parent Options and
SpinCo Options.

 

1.28       “Parent 401(k) Plans” means the WestRock Company 401(k) Retirement
Savings Plan or any other defined contribution plan intended to be qualified
under Section 401 of the Code maintained by Parent or any Parent Entity as in
effect as of the time relevant to the applicable provision of this Agreement.

 

1.29       “Parent Common Stock” means shares of common stock, $0.01 par value
per share, of Parent

 

1.30       “Parent DSU” means an award of director stock units corresponding to
shares of Parent Common Stock granted under any Parent Long-Term Incentive Plan.

 

1.31        “Parent Employee” means any individual who (a) as of immediately
prior to January 1, 2016, was either actively employed by, or then on Approved
Leave of Absence from, any Parent Entity or (b) became actively employed by any
Parent Entity on or after such date, in each case, excluding any Former Parent
Employee, SpinCo Employee, or Former SpinCo Employee.

 

1.32       “Parent Entities” means the members of the Parent Group, as defined
in the Separation and Distribution Agreement.

 

1.33       “Parent Executive DB Plans” means the Rock-Tenn Company Supplemental
Executive Retirement Plan, the MeadWestvaco Corporation Executive Retirement
Plan, the MeadWestvaco Corporation Retirement Restoration Plan, each as amended
and restated, or any other similar plan maintained by Parent as in effect as of
the time relevant to the applicable provision of this Agreement, other than any
Parent Executive DC Plan.

 

1.34       “Parent Executive DC Plans” means the MeadWestvaco Deferred Income
Plan, the Rock-Tenn Company Supplemental Retirement Savings Plan, the WestRock
Company

 

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Deferred Compensation Plan or any other supplemental defined contribution plan
maintained by Parent as in effect as of the time relevant to the applicable
provision of this Agreement.

 

1.35       “Parent Retiree Life Insurance Plan” means the MeadWestvaco
Corporation Retiree Welfare Benefit Program, to the extent such program provides
for post-employment life insurance benefits.

 

1.36       “Parent Retiree Medical Plan” means the MeadWestvaco Corporation
Retiree Welfare Benefit Program, to the extent such program provides for
post-employment health insurance benefits.

 

1.37       “Parent Union Hourly DB Plan” has the meaning set forth in Section
3.2(a).

 

1.38       “Parent Indemnitees” has the meaning given that term in the
Separation and Distribution Agreement.

 

1.39       “Parent Long-Term Incentive Plans” means the WestRock Company 2016
Incentive Stock Plan, Rock-Tenn Company Amended and Restated 2004 Incentive
Stock Plan, the Rock-Tenn Company 2000 Incentive Stock Plan, the Rock-Tenn
Company 1993 Employee Stock Option Plan, the MeadWestvaco Corporation 2005
Performance Incentive Plan, the 2009 Compensation Plan for Non-Employee
Directors and the 1996 Stock Option Plan, each as amended and restated, and any
other plan providing for the grant of equity-based compensation or cash-based
long-term incentive awards maintained by Parent, as in effect as of the time
relevant to the applicable provision of this Agreement.

 

1.40       “Parent Non-U.S. Health and Welfare Plans” has the meaning set forth
in Section 4.3(b) of this Agreement.

 

1.41       “Parent Pension Plan” has the meaning set forth in Section 3.2(a).

 

1.42       “Parent Post-Separation Stock Value” means the closing per-share
price of Parent Common Stock in the “ex-distribution market” on the NYSE on the
last trading day preceding the Distribution Date, as reported by Bloomberg L.P.

 

1.43       “Parent Pre-Separation Stock Value” means the closing per-share price
of Parent Common Stock trading “regular way with due bills” on the NYSE on the
last trading day preceding the Distribution Date, as reported by Bloomberg L.P.

 

1.44       “Parent Ratio” means the quotient obtained by dividing the Parent
Pre-Separation Stock Value by the Parent Post-Separation Stock Value.

 

1.45       “Parent U.S. Health and Welfare Plan” means a U.S. Health and Welfare
Plan sponsored by any Parent Entity, other than a SpinCo U.S. Health and Welfare
Plan.

 

1.46       “Parent” has the meaning set forth in the preamble to this Agreement.

 

1.47       “Participating Company” means (a) Parent and (b) any other Person
(other than an individual) that participates in a plan sponsored by any Parent
Entity.

 

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1.48       “Parties” has the meaning set forth in the preamble to this
Agreement.

 

1.49       “Person” has the meaning given that term in the Separation and
Distribution Agreement.

 

1.50       “Reimbursement Award” means any award, whether vested or unvested,
that was granted under any MeadWestvaco Long-Term Incentive Plan (other than any
Cash LTI Award) that is outstanding as of immediately prior to the Effective
Time and held by a SpinCo Employee.

 

1.51       “Reimbursement Event” means (i) the settlement of any Reimbursement
Award that is an RSU, Restricted Share or similar full-value share-based award
or (ii) the exercise of any Reimbursement Award that is an Option or SAR.

 

1.52       “Reimbursement Invoice” has the meaning set forth in Section 5.3(e).

 

1.53       “Restricted Share” (a) when immediately preceded by “Parent,” means a
share of Parent Common Stock that is subject to transfer restrictions granted
under any Parent Long-Term Incentive Plan and (b) when immediately preceded by
“SpinCo,” means a share of SpinCo Common Stock that is subject to transfer
restrictions following the Effective Time granted (or deemed to be granted)
under the SpinCo Long-Term Incentive Plan.  If not immediately preceded by
“Parent” or “SpinCo”, Restricted Share means Parent Restricted Shares and SpinCo
Restricted Shares.

 

1.54       “Retiree Life Participants” has the meaning set forth in Section
4.1(f).

 

1.55       “Retiree Medical Beneficiaries” has the meaning set forth in Section
4.1(d).

 

1.56       “Retiree Medical Invoice” has the meaning set forth in Section
4.1(d).

 

1.57       “RSU” (a) when immediately preceded by “Parent,” means units granted
under any Parent Long-Term Incentive Plan representing a general unsecured
promise by Parent to pay the value of shares of Parent Common Stock in cash or
shares of Parent Common Stock, other than Parent DSUs, and, (b) when immediately
preceded by “SpinCo,” means units granted (or deemed to be granted) under the
SpinCo Long-Term Incentive Plan representing a general unsecured promise by
SpinCo to pay the value of shares of SpinCo Common Stock in cash or shares of
SpinCo Common Stock following the Effective Time.  If not immediately preceded
by “Parent” or “SpinCo”, RSU means Parent RSUs and SpinCo RSUs.

 

1.58       “SAR” (a) when immediately preceded by “Parent” means a stock
appreciation right covering shares of Parent Common Stock granted under any
Parent Long-Term Incentive Plan, and (b) when immediately preceded by “SpinCo,”
SAR means a stock appreciation right covering shares of SpinCo Common Stock
following the Effective Time granted (or deemed to be granted) under the SpinCo
Long-Term Incentive Plan.  If not immediately preceded by “Parent” or “SpinCo”,
SAR means Parent SARs and SpinCo SARs.

 

1.59       “Section 414(l) Amount” has the meaning set forth in Section 3.2(c).

 

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1.60       “Separation and Distribution Agreement” has the meaning set forth in
the recitals to this Agreement.

 

1.61       “Separation” has the meaning given that term in the Separation and
Distribution Agreement.

 

1.62       “SpinCo” has the meaning set forth in the preamble to this Agreement.

 

1.63       “SpinCo 401(k) Plan” has the meaning set forth in Section 3.1(a).

 

1.64       “SpinCo 401(k) Plan Trust” has the meaning set forth in Section
3.1(a).

 

1.65       “SpinCo Common Stock” means shares of common stock, $0.01 par value
per share, of SpinCo.

 

1.66       “SpinCo Employee” means any individual who (a) as of immediately
prior to January 1, 2016, was either actively employed by, or then on Approved
Leave of Absence (including, for the avoidance of doubt, any individual absent
due to long-term disability as determined by Parent in its sole discretion)
from, a SpinCo Entity or (b) became actively employed by a SpinCo Entity on or
after such date, in each case, excluding any Former SpinCo Employee.

 

1.67       “SpinCo Entities” means the members of the SpinCo Group as defined in
the Separation and Distribution Agreement.

 

1.68       “SpinCo Executive Benefit Plans” means the executive benefit and
nonqualified plans, programs, and arrangements established, sponsored,
maintained, or agreed upon, by any SpinCo Entity for the benefit of employees
and former employees of any SpinCo Entity.

 

1.69       “SpinCo Executive DB Obligations” has the meaning set forth in
Section 5.1.

 

1.70       “SpinCo Executive DC Plan” has the meaning set forth in Section
5.5(b).

 

1.71       “SpinCo Long-Term Incentive Plan” has the meaning set forth in
Section 2.7.

 

1.72       “SpinCo Non-U.S. Health and Welfare Plans” has the meaning set forth
in Section 4.2.

 

1.73       “SpinCo Non-U.S. Employee” means a SpinCo Employee whose principal
place of employment or engagement is outside the United States.

 

1.74       “SpinCo NQDC Plan” has the meaning set forth in Section 5.5(b).

 

1.75       “SpinCo Pension Plan” has the meaning set forth in Section 3.2(b).

 

1.76       “SpinCo Pension Plan Trust” has the meaning set forth in Section
3.2(b).

 

1.77       “SpinCo U.S. Employee” means a SpinCo Employee whose principal place
of employment or engagement is in the United States.

 

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1.78       “SpinCo U.S. Health and Welfare Plans” has the meaning set forth in
Section 4.1(a) of this Agreement.

 

1.79       “Subsidiary” has the meaning given that term in the Separation and
Distribution Agreement.

 

1.80       “Transfer Date” has the meaning set forth in Section 3.2(c).

 

1.81       “Union Hourly SpinCo Employee” means each SpinCo Employee (including,
for the avoidance of doubt, those SpinCo Employees on Approved Leave of Absence,
including due to long-term disability as determined by Parent in its sole
discretion) who, as of immediately prior to the Effective Time, is participating
in any Parent Pension Plan under any benefit formula applicable to bargained
hourly employees.

 

1.82       “United States” or “U.S.” means the 50 United States of America and
the District of Columbia.

 

1.83       “U.S. Health and Welfare Plan” means any Health and Welfare Plan that
is primarily for the benefit of employees whose principal place of employment or
engagement is in the United States.

 

ARTICLE II
GENERAL PRINCIPLES

 

2.1         Employment of SpinCo Employees. All employees of SpinCo and each
other SpinCo Entity as of immediately prior to the Effective Time (including,
for the avoidance of doubt, any individual absent due to long-term disability as
determined by Parent in its sole discretion) shall continue to be employees of
SpinCo or such other SpinCo Entity, as the case may be, immediately after the
Effective Time.

 

2.2         Assumption and Retention of Liabilities; Related Assets.

 

(a)          As of the Distribution Date, except as expressly provided in this
Agreement, the Parent Entities shall assume or retain and Parent hereby agrees
to pay, perform, fulfill and discharge, in due course in full (i) all
Liabilities under all Parent Benefit Plans with respect to all Parent Employees,
Former Parent Employees and their dependents and beneficiaries, (ii) all
Liabilities with respect to the employment or termination of employment of all
Parent Employees and Former Parent Employees, and (iii) any other Liabilities
expressly assigned to Parent under this Agreement. All assets held in trust to
fund the Parent Benefit Plans and all insurance policies funding the Parent
Benefit Plans shall be Parent Assets (as defined in the Separation and
Distribution Agreement), except to the extent specifically provided otherwise in
this Agreement.

 

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(b)          From and after the Distribution Date, except as expressly provided
in this Agreement, SpinCo and the SpinCo Entities shall assume or retain, as
applicable, and SpinCo hereby agrees to pay, perform, fulfill and discharge, in
due course in full, (i) all Liabilities under all SpinCo Benefit Plans, (ii) all
Liabilities with respect to the employment or termination of employment of all
SpinCo Employees and Former SpinCo Employees, and (iii) any other Liabilities
expressly assigned to SpinCo or any SpinCo Entity under this Agreement.

 

2.3         SpinCo Participation in Parent Benefit Plans. Except as expressly
provided in this Agreement, effective as of the Effective Time (or, in the case
of Parent U.S. Health and Welfare Plans and Parent 401(k) Plans, January 1,
2016), SpinCo and each other SpinCo Entity shall cease to be a Participating
Company in any Parent Benefit Plan and each SpinCo Employee and each Former
SpinCo Employee shall cease to be an individual participant in any Parent
Benefit Plan, and Parent and SpinCo shall take all necessary action to
effectuate such cessation as a Participating Company and as an individual
participant.  With respect to SpinCo Employees and Former SpinCo Employees,
service with SpinCo or any other SpinCo Entity on or after the Effective Time
(or, in the case of Parent U.S. Health and Welfare Plans and Parent 401(k)
Plans, January 1, 2016) shall not be recognized under any Parent Benefit Plan
for any purpose, except to the extent otherwise required by applicable law or as
expressly provided in this Agreement.

 

2.4         Terms of Participation by SpinCo Employees in SpinCo Benefit Plans.
Parent and SpinCo shall agree on methods and procedures, including amending the
respective Benefit Plan documents, to prevent SpinCo Employees from receiving
duplicative benefits from the Parent Benefit Plans and the SpinCo Benefit
Plans.  With respect to SpinCo Employees, each SpinCo Benefit Plan shall provide
that all service, all compensation and all other benefit-affecting
determinations that, as of the Effective Time, were recognized under the
corresponding Parent Benefit Plan shall, as of immediately after the
Distribution Date or any subsequent effective date for such SpinCo Benefit Plan,
receive full recognition, credit and validity and be taken into account under
such SpinCo Benefit Plan to the same extent as if such items occurred under such
SpinCo Benefit Plan, except to the extent that duplication of benefits would
result or for benefit accrual under any defined benefit pension plan.

 

2.5         Commercially Reasonable Efforts. Parent and SpinCo shall use
commercially reasonable efforts to (a) enter into any necessary agreements to
accomplish the assumptions and transfers contemplated by this Agreement and (b)
provide for the maintenance of the necessary participant records, the
appointment of the trustees and the engagement of recordkeepers, investment
managers, providers, insurers, and other third parties reasonably necessary to
maintaining and administering the Parent Benefit Plans and the SpinCo Benefit
Plans.

 

2.6         Regulatory Compliance. Parent and SpinCo shall, in connection with
the actions taken pursuant to this Agreement, reasonably cooperate in making any
and all appropriate filings required under the Code, ERISA and any applicable
securities laws, implementing all appropriate communications with participants,
transferring appropriate records and taking all such other reasonable actions as
the requesting party may reasonably determine to be necessary or appropriate to
implement the provisions of this Agreement in a timely manner.

 

2.7         Approval by Parent as Sole Stockholder. Prior to the Effective Time,
Parent shall cause SpinCo to adopt a long-term incentive plan or program, to be
effective immediately prior

 

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to the Distribution Date (the “SpinCo Long-Term Incentive Plan”) and Parent
shall approve the SpinCo Long-Term Incentive Plan as the sole stockholder of
SpinCo.

 

2.8         No Change in Control.  The Parties hereto agree that none of the
transactions contemplated by the Separation and Distribution Agreement or any of
the Ancillary Agreements, including this Agreement, constitutes a “change in
control,” “change of control” or similar term, as applicable, within the meaning
of any SpinCo Benefit Plan or SpinCo Benefit Agreement, including the SpinCo
Long-Term Incentive Plan.

 

ARTICLE III
Defined Contribution Plans; Defined Benefit Plans

 

3.1         Defined Contribution Plans.

 

(a)          SpinCo has established a defined contribution Benefit Plan intended
to be qualified under Section 401(a) of the Code (the “SpinCo 401(k) Plan”) and
a related trust that is intended to be exempt from tax under Section 501(a) of
the Code (the “SpinCo 401(k) Plan Trust”). Effective as of January 1, 2016,
Parent implemented a trust to trust transfer of the accounts of the SpinCo
Employees and Former SpinCo Employees (in each case, determined as of the date
of transfer) under the Parent 401(k) Plan (including any outstanding participant
loans) and such accounts were transferred to the SpinCo 401(k) Plan and the
SpinCo 401(k) Plan Trust in cash or such other assets as determined by Parent in
its sole discretion; provided that shares of Parent Common Stock were
transferred as provided in Section 3.1(b).  Effective as of January 1, 2016,
SpinCo shall cause the SpinCo 401(k) Plan to assume and be solely responsible
for all Liabilities for plan benefits under the SpinCo 401(k) Plan to or
relating to SpinCo Employees and Former SpinCo Employees, including those whose
accounts have been transferred from the Parent 401(k) Plan. Parent and SpinCo
agree to cooperate in making all appropriate filings and taking all reasonable
actions required to implement the provisions of this Section 3.1; provided that
SpinCo acknowledges that it will be responsible for complying with any
requirements and applying for any Internal Revenue Service determination letters
with respect to the SpinCo 401(k) Plan.

 

(b)          Stock Considerations.

 

(i)          To the extent that SpinCo Employees or Former SpinCo Employees hold
shares of Parent Common Stock under the SpinCo 401(k) Plan, such shares will be
deposited in a stock fund under the SpinCo 401(k) Plan, subject to such
limitations (including the ability to dispose of such shares of Parent Common
Stock in accordance with the terms of the SpinCo 401(k) Plan), or the removal of
such stock fund, in each case, as determined solely by SpinCo or the applicable
fiduciary of the SpinCo 401(k) Plan.  Following January 1, 2016, SpinCo
Employees and Former SpinCo Employees shall not be permitted to acquire shares
of Parent Common Stock in any stock fund under the SpinCo 401(k) Plan, except
for dividend reinvestments permitted under the terms of the SpinCo 401(k) Plan.

 

(ii)         To the extent that Parent Employees or Former Parent Employees
receive shares of SpinCo Common Stock in connection with the Separation with
respect

 

 10 

 

 

to Parent Common Stock held under the Parent 401(k) Plan, such shares will be
deposited in the Parent 401(k) Plan, subject to such limitations (including the
ability to dispose of such shares of SpinCo Common Stock in accordance with the
terms of the Parent 401(k) Plan), or the removal of such fund, in each case, as
determined solely by Parent or the applicable fiduciary of the Parent 401(k)
Plan.  Following January 1, 2016, Parent Employees and Former Parent Employees
shall not be permitted to acquire shares of SpinCo Common Stock fund under the
Parent 401(k) Plan, except for the shares of SpinCo Common Stock acquired in
connection with the Separation.

 

(c)          Parent and SpinCo shall assume sole responsibility for ensuring
that their respective savings plans are maintained in compliance with applicable
laws (including the fiduciary requirements under ERISA) with respect to holding
shares of their respective common stock and common stock of the other Party.

 

3.2         Defined Benefit Plans.   (a)  On and after the Distribution Date,
(i) Parent shall make payments under any Parent Benefit Plan that is a defined
benefit pension plan subject to Title IV of ERISA, other than a “multiemployer
plan” as defined in Section 4001(a)(3) of ERISA, (each a “Parent Pension Plan”)
to any SpinCo Employees who participated in any such Parent Pension Plan prior
to the Distribution Date, other than any Union Hourly SpinCo Employee and (ii)
Parent shall make payments under any Parent Pension Plan to any Parent Employee,
Former Parent Employee or Former SpinCo Employee (for the avoidance of doubt,
determined as of the Distribution Date), in each case, in accordance with the
terms of the applicable Parent Pension Plan as in effect from time to time.

 

(b)          Establishment of SpinCo Pension Plan.  As of the Distribution Date,
SpinCo shall have in effect a defined benefit pension plan that is intended to
be qualified under Section 401(a) of the Code (the “SpinCo Pension Plan”) and a
related trust that is intended to be exempt from tax under Section 501(a) of the
Code (the “SpinCo Pension Plan Trust”).  The SpinCo Pension Plan shall be
established and maintained for the benefit of all Union Hourly SpinCo
Employees.  Without limiting the generality of Section 2.2 or Section 2.3, as of
the Effective Time, (i) each Union Hourly SpinCo Employee shall become a
participant in the SpinCo Pension Plan and (ii) SpinCo shall assume all
Liabilities and obligations of the Parent Entities for the benefits accrued by
the Union Hourly SpinCo Employees in respect of service prior to the Effective
Time under any benefit formula applicable to bargained hourly employees (such
benefits, the “Accrued Union Hourly DB Benefits”) whether arising prior to, at
or after the Effective Time; provided that, for the period between the
Distribution Date and the Transfer Date (as defined below), Parent or any other
applicable Parent Entity shall, to the extent permitted by applicable law,
continue to make benefit payments to Union Hourly SpinCo Employees from the
Parent Pension Plans in respect of benefit payments under the SpinCo Pension
Plan.  The SpinCo Pension Plan and the SpinCo Pension Plan Trust (and any
successors to such plan and/or trust) shall provide that (A) with respect to
assets transferred to the SpinCo Pension Plan from the Parent Pension Plans in
accordance with Section 3.2(c), such assets shall be held by the SpinCo Pension
Plan Trust for the exclusive benefit of the participants in the SpinCo Pension
Plan, (B) the Accrued Union Hourly DB Benefits may not be decreased by amendment
or otherwise and (C) at the time he or she otherwise would be eligible to
receive a payment in respect of his or her Accrued Union Hourly DB Benefit, each
Union Hourly SpinCo Employee shall have the right to elect to receive under the
SpinCo Pension Plan his or her

 

 11 

 

 

Accrued Union Hourly DB Benefit in any form such Union Hourly SpinCo Employee
would have been permitted to elect under the Parent Pension Plan.  

 

(c)          Transfer of Assets to SpinCo Pension Plan.  As soon as practicable
following the Effective Time and subject to this Section 3.2(c), Parent shall
cause the trustee of the applicable Parent Pension Plans to transfer to the
trustee of the SpinCo Pension Plan assets in respect of the Accrued Union Hourly
DB Benefits equal to:  (i) the amount required to be transferred pursuant to
Section 414(l) of the Code, Treasury Regulation Section 1.414(l)-1(n)(2) (unless
the requirements of such section cannot be satisfied) and such other applicable
law using the actuarial assumptions and methodology deemed reasonable by Parent
in its sole discretion (for the avoidance of doubt, such actuarial assumptions
and methodology need not include the safe harbor assumptions specified in
Section 414(l) of the Code), subject to any requirements under such Section of
the Code and ERISA (the “Section 414(l) Amount”); plus (ii) for the period
between the Distribution Date and the date such assets are transferred (the
“Transfer Date”), an interest increment on the Section 414(l) Amount at the rate
equal to the yield on the three month US Treasury Bill rate as of the
Distribution Date; less (iii) any benefit payments that are made from the Parent
Pension Plans to the Union Hourly SpinCo Employees in respect of the Accrued
Union Hourly DB Benefits for the period between the Distribution Date and the
Transfer Date; less (iv) any costs or expenses incurred by Parent in respect of
the Accrued Union Hourly DB Benefits for the period between the Distribution
Date and the Transfer Date.  Notwithstanding the foregoing, no transfer shall be
made until such time as Parent has been provided evidence reasonably
satisfactory to Parent that SpinCo has submitted the SpinCo Pension Plan to the
Internal Revenue Service for a favorable determination letter; provided that, to
the fullest extent permitted by law, SpinCo shall, and shall cause each of the
other SpinCo Entities to, indemnify, defend and hold harmless the Parent
Indemnitees, from and against any and all Liabilities of the Parent Indemnitees
relating to, arising out of or resulting from, directly or indirectly, SpinCo
not having received the applicable favorable determination letter.  For purposes
of this Section 3.2(c), the fair market value of the assets of the Parent
Pension Plans shall be based on actual market values as of the Distribution
Date. For the avoidance of doubt, Parent and the trustee of the applicable
Parent Pension Plan shall retain all assets of the applicable Parent Pension
Plan other than the assets described in the first sentence of this Section
3.2(c).

 

(d)          Determination of Section 414(l) Amount; Disputes.  The Section
414(l) Amount shall be determined by an enrolled actuary designated by Parent,
and Parent shall provide an actuary designated by SpinCo with information
reasonably necessary to calculate the Section 414(l) Amount and to verify that
such calculations have been performed in a manner consistent with Section 414(l)
of the Code.  Within 14 days following receipt by SpinCo’s actuary of the
calculation of the Section 414(l) Amount, SpinCo shall notify Parent in writing
if there is a good faith dispute between Parent’s actuary and SpinCo’s actuary
as to whether Parent’s calculation of the Section 414(l) Amount is in violation
of applicable law or contains errors of a mathematical nature.  If SpinCo does
not notify Parent of any such good faith dispute within such 14-day period, the
determination of Parent’s actuary shall become conclusive, final and
binding.  If any such dispute remains unresolved for 14 days following Parent’s
receipt of such written notification from SpinCo (or within such longer period
as Parent and SpinCo shall mutually agree), Parent and SpinCo shall (in writing)
select and appoint a third actuary (the cost of which shall be borne equally by
Parent and SpinCo), who shall make a final and binding

 

 12 

 

 

determination of the Section 414(l) Amount in accordance with applicable
law.  Each of Parent and SpinCo shall be responsible for the cost of its own
actuary.  Parent’s actuary shall be responsible for the required actuarial
certification under Section 414(l) of the Code.

 

(e)          Filings.  Parent and SpinCo shall reasonably cooperate to make any
and all filings and submissions to the appropriate governmental agencies and
authorities required to be made by Parent or SpinCo in effectuating the
provisions of this Section 3.2, including (i) IRS Forms 5310-A in respect of the
transfers of assets, if applicable, and (ii) in the event that the transactions
contemplated by the Separation and Distribution Agreement or any of the
Ancillary Agreements constitute a “reportable event” (within the meaning of
Section 4043 of ERISA) for which the 30-day notice has not been waived, timely
notification of the Pension Benefit Guaranty Corporation and filing of all
reports required in connection therewith.

 

ARTICLE IV
HEALTH AND WELFARE PLANS

 

4.1         U.S. Health and Welfare Plans

 

(a)          Establishment of SpinCo Health and Welfare Plans. Effective as of
January 1, 2016, SpinCo has adopted U.S. Health and Welfare Plans for the
benefit of SpinCo U.S. Employees, Former SpinCo U.S. Employees and their
dependents and beneficiaries (the “SpinCo U.S. Health and Welfare Plans”), and
SpinCo shall be responsible for all Liabilities relating to, arising out of or
resulting from health and welfare coverage (including COBRA continuation
coverage) from and after January 1, 2016 or claims incurred on or after January
1, 2016 by or on behalf of SpinCo U.S. Employees, Former SpinCo U.S. Employees
or their covered dependents and beneficiaries under the SpinCo U.S. Health and
Welfare Plans.

 

(b)          Flexible Benefit Plan. Effective as of January 1, 2016, SpinCo has
established a flexible benefit plan for the benefit of SpinCo U.S. Employees.  

 

(c)          COBRA and HIPAA Compliance. Parent shall be responsible for
administering compliance with the health care continuation requirements of
COBRA, the certificate of creditable coverage requirements of HIPAA, and the
corresponding provisions of the Parent U.S. Health and Welfare Plans with
respect to Parent Employees and Former Parent Employees and their covered
dependents and beneficiaries who incur a COBRA qualifying event or loss of
coverage under the Parent U.S. Health and Welfare Plans at any time before, on
or after the Effective Time. Parent shall be responsible for administering
compliance with the health care continuation requirements of COBRA, the
certificate of creditable coverage requirements of HIPAA, and the corresponding
provisions of the Parent U.S. Health and Welfare Plans with respect to SpinCo
Employees and their covered dependents and beneficiaries who incurred a COBRA
qualifying event or loss of coverage under the Parent U.S. Health and Welfare
Plans at any time prior to January 1, 2016. SpinCo or another SpinCo Entity
shall be responsible for administering compliance with the health care
continuation requirements of COBRA, the certificate of creditable coverage
requirements of HIPAA, and the corresponding provisions of the SpinCo U.S.
Health and Welfare Plans with respect to SpinCo Employees and Former

 

 13 

 

 

SpinCo Employees and their covered dependents who incur a COBRA qualifying event
or loss of coverage under the SpinCo U.S. Health and Welfare Plans on or after
January 1, 2016. The Parties hereto agree that none of the transactions
contemplated by the Separation and Distribution Agreement or any of the
Ancillary Agreements, including this Agreement, shall constitute a COBRA
qualifying event for any purpose of COBRA.  

 

(d)          Retiree Medical Benefits. Each SpinCo Employee and each former
employee of the SpinCo Group (excluding any Parent Employee), and each of their
respective dependents and beneficiaries, who participated in the Parent Retiree
Medical Plan as of January 1, 2016 (the “Retiree Medical Beneficiaries”) may
continue to participate in the Parent Retiree Medical Plan during the period
commencing on January 1, 2016 and ending on December 31, 2016 on the same
general terms and conditions as similarly situated Parent Employees and former
employees of the Parent Group (and their respective dependents and
beneficiaries) for so long as such individual satisfies the applicable
eligibility criteria (with, in the case of SpinCo Employees, employment with any
SpinCo Entity being treated as employment with Parent).  Beginning on the
Distribution Date, as promptly as practicable following the end of each calendar
month, Parent shall deliver to SpinCo a summary (the “Retiree Medical Invoice”)
that sets forth the following amounts for the applicable calendar month (or, in
the case of the first Retiree Medical Invoice delivered to SpinCo, since January
1, 2016):  (i) the aggregate amounts paid by the Parent Group for welfare
benefit claims in respect of the Retiree Medical Beneficiaries under the Parent
Retiree Medical Plan, to the extent not fully covered by insurance (if
applicable); (ii) the aggregate premiums paid by the Parent Group to third-party
insurance providers in respect of coverage of the Retiree Medical Beneficiaries;
and (iii) the aggregate administrative costs and any legal fees incurred by the
Parent Group in respect of participation by the Retiree Medical Beneficiaries in
the Parent Retiree Medical Plan.  Within ten (10) days following SpinCo’s
receipt of each Retiree Medical Invoice, SpinCo shall make a cash payment to
Parent in an amount equal to the aggregate amount set forth on such Retiree
Medical Invoice (in the case of the first Retiree Medical Invoice delivered to
SpinCo, reduced by any amounts previously paid by SpinCo in respect thereof
prior to the Distribution Date).  Notwithstanding anything in Section 7.5 to the
contrary, Parent’s obligation to permit the participation provided for in this
Section 4.1(d) shall be subject to any necessary consents of any third-party
vendors and insurance carriers in respect of the Parent Retiree Medical
Plan.  In order to implement the provisions of this Section 4.1(d), Parent and
SpinCo shall reasonably cooperate in the exchange of information, notification
to Retiree Medical Beneficiaries and in the preparation of any documentation
required to be filed with appropriate governmental agencies or authorities,
except as prohibited by applicable law.

 

(e)          Retiree Medical Indemnification.  Notwithstanding anything in the
Separation and Distribution Agreement or any of the Ancillary Agreements,
including this Agreement, to the contrary, to the fullest extent permitted by
law, SpinCo shall, and shall cause each of the other SpinCo Entities to,
indemnify, defend and hold harmless the Parent Indemnitees, from and against any
and all Liabilities of the Parent Indemnitees relating to, arising out of or
resulting from, directly or indirectly, any suit or other claim by any Retiree
Medical Beneficiary, SpinCo Employee or Former SpinCo Employee related to (i)
participation in the Parent Retiree Medical Plan or (ii) the termination of
post-employment health insurance benefits under the Parent Retiree Medical Plan;
provided, however, that this indemnity shall not

 

 14 

 

 

apply to any such Liabilities resulting from the willful misconduct of Parent or
any other member of the Parent Group.

 

(f)           Retiree Life Insurance.  As of the Distribution Date, SpinCo shall
have in effect a life insurance plan (the “SpinCo Life Insurance Plan”).  The
SpinCo Life Insurance Plan shall be established and maintained for the benefit
of all SpinCo Employees and former employees of the SpinCo Group (excluding any
Parent Employees) who participate in the Parent Retiree Life Insurance Plan as
of the Effective Time (“Retiree Life Participants”).  Without limiting the
generality of Section 2.2 or Section 2.3, as of the Effective Time, (i) each
Retiree Life Participant shall become a participant in the SpinCo Life Insurance
Plan and (ii) SpinCo shall assume all Liabilities and obligations of the Parent
Entities in respect of the Retiree Life Participants under the Parent Retiree
Life Insurance Plan.  

 

4.2         Non-U.S. Health and Welfare Plans. Effective as of the Distribution
Date, SpinCo shall adopt Non-U.S. Health and Welfare Plans for the benefit of
SpinCo Non-U.S. Employees, Former SpinCo Non-U.S. Employees and their dependents
and beneficiaries (the “SpinCo Non-U.S. Health and Welfare Plans”), and SpinCo
shall be responsible for all Liabilities relating to, arising out of or
resulting from health and welfare coverage from and after the Distribution Date
or claims incurred on or after the Distribution Date by or on behalf of SpinCo
Non-U.S. Employees, Former SpinCo Non-U.S. Employees or their covered dependents
and beneficiaries under the SpinCo Non-U.S. Health and Welfare Plans.    

 

4.3         Retention of Sponsorship and Liabilities.

 

(a)          Following December 31, 2015, the Parent Entities shall retain:

 

(i)          sponsorship of all Parent U.S. Health and Welfare Plans and any
trust or other funding arrangement established or maintained with respect to
such plans, including any assets held as of December 31, 2015 with respect to
such plans; and

 

(ii)         all Liabilities under the Parent U.S. Health and Welfare Plans,
except as set forth in Section 4.1(d),  Section 4.1(e) or Section 4.1(f).

 

(b)          Following the Distribution Date, the Parent Entities shall retain:

 

(i)          sponsorship of all Non-U.S. Health and Welfare Plans sponsored by
any Parent Entity, other than a SpinCo Non-U.S. Health and Welfare Plan (the
“Parent Non-U.S. Health and Welfare Plans”) and any trust or other funding
arrangement established or maintained with respect to such plans, including any
assets held as of the Distribution Date with respect to such plans; and

 

(ii)         all Liabilities under the Parent Non-U.S. Health and Welfare Plans,
except as set forth in Section 4.1(d),  Section 4.1(e) or Section 4.1(f).

 

Parent shall not assume any Liability under any SpinCo U.S. Health and Welfare
Plan or any SpinCo Non-U.S. Health and Welfare Plan, and all such claims shall
be satisfied pursuant to Section 4.1(a) and Section 4.2.

 

 15 

 

 

4.4         Workers’ Compensation Liabilities. The Parent Entities shall retain
all workers’ compensation Liabilities relating to, arising out of, or resulting
from any claim by a Parent Employee or Former Parent Employee and SpinCo
Entities shall retain all workers’ compensation Liabilities relating to, arising
out of, or resulting from any claim by a SpinCo Employee or Former SpinCo
Employee. Parent and SpinCo shall cooperate with respect to any notification to
appropriate governmental agencies or authorities of the effective time of, and
the issuance of new, or the transfer of existing, workers’ compensation
insurance policies and claims handling contracts. In the event that any claims
arising prior to the Effective Time are part of a Parent Entity self-insurance
program that cannot by statute be transferred to the SpinCo Entities, SpinCo
will arrange for a separate administration agreement of such claims and/or will
arrange for financial payment of or reimbursement for any claim and expense
payments made on such claims made on its behalf by the Parent Entities.  SpinCo
shall promptly provide any and all data required by the Parent Entities for
filing of any self-insurance reports and shall promptly pay any and all fees and
assessments as they become due from any governing state self-insurance
agency.  SpinCo shall also pay its proportionate share of any collateral
required (including associated collateral fees) for any self-insured workers’
compensation Liabilities.

 

4.5         Payroll Taxes and Reporting of Compensation. Parent and SpinCo
shall, and shall cause the other Parent Entities and the other SpinCo Entities
to, respectively, take such action as may be reasonably necessary or appropriate
in order to minimize Liabilities related to payroll taxes after the Distribution
Date.   Subject to Sections 5.3(e) and 5.3(f), Parent and SpinCo shall, and
shall cause the other Parent Entities and the other SpinCo Entities to,
respectively, each bear its responsibility for payroll tax obligations and for
the proper reporting to the appropriate governmental agencies or authorities of
compensation earned by their respective employees after the Effective Time,
including compensation related to the Parent Executive DC Plans, the SpinCo
Executive DC Plans, the exercise of Options or SARs or the vesting and/or
settlement of any RSUs, DSUs or Restricted Shares.

 

ARTICLE V
EXECUTIVE BENEFITS AND OTHER BENEFITS

 

5.1         Assumption of Executive Benefit Plan Obligations. Except as
expressly provided in this Agreement, effective as of the Effective Time, the
SpinCo Entities shall assume and be solely responsible for all Liabilities to or
relating to SpinCo Employees and Former SpinCo Employees under all Parent
Executive DB Plans (the “SpinCo Executive DB Obligations”) and SpinCo Executive
Benefit Plans.  After the Effective Time, the Parent Entities shall provide the
SpinCo Entities with all information, data and administrative support that is
reasonably necessary for SpinCo to properly fully satisfy the SpinCo Executive
DB Obligations in accordance with the terms of the Parent Executive DB Plans;
provided that, to the fullest extent permitted by law, SpinCo shall, and shall
cause each of the other SpinCo Entities to, indemnify, defend and hold harmless
the Parent Indemnitees, from and against any and all Liabilities of the Parent
Indemnitees relating to, arising out of or resulting from, directly or
indirectly, the SpinCo Executive DB Obligations, including such provision of
information, data and administrative support.

 

 16 

 

 

5.2         Short-Term Incentive Awards.

 

(a)          SpinCo Bonus Awards.

 

(i)          SpinCo shall assume all Liabilities with respect to any bonus or
other short-term incentive awards payable under any Benefit Plan or Benefit
Agreement (other than any equity-based awards described in Section 5.3) to any
SpinCo Employee or Former SpinCo Employee on or after January 1, 2016 (the
“SpinCo Bonus Payments”).  SpinCo shall be responsible for determining the
amounts of all SpinCo Bonus Payments that have not be determined prior to the
Effective Time, including the extent to which established performance criteria
(as interpreted by SpinCo, in its sole discretion) have been met, and shall pay
all SpinCo Bonus Payments no later than the times provided for under the
applicable Benefit Plan or Benefit Agreement.  For the avoidance of doubt, any
determinations made prior to the Effective Time regarding the amounts of any
SpinCo Bonus Payments shall be subject to Parent’s approval.

 

(ii)         If any SpinCo Employee (determined as of January 1, 2016) received
a bonus or other short-term incentive award cash payment from Parent in respect
of the period beginning on July 1, 2015 and ending on September 30, 2015 and has
remained continuously employed by the Parent Entities or the SpinCo Entities
through January 1, 2016, then SpinCo shall provide such SpinCo Employee with one
or more bonus or other short-term incentive award cash payments in respect of
the period beginning on October 1, 2015 and ending on December 31, 2015 in
amounts that shall be determined by SpinCo in its reasonable discretion.

 

(b)          Parent Bonus Awards. Parent shall retain all Liabilities with
respect to any bonus or other short-term incentive awards payable under any
Benefit Plan or Benefit Agreement (other than equity-based awards described in
Section 5.3) to Parent Employees for the fiscal year of Parent in which the
Effective Time occurs and thereafter.

 

5.3         Parent Equity and Long-Term Incentive Awards. Parent and SpinCo
shall use commercially reasonable efforts to take all actions necessary or
appropriate so that each outstanding Parent Option, Parent SAR, Parent RSU,
Parent Restricted Share, Parent Cash LTI Award and any other award (including
cash awards) granted under the Parent Long-Term Incentive Plans held by any
individual, in each case, as of the Effective Time, shall be treated as set
forth in this Section 5.3.  

 

(a)          Parent Options and Parent SARs.  As determined by the Compensation
Committee of the Parent Board of Directors (the “Committee”) pursuant to its
authority under the applicable Parent Long-Term Incentive Plan, each Parent
Option and each Parent SAR, whether vested or unvested, shall be subject to the
same terms and conditions after the Effective Time as were applicable to such
Parent Option or Parent SAR immediately prior to the Effective Time; provided,
however, that from and after the Effective Time:

 

(i)          the number of shares of Parent Common Stock subject to such Parent
Option or Parent SAR shall be equal to the product, rounded down to the nearest
whole share, obtained by multiplying (A) the number of shares of Parent Common
Stock subject to such Parent Option or Parent SAR immediately prior to the
Effective Time by (B) the Parent Ratio,

 

 17 

 

 

(ii)         the per share exercise or base price of such Parent Option or
Parent SAR shall be equal to the quotient, rounded up to the nearest whole cent,
obtained by dividing (A) the per share exercise or base price of such Parent
Option or Parent SAR immediately prior to the Effective Time by (B) the Parent
Ratio and

 

(iii)        any portion of such Parent Option or Parent SAR that is unvested
immediately prior to the Effective Time and that is held by a SpinCo Employee
shall vest in full on the Effective Time.

 

(b)          Parent RSUs and Parent DSUs. As determined by the Committee
pursuant to its authority under the applicable Parent Long-Term Incentive Plan,
each Parent RSU and each Parent DSU awarded in respect of service as a Parent
director shall be subject to the same terms and conditions after the Effective
Time as the terms and conditions applicable to such Parent RSUs or Parent DSUs
immediately prior to the Effective Time; provided, however, that from and after
the Effective Time:

 

(i)          the number of Parent RSUs or Parent DSUs shall be equal to the
product, rounded to the nearest whole share, obtained by multiplying (A) the
number of Parent RSUs or Parent DSUs immediately prior to the Effective Time by
(B) the Parent Ratio,

 

(ii)         Parent RSUs that (A) were granted prior to 2015, (B) are unvested
immediately prior to the Effective Time and (C) are held by a SpinCo Employee
shall vest in full on the Effective Time and shall be settled in accordance with
their terms, and

 

(iii)        a pro-rata portion of the Parent RSUs that (A) were granted in
2015, (B) are unvested immediately prior to the Effective Time and (C) are held
by a SpinCo Employee shall vest on the Effective Time and shall be settled in
accordance with their terms such that the ratio of (x) the total number of
shares of Parent Common Stock covered by such Parent RSUs that have vested after
giving effect to this provision to (y) the total number of shares of Parent
Common Stock covered by such Parent RSUs shall equal the ratio of (I) the number
of full months that have elapsed from January 1, 2015 through the date on which
the Effective Time occurs to (II) thirty-six (36), and the balance of such
Parent RSUs shall be forfeited; provided that performance with respect to any
Parent RSUs subject to performance criteria shall be deemed satisfied at the
target performance level.

 

(c)          Parent Restricted Shares. Notwithstanding anything in the
Separation and Distribution Agreement to the contrary, as determined by the
Committee pursuant to its authority under the applicable Parent Long-Term
Incentive Plan, the holder of each Parent Restricted Share shall be entitled to
receive a number of SpinCo Restricted Shares determined in the same manner as
the number of shares of SpinCo Common Stock to be received by the holder of each
share of Parent Common Stock upon the Distribution, which SpinCo Restricted
Shares shall be subject to the same terms and conditions after the Effective
Time as were applicable to the Parent Restricted Shares to which they
relate.  For the avoidance of doubt, no Parent Restricted Share shall receive
any shares of SpinCo Common Stock that are not SpinCo Restricted Shares in
connection with the Distribution.

 

 18 

 

 

(d)          Cash LTI Awards.  As determined by the Committee pursuant to its
authority under the Parent Long-Term Incentive Plans, the Cash LTI Awards held
by a SpinCo Employee shall be assumed by the SpinCo Long-Term Incentive Plan,
which shall be considered a successor to the applicable Parent Long-Term
Incentive Plans with respect to such Cash LTI Awards, and shall otherwise be
subject to the same terms and conditions after the Effective Time as were
applicable to such Cash LTI Award immediately prior to the Effective Time.  The
SpinCo Entities shall be solely responsible for all Liabilities in connection
with any payments pursuant to such assumed Cash LTI Awards.

 

(e)          Reimbursement Awards.  Following the Effective Time, Parent may,
from time to time, deliver to SpinCo a summary (a “Reimbursement Invoice”) of
all Reimbursement Events that have occurred on or after the date of the previous
Reimbursement Invoice or, in the case of the first Reimbursement Invoice
delivered to SpinCo, the Effective Time.  Such Reimbursement Invoice shall also
provide Parent’s determination of the amounts that are due in respect of such
Reimbursement Events under this Section 5.3(e), as described below.  Within ten
(10) days following the delivery of such Reimbursement Invoice, SpinCo shall
make a cash payment to Parent equal to the aggregate value of all Reimbursement
Awards settled or exercised, in whole or in part, in connection with the
Reimbursement Events identified in such Reimbursement Invoice, as determined in
accordance with this Section 5.3(e), plus the amount of any employer-paid
employment and payroll taxes paid by any Parent Entity related to such
Reimbursement Events.  With respect to each Reimbursement Award that is an RSU,
Restricted Share or similar full-value share-based equity award, the value for
purposes of this Section 5.3(e) shall be equal to the number of shares of Parent
Common Stock with respect to which such award is settled, multiplied by the
closing per share price of Parent Common Stock on the day of settlement of such
award.  With respect to each Reimbursement Award that is an Option or SAR, the
value for purposes of this Section 5.3(e) shall be equal to (A) the number of
shares of Parent Common Stock with respect to which such award was exercised,
multiplied by (B) the closing per share price of Parent Common Stock on the day
of such exercise minus the exercise price or base price, as applicable, of such
award.  The Parties shall reasonably cooperate with respect to the exchange of
any other information necessary to satisfy their obligations under this Section
5.3(e). Income tax deductions with respect to the vesting and settlement of
Reimbursement Awards pursuant to this Section 5.3(e) shall be claimed solely by
SpinCo. Within ten (10) days following the Effective Time, SpinCo shall make a
cash payment to Parent in the amount of $25,000 to compensate Parent for the
administrative costs and expenses Parent will incur in connection with the
Reimbursement Awards.

 

(f)          Foreign Grants/Awards. To the extent that any of the Parent
Options, Parent SARs, Parent RSUs or Parent Restricted Shares are held by
non-U.S. employees, Parent and SpinCo shall use their commercially reasonable
efforts to preserve, at and after the Effective Time, the value and tax
treatment accorded to such Parent Options, Parent SARs, Parent RSUs or Parent
Restricted Shares; provided that, SpinCo shall, and shall cause each of the
other SpinCo Entities to, indemnify, defend and hold harmless the Parent
Indemnitees, from and against any and all Liabilities of the Parent Indemnitees
relating to, arising out of or resulting from, directly or indirectly, any such
efforts by Parent in respect of any Reimbursement Award.

 

(g)          Miscellaneous Equity Award Terms. After the Distribution Date,
Parent Options, Parent SARs, Parent RSUs, Parent DSUs, and Parent Restricted
Shares, regardless of by whom held, shall be settled by Parent pursuant to the
terms of the Parent Long-Term Incentive Plans, and SpinCo Options, SpinCo SARs,
SpinCo RSUs, and SpinCo Restricted Shares, regardless of by whom held, shall be
settled by SpinCo pursuant to the terms of the SpinCo Long-Term Incentive
Plan.  Accordingly, it is intended that, to the extent of the issuance of such

 

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SpinCo Restricted Shares in connection with the adjustment provisions of this
Section 5.3, the SpinCo Long-Term Incentive Plan shall be considered a successor
to the applicable Parent Long-Term Incentive Plan.  With respect to equity
awards adjusted pursuant to this Section 5.3, employment with any SpinCo Entity
shall be treated as employment with Parent with respect to Parent equity awards
held by SpinCo Employees and employment with any Parent Entity shall be treated
as employment with SpinCo with respect to SpinCo equity awards held by Parent
Employees.

 

(h)          Waiting Period for Exercisability of Options and SARs and
Settlement of RSUs and DSUs. Parent Options and Parent SARs that are covered by
this Section 5.3 shall not be exercisable during a period beginning on a date
prior to the Distribution Date determined by Parent in its sole discretion, and
continuing until the Parent Post-Separation Stock Value is determined after the
Effective Time, or such longer period as Parent determines necessary to
implement the provisions of this Section 5.3. Parent RSUs and Parent DSUs that
are covered by this Section 5.3 shall not be settled during a period beginning
on a date prior to the Distribution Date determined by Parent in its sole
discretion, and continuing until the Parent Post-Separation Stock Value is
determined after the Effective Time, or such longer period as Parent determines
necessary to implement the provisions of this Section 5.3.

 

(i)           MWV LTI Indemnification.  Notwithstanding anything in the
Separation and Distribution Agreement or any of the Ancillary Agreements,
including this Agreement, to the contrary and in addition to the
indemnifications set forth in Section 5.3(e) and Section 5.3(f), to the fullest
extent permitted by law, SpinCo shall, and shall cause each of the other SpinCo
Entities to, indemnify, defend and hold harmless the Parent Indemnitees, from
and against any and all Liabilities of the Parent Indemnitees relating to,
arising out of or resulting from, directly or indirectly, any suit or other
claim relating to any awards granted under the MeadWestvaco Long-Term Incentive
Plans to any SpinCo Employee (determined as of the Effective Time) (other than
any Reimbursement Awards).    

 

5.4         Employment Agreements. Any employment agreement between Parent and a
SpinCo Employee shall, effective as of January 1, 2016, be assigned by Parent to
SpinCo and assumed by SpinCo.

 

5.5         Parent Executive DC Plans.

 

(a)          Parent shall retain, or cause another of the Parent Entities to
retain, all assets and all Liabilities arising out of or relating to the Parent
Executive DC Plans related to (i) any Parent Employee or Former Parent Employee
or (ii) any SpinCo Employee or Former SpinCo Employee in connection with his or
her service prior to December 31, 2015, including the obligation to make all
payments or distributions in respect of such Liabilities in accordance with the
terms of the applicable Parent Executive DC Plan. The Parties hereto agree that
none of the transactions contemplated by the Separation and Distribution
Agreement or any of the Ancillary Agreements, including this Agreement, will
trigger a payment or distribution of

 

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compensation under the Parent Executive DC Plans to any SpinCo Employee or
Former SpinCo Employee and, consequently, that the payment or distribution of
any compensation to which any SpinCo Employee or Former SpinCo Employee is
entitled under the Parent Executive DC Plans will occur upon the time provided
for under the applicable Parent Executive DC Plan and such SpinCo Employee’s or
Former SpinCo Employee’s deferral election.

 

(b)          On or as soon as practicable following January 1, 2016, SpinCo
shall, in respect of each Parent Executive DC Plan in which any SpinCo Employee
participates, establish a nonqualified deferred compensation plan (a “SpinCo
Executive DC Plan”) for the benefit of such participating SpinCo Employees (the
date such plan is established, a “SpinCo NQDC Plan Date”).  For the avoidance of
doubt, from and after December 31, 2015, all participating SpinCo Employees
shall cease participation in the applicable Parent Executive DC Plan, and on the
applicable SpinCo NQDC Plan Date shall begin to accrue benefits, if any, under
the applicable SpinCo Executive DC Plan in accordance with the terms of such
SpinCo Executive DC Plan, and the Parent Entities shall have no Liabilities or
obligations with respect to the SpinCo Executive DC Plans.  

 

5.6         Severance. The Parties hereto agree that none of the transactions
contemplated by the Separation and Distribution Agreement or any of the
Ancillary Agreements, including this Agreement, shall result in any SpinCo
Employee or Former SpinCo Employee being deemed to have incurred a termination
of employment or being eligible to receive severance benefits. The SpinCo
Entities shall be solely responsible for all Liabilities arising out of any
payments and benefits relating to the termination or alleged termination of the
employment of any SpinCo Employee or Former SpinCo Employee (in each case,
determined as of January 1, 2016), including for purposes of the MeadWestvaco
Corporation Change of Control Severance Pay Plan for Salaried and Non-Union
Hourly Employees, other than with respect to the portion of any such payments or
benefits to SpinCo Employees or Former SpinCo Employees who terminate employment
prior to the Effective Time that Parent has agreed, in its sole discretion, to
provide to such employees as a payment from, or benefit under, a Parent Pension
Plan.  For the avoidance of doubt, such Liabilities shall include any
employer-paid portion of any employment and payroll taxes (including social
security or similar contributions) related thereto.

 

ARTICLE VI
Labor Matters

 

6.1         Works Councils; Employee Notices.  Prior to the Effective Time,
(a) SpinCo shall, and shall cause the other SpinCo Entities, to satisfy all
legally required obligations of the SpinCo Entities and (b) Parent shall, and
shall cause the other Parent Entities, to satisfy all legally required
obligations of the Parent Entities, in each case, relating to (i) notification
and consultation with works councils, labor unions and other employee
representatives, (ii) completion of all regulatory filings relating to SpinCo
Employees and Former SpinCo Employees, (iii) notification of SpinCo Employees,
and Former SpinCo Employees, (iv) obtaining any required consents from any
SpinCo Employees and Former SpinCo Employees and (v) taking such other actions
with respect to the SpinCo Employees and Former SpinCo Employees as may be
required by applicable law, in each case, as may be necessary in order to
consummate the transactions contemplated by the Separation and Distribution
Agreement or any of the Ancillary Agreements, including this Agreement. Each of
the Parties

 

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hereto shall indemnify, defend and hold harmless the other Party hereto from and
against any and all Liabilities relating to, arising out of or resulting from
the failure of any of the indemnifying Party to satisfy its obligations pursuant
to this Section 6.1.

 

6.2         Collective Bargaining Agreements. As of the Effective Time, SpinCo
shall, and shall cause the other SpinCo Entities as appropriate to, adopt and
assume any collective bargaining, works council or other labor union contract or
labor arrangement (collectively, “Collective Bargaining Agreements”) covering
any of the SpinCo Employees immediately prior to the Effective Time and
recognize the works councils, labor unions and other employee representatives
that are party to such Collective Bargaining Agreements; provided that, any
compensation or benefits that were, prior to the Effective Time, provided to
SpinCo Employees under the Collective Bargaining Agreements through the Parent
Benefit Plans shall, from and after the Effective Time, be provided through the
SpinCo Benefit Plans as set forth in this Agreement.

 

6.3         Reinstatements.  Subject to applicable laws and Collective
Bargaining Agreements, in the event that any individual who is a former employee
of the SpinCo Group (regardless of whether such employee is a Former SpinCo
Employee or a Former Parent Employee) is awarded reinstatement to employment
with the Parent Entities under any applicable law or Collective Bargaining
Agreement, including any Collective Bargaining Agreement dispute resolution
procedure, within five days of receiving notification of such reinstatement from
Parent, SpinCo, or one of the other SpinCo Entities, shall offer such former
employee of the SpinCo Group employment with SpinCo or one of the other SpinCo
Entities on substantially identical terms and conditions as required pursuant to
the terms of the award of reinstatement, and the Parties shall otherwise
reasonably cooperate in order to transfer (a) the employment of such former
employee of the SpinCo Group and (b) all Liabilities related to such former
employee of the SpinCo Group that would have become liabilities of the SpinCo
Group under this Agreement if such former employee had been a SpinCo Employee
immediately prior to the Effective Time (including, for the avoidance of doubt,
the portion of any backpay awarded to such former employee of the SpinCo Group
in respect of the period beginning on the Distribution Date) to SpinCo or one of
the other SpinCo Entities, including taking all reasonable actions to ensure
that such former employee of the SpinCo Group accepts such offer of
employment.  

 

ARTICLE VII
GENERAL AND ADMINISTRATIVE

 

7.1         Sharing of Participant Information. Subject to applicable laws,
Parent and SpinCo shall share, and Parent shall cause each other Parent Entity
to share, and SpinCo shall cause each other SpinCo Entity to share with each
other and their respective agents and vendors (without obtaining releases) all
participant information necessary for the efficient and accurate administration
of each of the SpinCo Benefit Plans and the Parent Benefit Plans. Parent and
SpinCo and their respective authorized agents shall, subject to applicable laws,
be given reasonable and timely access to, and may make copies of, all
information relating to the subjects of this Agreement in the custody of the
other Party, to the extent necessary for such administration. Until the
Effective Time, all participant information shall be provided in the manner and
medium applicable to Participating Companies in Parent Benefit Plans generally.
Notwithstanding anything in the Separation and Distribution Agreement or any of
the Ancillary Agreements, including this Agreement, to the contrary, to the
fullest extent permitted by law SpinCo shall, and shall cause each of the other
SpinCo Entities to, indemnify, defend and hold harmless the Parent Indemnitees,
from and against any and all Liabilities of the Parent Indemnitees relating to,
arising out of or resulting from, directly or indirectly, any failure by SpinCo
to comply with the provisions of this Section 7.1.

 

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7.2         Reasonable Efforts/Cooperation. Each of the Parties hereto will use
its commercially reasonable efforts to promptly take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate the transactions
contemplated by this Agreement. Each of the Parties hereto shall cooperate fully
on any issue relating to the transactions contemplated by this Agreement,
including, but not limited to, those for which the other Party seeks a
determination letter or private letter ruling from the Internal Revenue Service,
an advisory opinion from the Department of Labor or any other filing (including,
but not limited to, securities filings (remedial or otherwise)), consent or
approval with respect to or by a governmental agency or authority in any
jurisdiction in the U.S. or abroad.  Without limiting the generality of the
preceding sentence, the Parties shall cooperate in connection with any (a)
audits of (i) any Benefit Plan with respect to which such Party may have
relevant information or (ii) their respective payroll services in connection
with the services provided by one Party to the other Party and (b) any
terminations of the employment of any Parent Employee or any SpinCo Employee to
the extent necessary to administer any Benefit Plans and Benefit Agreements of
the Parties, including the Parent Executive DC Plans and the SpinCo Executive DC
Plans and any equity-awards held by Parent Employees and SpinCo Employees.

 

7.3         No Third-Party Beneficiaries. This Agreement is solely for the
benefit of the Parties hereto and is not intended to confer upon any other
Persons any rights or remedies hereunder. Except as expressly provided in this
Agreement, nothing in this Agreement shall preclude Parent or any other Parent
Entity, at any time after the Effective Time, from amending, merging, modifying,
terminating, eliminating, reducing, or otherwise altering in any respect any
Parent Benefit Plan or Benefit Agreement, any benefit under any Parent Benefit
Plan or Benefit Agreement or any trust, insurance policy or funding vehicle
related to any Parent Benefit Plan or Benefit Agreement.  Except as expressly
provided in this Agreement, nothing in this Agreement shall preclude SpinCo or
any other SpinCo Entity, at any time after the Effective Time, from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise altering in
any respect any SpinCo Benefit Plan or Benefit Agreement, any benefit under any
SpinCo Benefit Plan or Benefit Agreement or any trust, insurance policy or
funding vehicle related to any SpinCo Benefit Plan or Benefit Agreement.

 

7.4         Fiduciary Matters. It is acknowledged that actions required to be
taken pursuant to this Agreement may be subject to fiduciary duties or standards
of conduct under ERISA or other applicable law, and no Party shall be deemed to
be in violation of this Agreement if it fails to comply with any provisions
hereof based upon its good faith determination that to do so would violate such
a fiduciary duty or standard. Except as provided in Section 4.1(e), each Party
shall be responsible for taking such actions as are deemed necessary and
appropriate to comply with its own fiduciary responsibilities and shall fully
release and indemnify the other Party for any Liabilities caused by the failure
to satisfy any such responsibility.

 

7.5         Consent of Third Parties. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor) and such consent
is withheld, the Parties hereto shall use commercially reasonable efforts to
implement the applicable provisions of this Agreement to the full extent
practicable. If any provision of this Agreement cannot be implemented due to the
failure of such third party to consent, the Parties hereto shall negotiate in
good faith to implement the provision in a mutually satisfactory manner. The
phrase

 

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“commercially reasonable efforts” as used herein shall not be construed to
require any Party to incur any unreasonable expense or Liability or to waive any
right.

 

ARTICLE VIII
MISCELLANEOUS

 

8.1         Effect If Effective Time Does Not Occur. If the Separation and
Distribution Agreement is terminated in accordance with its terms prior to the
Effective Time, then this Agreement shall terminate and all actions and events
that are, under this Agreement, to be taken or occur effective immediately prior
to or as of the Effective Time, or immediately after the Effective Time, or
otherwise in connection with the Separation, shall not be taken or occur except
to the extent specifically agreed by Parent and SpinCo.

 

8.2         Relationship of Parties. Nothing in this Agreement shall be deemed
or construed by the Parties or any third party as creating the relationship of
principal and agent, partnership or joint venture between the Parties, it being
understood and agreed that no provision contained herein, and no act of the
Parties, shall be deemed to create any relationship between the Parties other
than the relationship set forth herein.

 

8.3         Affiliates. Each of Parent and SpinCo shall cause to be performed,
and hereby guarantees the performance of, all actions, agreements and
obligations set forth in this Agreement to be performed by another Parent Entity
or another SpinCo Entity, respectively.

 

8.4         Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given to a
Party when (a) delivered to the appropriate address by hand or by nationally
recognized overnight courier service (costs prepaid); (b) sent by facsimile with
confirmation of transmission by the transmitting equipment; or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested,
in each case to the following addresses and facsimile numbers and marked to the
attention of the person (by name or title) designated below (or to such other
address, facsimile number or person as a Party may designate by notice to the
other Parties):

 

(a)          if to Parent:

 

WestRock Company
504 Thrasher Street
Norcross, GA 30071
Attention:  General Counsel

 

(b)         if to SpinCo:

 

Ingevity Corporation
5255 Virginia Avenue
North Charleston, SC 29406
Attention:  General Counsel

 

8.5         Incorporation of Separation and Distribution Agreement Provisions.
The following provisions of the Separation and Distribution Agreement are hereby
incorporated

 

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herein by reference, and unless otherwise expressly specified herein, such
provisions shall apply as if fully set forth herein mutatis mutandis, and
modified to the extent necessary to comply with applicable laws (references in
this Section 8.5 to an “Article” or “Section” shall mean Articles or Sections of
the Separation and Distribution Agreement, and references in the material
incorporated herein by reference shall be references to the Separation and
Distribution Agreement):  Article IV (relating to Mutual Releases;
Indemnification); Article VI (relating to Exchange of Information;
Confidentiality); Article VII (relating to Dispute Resolution); Article VIII
(relating to Further Assurances); Article IX (relating to Termination); and
Article X (relating to Miscellaneous).

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the Parties have caused this Employee Matters Agreement to
be duly executed as of the day and year first above written.

 

  WESTROCK COMPANY             By: /s/ Robert B. McIntosh       Name: Robert B.
McIntosh       Title: Executive Vice President, General Counsel            
INGEVITY CORPORATION             By: /s/ Edward A. Rose       Name: Edward A.
Rose       Title: President, Specialty Chemicals  

 

[SIGNATURE PAGE TO EMPLOYEE MATTERS AGREEMENT]

 

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