AGREEMENT
THIS AGREEMENT, dated Jan 22, 1996, is made
by and between Orange and Rockland Utilities, Inc., a New
York corporation (the "Company"), and R. Xxx Xxxxx (the
"Executive").
WHEREAS, the Company considers it essential to
the best interests of its shareholders to xxxxxx the
continuous employment of key management personnel; and
WHEREAS, the Board recognizes that, as is the
case with many publicly held corporations, the possibili-
ty of a Change in Control exists and that such possibili-
ty, and the uncertainty and questions which it may raise
among management, may result in the departure or distrac-
tion of management personnel to the detriment of the
Company and its shareholders; and
WHEREAS, the Board has determined that appro-
priate steps should be taken to reinforce and encourage
the continued attention and dedication of members of the
Company's management, including the Executive, to their
assigned duties without distraction in the face of poten-
tially disturbing circumstances arising from the possi-
bility of a Change in Control; and
WHEREAS, the Company has previously entered
into an Agreement with the Executive dated October 18,
1995 (the "Prior Agreement").
NOW, THEREFORE, in consideration of the premis-
es and the mutual covenants herein contained, the Company
and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capital-
ized terms used in this Agreement are provided in the
last Section hereof.
2. Company's Covenants Summarized. In order
to induce the Executive to remain in the employ of the
Company and in consideration of the Executive's covenants
set forth in Section 3 hereof, the Company agrees, under
the conditions described herein, to pay the Executive the
Severance Payments and the other payments and benefits
described herein in the event the Executive's employment
with the Company is (or, under the terms of the second
sentence of Section 6.1 hereof, is deemed to have been)
terminated following a Change in Control and during the
term of this Agreement. Except as provided in the first
sentence of Section 6.2(A) hereof and Section 9.1 hereof,
no amount or benefit shall be payable under this Agree-
ment unless there shall have been (or, under the terms of
the second sentence of Section 6.1 hereof, there shall be
deemed to have been) a termination of the Executive's
employment with the Company following a Change in Control
and during the Term of this Agreement. This Agreement
shall not be construed as creating an express or implied
contract of employment and, except as otherwise agreed in
writing between the Executive and the Company, the Execu-
tive shall not have any right to be retained in the
employ of the Company.
3. The Executive's Covenants. The Executive
agrees that, subject to the terms and conditions of this
Agreement, in the event of a Potential Change in Control
during the term of this Agreement, the Executive will
remain in the employ of the Company until the earliest of
(i) a date which is six (6) months from the date of such
Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive
of the Executive's employment for Good Reason or by
reason of death, Disability or Retirement, or (iv) the
termination by the Company of the Executive's employment
for any reason.
4. Term of Agreement. This Agreement shall
commence on the date hereof and shall continue in effect
for a period of thirty-six (36) months beyond the month
in which a Change in Control occurs (or, if later, thir-
ty-six (36) months beyond the consummation of the trans-
action the approval of which by the Company's sharehold-
ers constitutes a Change in Control under Section
15(E)(III) or (IV) hereof).
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during
the term of this Agreement, during any period that the
Executive fails to perform the Executive's full-time
duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the
Executive's full salary to the Executive at the rate in
effect at the commencement of any such period, together
with all compensation and benefits payable to the Execu-
tive under the terms of any compensation or benefit plan,
program or arrangement maintained by the Company during
such period, until the Executive's employment is termi-
nated by the Company for Disability.
5.2 If the Executive's employment shall be
terminated for any reason following a Change in Control
and during the term of this Agreement, the Company shall
pay the Executive's full salary to the Executive through
the Date of Termination at the rate in effect at the time
the Notice of Termination is given, together with all
compensation and benefits to which the Executive is
entitled in respect of all periods preceding the Date of
Termination under the terms of the Company's compensation
and benefit plans, programs or arrangements.
5.3 If the Executive's employment shall be
terminated for any reason following a Change in Control
and during the term of this Agreement, the Company shall
pay the Executive's normal post-termination compensation
and benefits to the Executive as such payments become
due. Such post-termination compensation and benefits
shall be determined under, and paid in accordance with,
the Company's retirement, insurance and other compensa-
tion or benefit plans, programs and arrangements.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, the Company
shall pay the Executive the payments described in this
Section 6.1 (the "Severance Payments") upon the termina-
tion of the Executive's employment following a Change in
Control and during the term of this Agreement, in addi-
tion to any payments and benefits to which the Executive
is entitled under Section 5 hereof, unless such termina-
tion is (i) by the Company for Cause, (ii) by reason of
death or Disability, or (iii) by the Executive without
Good Reason. For purposes of this Agreement, the
Executive's employment shall be deemed to have been
terminated by the Company without Cause or by the Execu-
tive with Good Reason following a Change in Control if
(i) the Executive's employment is terminated without
Cause prior to a Change in Control and such termination
was at the request or direction of a Person who has en-
tered into an agreement with the Company the consummation
of which would constitute a Change in Control, (ii) the
Executive terminates his employment with Good Reason
prior to a Change in Control and the circumstance or
event which constitutes Good Reason occurs at the request
or direction of such Person, or (iii) the Executive's
employment is terminated without Cause prior to a Change
in Control and such termination is otherwise in connec-
tion with or in anticipation of a Change in Control which
actually occurs. For purposes of any determination
regarding the applicability of the immediately preceding
sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes to
the Board by clear and convincing evidence that such
position is not correct.
(A) In lieu of any further salary
payments to the Executive for periods subsequent to
the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the
Company shall pay to the Executive a lump sum sever-
ance payment, in cash, equal to three times the sum
of (i) the higher of the Executive's annual base
salary in effect immediately prior to the occurrence
of the event or circumstance upon which the Notice
of Termination is based or the Executive's annual
base salary in effect immediately prior to the
Change in Control, and (ii) the higher of the aver-
age of the annual bonuses earned or received by the
Executive from the Company or its subsidiaries in
respect of the three (3) consecutive fiscal years
immediately preceding that in which the Date of
Termination occurs or the average of the annual
bonuses so earned or received in respect of the
three (3) consecutive fiscal years immediately pre-
ceding that in which the Change in Control occurs.
(B) Notwithstanding any provision of
any annual or long-term incentive plan to the con-
trary, the Company shall pay to the Executive a lump
sum amount, in cash, equal to the sum of (i) any
incentive compensation which has been allocated or
awarded to the Executive for a completed fiscal year
or other measuring period preceding the Date of
Termination under any such plan but which, as of the
Date of Termination, is contingent only upon the
continued employment of the Executive to a subse-
quent date or otherwise has not been paid, and (ii)
a pro rata portion to the Date of Termination of the
aggregate value of all contingent incentive compen-
sation awards to the Executive for all then uncom-
pleted periods under any such plan, calculated as to
each such award by multiplying the award that the
Executive would have earned on the last day of the
performance award period, assuming the achievement,
at the target level of the individual and corporate
performance goals established with respect to such
award, by the fraction obtained by dividing the
number of full months and any fractional portion of
a month during such performance award period through
the Date of Termination by the total number of
months contained in such performance award period.
(C) Notwithstanding any provision of
the Officers' Supplemental Retirement Plan of Orange
and Rockland Utilities, Inc. as Amended and Restated
(the "SERP") to the contrary, for purposes of deter-
mining the Executive's Benefit Formula Percentage
under the SERP and for purposes of Section 2(8) of
the SERP, the Executive shall be treated as having
completed a number of years of Service equal to the
greater of (i) 10 or (ii) the sum of (I) the number
of years of the Executive's service determined under
the SERP, (II) the lesser of 5 or the sum of the
number of the Executive's years of Service determi-
xxx under the SERP and the number, if any, deter-
mined under clause (III) below and (III) if the
Executive's employment terminates following a Change
in Control and during the term of this Agreement
(unless such termination is by the Company for
Cause, by reason of death or Disability or by the
Executive without Good Reason), the number 3.
Exhibit A hereto is intended to illustrate the
operation of this Section 6.1(C).
(D) For the thirty-six (36) month
period immediately following the Date of Termina-
tion, the Company shall arrange to provide the
Executive with life, disability, accident and health
insurance benefits substantially similar to those
which the Executive is receiving immediately prior
to the Notice of Termination (without giving effect
to any amendment to such benefits made subsequent to
a Change in Control which amendment adversely af-
fects in any manner the Executive's entitlement to
or the amount of such benefits); provided, however,
that, unless the Executive consents to a different
method (after taking into account the effect of such
method on the calculation of "parachute payments"
pursuant to Section 6.2 hereof), such health insur-
ance benefits shall be provided through a third-
party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(D) shall be
reduced to the extent comparable benefits are actu-
ally received by or made available to the Executive
without cost during the thirty-six (36) month period
following the Executive's termination of employment
(and any such benefits actually received by or made
available to the Executive shall be reported to the
Company by the Executive). If the benefits provided
to the Executive under this Section 6.1(D) shall
result in a decrease, pursuant to Section 6.2 here-
of, in the Severance Payments and these Section
6.1(D) benefits are thereafter reduced pursuant to
the immediately preceding sentence because of the
receipt or availability of comparable benefits, the
Company shall, at the time of such reduction, pay to
the Executive the lesser of (a) the amount of the
decrease made in the Severance Payments pursuant to
Section 6.2 hereof, or (b) the maximum amount which
can be paid to the Executive without being, or
causing any other payment to be, nondeductible by
reason of section 280G of the Code.
(E) If the Executive would have become
entitled to benefits under the Company's post-re-
tirement health care or life insurance plans had the
Executive's employment terminated at any time during
the period of thirty-six (36) months after the Date
of Termination, the Company shall provide such post-
retirement health care or life insurance benefits to
the Executive commencing on the later of (i) the
date that such coverage would have first become
available and (ii) the date that benefits described
in subsection (D) of this Section 6.2 terminate.
6.2 (A) Whether or not the Executive becomes
entitled to the Severance Payments, if any payment or
benefit received or to be received by the Executive in
connection with a Change in Control or the termination of
the Executive's employment (whether pursuant to the terms
of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions
result in a Change in Control or any Person affiliated
with the Company or such Person) (all such payments and
benefits, including the Severance Payments, being herein-
after called "Total Payments") will be subject (in whole
or part) to the Excise Tax, then, subject to the provi-
sions of subsection (B) of this Section 6.2, the Company
shall pay to the Executive an additional amount (the
"Gross-Up Payment") such that the net amount retained by
the Executive, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income
and employment tax and Excise Tax upon the Gross-Up Pay-
ment, shall be equal to the Total Payments. For purposes
of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income and
employment taxes at the highest marginal rate of federal
income and employment taxation in the calendar year in
which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxa-
tion in the state and locality of the Executive's resi-
dence on the Date of Termination, net of the maximum
reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
(B) In the event that, after giving effect to
any redeterminations described in subsection (D) of this
Section 6.2, a reduction in the Severance Payments to the
largest amount that would result in no portion of the
Total Payments being subject to the Excise Tax (after
taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such
other plan, arrangement or agreement) would produce a net
amount (after deduction of the net amount of federal,
state and local income tax on such reduced Total Pay-
ments) that would be greater than the net amount of
unreduced Total Payments (after deduction of the net
amount of federal, state and local income tax and the
amount of Excise Tax to which the Executive would be
subject in respect of such unreduced Total Payments),
then subsection (A) of this Section 6.2 shall not apply
and the cash Severance Payments shall first be reduced
(if necessary, to zero), and all other noncash Severance
Benefits shall thereafter be reduced (if necessary, to
zero); provided, however, that the Executive may elect to
have the noncash Severance Payments reduced (or elimi-
nated) prior to any reduction of the cash Severance
Payments.
(C) For purposes of determining whether any of
the Total Payments will be subject to the Excise Tax and
the amount of such Excise Tax, (i) all of the Total Pay-
ments shall be treated as "parachute payments" within the
meaning of section 280G(b)(2) of the Code, unless in the
opinion of tax counsel (the "Tax Counsel") reasonably ac-
ceptable to the Executive and selected by the accounting
firm (the "Auditor") which was, immediately prior to the
Change in Control, the Company's independent auditor,
such other payments or benefits (in whole or in part) do
not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess
parachute payments" within the meaning of section
280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of Tax Counsel, such
excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered,
within the meaning of section 280G(b)(4)(B) of the Code,
in excess of the Base Amount allocable to such reasonable
compensation, or are otherwise not subject to the Excise
Tax, and (iii) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the
Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. Prior to the payment
date set forth in Section 6.3 hereof, the Company shall
provide the Executive with its calculation of the amounts
referred to in this Section 6.2(C) and such supporting
materials as are reasonably necessary for the Executive
to evaluate the Company's calculations. If the Executive
disputes the Company's calculations (in whole or in
part), the reasonable opinion of Tax Counsel with respect
to the matter in dispute shall prevail.
(D) In the event that (i) amounts are paid to
the Executive pursuant to subsection (A) of this Section
6.2, (ii) the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the
time of termination of the Executive's employment, and
(iii) after giving effect to such redetermination, the
Severance Payments are to be reduced pursuant to subsec-
tion (B) of this Section 6.2, the Executive shall repay
to the Company, at the time that the amount of such
reduction in Excise Tax is finally determined, the por-
tion of the Gross-Up Payment attributable to such reduc-
tion (plus that portion of the Gross-Up Payment attribut-
able to the Excise Tax and federal, state and local
income tax imposed on the Gross-Up Payment being repaid
by the Executive to the extent that such repayment re-
sults in a reduction in the Excise Tax and/or a federal,
state or local income tax deduction) plus interest on the
amount of such repayment at the rate provided in section
1274(b)(2)(B) of the Code. In the event that (x) the
Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of the
Executive's employment (including by reason of any pay-
ment the existence or amount of which cannot be deter-
mined at the time of the Gross-Up Payment) and (y) after
giving effect to such redetermination, the Severance Pay-
ments should not have been reduced pursuant to subsection
(B) of this Section 6.2, the Company shall make an addi-
tional Gross-Up Payment in respect of such excess and in
respect of any portion of the Excise Tax with respect to
which the Company had not previously made a Gross-Up Pay-
ment (plus any interest, penalties or additions payable
by the Executive with respect to such excess and such
portion) at the time that the amount of such excess is
finally determined.
(E) Exhibit B hereto is intended to illustrate
the operation of this Section 6.2
6.3 The payments provided for in subsections
(A) and (B) of Section 6.1 hereof and Section 6.2 hereof
shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the
amounts of such payments, and the limitation on such
payments set forth in Section 6.2 hereof, cannot be
finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as
determined in good faith by the Executive or, in the case
of payments under Section 6.2 hereof, in accordance with
Section 6.2 hereof, of the minimum amount of such pay-
ments to which the Executive is clearly entitled and
shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of
the Code) as soon as the amount thereof can be determined
but in no event later than the thirtieth (30th) day after
the Date of Termination. In the event that the amount of
the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute
a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section
1274(b)(2)(B) of the Code). At the time that payments
are made under this Section, the Company shall provide
the Executive with a written statement setting forth the
manner in which such payments were calculated and the
basis for such calculations including, without limita-
tion, any opinions or other advice the Company has re-
ceived from outside counsel, auditors or consultants (and
any such opinions or advice which are in writing shall be
attached to the statement). In the event the Company
should fail to pay when due the amounts described in
subsections (A) or (B) of Section 6.1 hereof or Section
6.2 hereof, the Executive shall also be entitled to
receive from the Company an amount representing interest
on any unpaid or untimely paid amounts from the due date,
as determined under this Section 6.3 (without regard to
any extension of the Date of Termination pursuant to
Section 7.3 hereof), to the date of payment at a rate
equal to the prime rate of Citibank as in effect from
time to time after such due date.
6.4 The Company also shall pay to the Execu-
tive all legal fees and expenses incurred by the Execu-
tive in disputing in good faith any issue relating to the
termination of the Executive's employment following a
Change in Control (including a termination of employment
following a Potential Change in Control if the Executive
alleges in good faith that such termination will be
deemed to have occurred following a Change in Control
pursuant to the second sentence of Section 6.1 hereof) or
in seeking in good faith to obtain or enforce any benefit
or right provided by this Agreement or in connection with
any tax audit or proceeding to the extent attributable to
the application of section 4999 of the Code to any pay-
ment or benefit provided hereunder. Such payments shall
be made as such fees and expenses are incurred by the
Executive, but in no event later than five (5) business
days after delivery of the Executive's written requests
for payment accompanied with such evidence of fees and
expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation
During Dispute.
7.1 Notice of Termination. After a Change in
Control and during the term of this Agreement, any pur-
ported termination of the Executive's employment (other
than by reason of death) shall be communicated by written
Notice of Termination from one party hereto to the other
party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and cir-
cumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indi-
cated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board at a meeting
of the Board which was called and held for the purpose of
considering such termination (after reasonable notice to
the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before
the Board) finding that, in the good faith opinion of the
Board, the Executive was guilty of conduct set forth in
clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termina-
tion," with respect to any purported termination of the
Executive's employment after a Change in Control and
during the term of this Agreement, shall mean (i) if the
Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given
(provided that the Executive shall not have returned to
the full-time performance of the Executive's duties
during such thirty (30) day period), and (ii) if the
Executive's employment is terminated for any other rea-
son, the date specified in the Notice of Termination
(which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the
case of a termination for Cause) and, in the case of a
termination by the Executive, shall not be less than
fifteen (15) days nor more than sixty (60) days, respec-
tively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. If within
fifteen (15) days after any Notice of Termination is
given, or, if later, prior to the Date of Termination (as
determined without regard to this Section 7.3), the party
receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination,
the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends (taking
into account any extensions thereof that shall have
occurred pursuant to Section 2 hereof) or (ii) the date
on which the dispute is finally resolved, either by
mutual written agreement of the parties or by a final
judgment, order or decree of a court of competent juris-
diction (which is not appealable or with respect to which
the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of
Termination shall be extended by a notice of dispute
given by the Executive only if such notice is given in
good faith and the Executive pursues the resolution of
such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a pur-
ported termination occurs following a Change in Control
and during the term of this Agreement and the Date of
Termination is extended in accordance with Section 7.3
hereof, the Company shall continue to pay the Executive
the full compensation in effect when the notice giving
rise to the dispute was given (including, but not limited
to, salary) and continue the Executive as a participant
in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving
rise to the dispute was given, until the Date of Termina-
tion, as determined in accordance with Section 7.3 here-
of. Amounts paid under this Section 7.4 are in addition
to all other amounts due under this Agreement and shall
not be offset against or reduce any other amounts due
under this Agreement.
8. No Mitigation. The Company agrees that, if
the Executive's employment with the Company terminates
during the term of this Agreement, the Executive is not
required to seek other employment or to attempt in any
way to reduce any amounts payable to the Executive by the
Company pursuant to Section 6 hereof or Section 7.4
hereof. Further, the amount of any payment or benefit
provided for in this Agreement (other than Section 6.1(D)
hereof) shall not be reduced by any compensation earned
by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Compa-
ny, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by
law upon any successor to the Company, the Company will
require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the
Company to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that
the Company would be required to perform it if no such
succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the effec-
tiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation
from the Company in the same amount and on the same terms
as the Executive would be entitled to hereunder if the
Executive were to terminate the Executive's employment
for Good Reason after a Change in Control, except that,
for purposes of implementing the foregoing, the date on
which any such succession becomes effective shall be
deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit
of and be enforceable by the Executive's personal or
legal representatives, executors, administrators, succes-
sors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be
payable to the Executive hereunder (other than amounts
which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all
such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators
of the Executive's estate.
10. Notices. For the purpose of this Agree-
ment, notices and all other communications provided for
in the Agreement shall be in writing and shall be deemed
to have been duly given when delivered or mailed by
United States registered mail, return receipt requested,
postage prepaid, addressed, if to the Executive, to the
address shown for the Executive in the personnel records
of the Company and, if to the Company, to the address set
forth below, or to such other address as either party may
have furnished to the other in writing in accordance
herewith, except that notice of change of address shall
be effective only upon actual receipt:
To the Company:
Orange and Rockland Utilities, Inc.
Xxx Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, XX 00000
Attention: Vice President and
General Counsel
11. Miscellaneous. No provision of this
Agreement may be modified, waived or discharged unless
such waiver, modification or discharge is agreed to in
writing and signed by the Executive and such officer as
may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition
or provision of this Agreement to be performed by such
other party shall be deemed a waiver of similar or dis-
similar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes the
Prior Agreement and any other agreements or representa-
tions, oral or otherwise, express or implied, with re-
spect to the subject matter hereof (i.e., benefits pay-
able to the Executive by reason of the occurrence of a
Change in Control) which have been made by either party.
The validity, interpretation, construction and perfor-
xxxxx of this Agreement shall be governed by the laws of
the State of New York. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to
any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applica-
ble withholding required under federal, state or local
law and any additional withholding to which the Executive
has agreed. The obligations of the Company and the
Executive under Sections 6 and 7 hereof shall survive the
expiration of the term of this Agreement.
12. Validity. The invalidity or
unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full
force and effect.
13. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be
deemed to be an original but all of which together will
constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All
claims by the Executive for benefits under this Agreement
shall be directed to and determined by the Board and
shall be in writing. Any denial by the Board of a claim
for benefits under this Agreement shall be delivered to
the Executive in writing and shall set forth the specific
reasons for the denial and the specific provisions of
this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of
the decision denying a claim and shall further allow the
Executive to appeal to the Board a decision of the Board
within sixty (60) days after notification by the Board
that the Executive's claim has been denied. Any further
dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by
arbitration in New York, New York in accordance with the
rules of the American Arbitration Association then in
effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction. Notwithstanding
any provision of this Agreement to the contrary, the
Executive shall be entitled to seek specific performance
of the Executive's right to be paid until the Date of
Termination during the pendency of any dispute or contro-
versy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agree-
ment, the following terms shall have the meanings indi-
cated below:
(A) "Base Amount" shall have the meaning set
forth in section 280G(b)(3) of the Code.
(B) "Beneficial Owner" shall have the meaning
set forth in Rule 13d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors
of the Company.
(D) "Cause" for termination by the Company of
the Executive's employment shall mean (i) the willful and
continued failure by the Executive to substantially
perform the Executive's duties with the Company (other
than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a
Notice of Termination for Good Reason by the Executive
pursuant to Section 7.1 hereof) after a written demand
for substantial performance is delivered to the Executive
by the Board, which demand specifically identifies the
manner in which the Board believes that the Executive has
not substantially performed the Executive's duties, or
(ii) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the
Company or its subsidiaries, monetarily or otherwise.
For purposes of clauses (i) and (ii) of this definition,
(x) no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without
reasonable belief that the Executive's act, or failure to
act, was in the best interest of the Company and (y) in
the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists
shall be given effect unless the Company establishes to
the Board by clear and convincing evidence that Cause ex-
ists.
(E) A "Change in Control" shall be deemed to
have occurred if the event set forth in any one of the
following paragraphs shall have occurred:
(I) any Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities beneficially owned by such Person
any securities acquired directly from the Com-
pany or its affiliates other than in connection
with the acquisition by the Company or its
affiliates of a business) representing 20% or
more of either the then outstanding shares of
common stock of the Company or the combined
voting power of the Company's then outstanding
securities; or
(II) the following individuals cease
for any reason to constitute a majority of the
number of directors then serving: individuals
who, on the date hereof, constitute the Board
and any new director (other than a director
whose initial assumption of office is in con-
nection with an actual or threatened election
contest, including but not limited to a consent
solicitation, relating to the election of di-
rectors of the Company (as such terms are used
in Rule 14a-11 of Regulation 14A under the
Exchange Act)) whose appointment or election by
the Board or nomination for election by the
Company's shareholders was approved by a vote
of at least two-thirds (2/3) of the directors
then still in office who either were directors
on the date hereof or whose appointment, elec-
tion or nomination for election was previously
so approved; or
(III) the shareholders of the Compa-
ny approve a merger or consolidation of the
Company with any other corporation or approve
the issuance of voting securities of the Compa-
ny in connection with a merger or consolidation
of the Company (or any direct or indirect sub-
sidiary of the Company) pursuant to applicable
stock exchange requirements, other than (i) a
merger or consolidation which would result in
the voting securities of the Company outstand-
ing immediately prior to such merger or consol-
idation continuing to represent (either by
remaining outstanding or by being converted
into voting securities of the surviving entity
or any parent thereof), in combination with the
ownership of any trustee or other fiduciary
holding securities under an employee benefit
plan of the Company, at least 65% of the com-
bined voting power of the voting securities of
the Company or such surviving entity or any
parent thereof outstanding immediately after
such merger or consolidation, or (ii) a merger
or consolidation effected to implement a recap-
italization of the Company (or similar transac-
tion) in which no Person is or becomes the
Beneficial Owner, directly or indirectly, of
securities of the Company (not including in the
securities Beneficially Owned by such Person
any securities acquired directly from the Com-
pany or its affiliates other than in connection
with the acquisition by the Company or its
affiliates of a business) representing 20% or
more of either the then outstanding shares of
common stock of the Company or the combined
voting power of the Company's then outstanding
securities; or
(IV) the stockholders of the Company
approve a plan of complete liquidation or dis-
solution of the Company or an agreement for the
sale or disposition by the Company of all or
substantially all of the Company's assets,
other than a sale or disposition by the Company
of all or substantially all of the Company's
assets to an entity, at least 65% of the com-
bined voting power of the voting securities of
which are owned by Persons in substantially the
same proportions as their ownership of the
Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control"
shall be deemed to have occurred if there is consummated
any transaction or series of integrated transactions
immediately following which the record holders of the
common stock of the Company immediately prior to such
transaction or series of transactions continue to have
substantially the same proportionate ownership in an
entity which owns all or substantially all of the assets
of the Company immediately following such transaction or
series of transactions.
(F) "Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
(G) "Company" shall mean Orange and Rockland
Utilities, Inc. and, except in determining under Section
15(E) hereof whether or not any Change in Control of the
Company has occurred, shall include its subsidiaries and
any successor to its business and/or assets which assumes
and agrees to perform this Agreement by operation of law,
or otherwise.
(H) "Date of Termination" shall have the
meaning stated in Section 7.2 hereof.
(I) "Disability" shall be deemed the reason
for the termination by the Company of the Executive's
employment, if, as a result of the Executive's incapacity
due to physical or mental illness, the Executive shall
have been absent from the full-time performance of the
Executive's duties with the Company for a period of six
(6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and,
within thirty (30) days after such Notice of Termination
is given, the Executive shall not have returned to the
full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended from time to time.
(K) "Excise Tax" shall mean any excise tax
imposed under section 4999 of the Code.
(L) "Executive" shall mean the individual
named in the first paragraph of this Agreement.
(M) "Good Reason" for termination by the
Executive of the Executive's employment shall mean the
occurrence (without the Executive's express written
consent) after any Change in Control, or after any Poten-
tial Change in Control under the circumstances described
in the second sentence of Section 6.1 hereof (treating
all references in paragraphs (I) and (VII) below to a
"Change in Control" as references to a "Potential Change
in Control"), of any one of the following acts by the
Company, or failures by the Company to act, unless, in
the case of any act or failure to act described in para-
graph (I), (V), (VI) or (VII) below, such act or failure
to act is corrected prior to the Date of Termination
specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of
any duties inconsistent with the Executive's
status as a senior executive officer of the
Company or a substantial adverse alteration in
the nature or status of the Executive's respon-
sibilities from those in effect immediately
prior to the Change in Control other than any
such alteration primarily attributable to the
fact that the Company may no longer be a public
company;
(II) a reduction by the Company in
the Executive's annual base salary as in effect
on the date hereof or as the same may be in-
creased from time to time except for
across-the-board salary reductions similarly
affecting all senior executives of the Company
and all senior executives of any Person in
control of the Company;
(III) the relocation of the
Company's principal executive offices to a
location within New York City or to a location
more than 50 miles from the location of such
offices immediately prior to the Change in Con-
trol or the Company's requiring the Executive
to be based anywhere other than the Company's
principal executive offices except for required
travel on the Company's business to an extent
substantially consistent with the Executive's
present business travel obligations;
(IV) the failure by the Company,
without the Executive's consent, to pay to the
Executive any portion of the Executive's cur-
rent compensation except pursuant to an
across-the-board compensation deferral similar-
ly affecting all senior executives of the Com-
pany and all senior executives of any Person in
control of the Company, or to pay to the Exec-
utive any portion of an installment of deferred
compensation under any deferred compensation
program of the Company, within seven (7) days
of the date such compensation is due;
(V) the failure by the Company to
continue in effect any compensation plan in
which the Executive participates immediately
prior to the Change in Control which is materi-
al to the Executive's total compensation, in-
cluding but not limited to the Company's stock
option, restricted stock, stock appreciation
right, incentive compensation, bonus and other
plans or any substitute plans adopted prior to
the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect
to such plan, or the failure by the Company to
continue the Executive's participation therein
(or in such substitute or alternative plan) on
a basis not materially less favorable, both in
terms of the amount of benefits provided and
the level of the Executive's participation
relative to other participants, as existed
immediately prior to the Change in Control;
(VI) the failure by the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by the
Executive under any of the Company's pension,
life insurance, medical, health and accident,
or disability plans in which the Executive was
participating immediately prior to the Change
in Control, the taking of any action by the
Company which would directly or indirectly
materially reduce any of such benefits or de-
prive the Executive of any material fringe
benefit enjoyed by the Executive at the time of
the Change in Control, or the failure by the
Company to maintain a vacation policy with
respect to the Executive that is at least as
favorable as the vacation policy (whether for-
mal or informal) in place with respect to the
Executive immediately prior to the Change in
Control; or
(VII) any purported termination of
the Executive's employment which is not effect-
ed pursuant to a Notice of Termination satisfy-
ing the requirements of Section 7.1 hereof; for
purposes of this Agreement, no such purported
termination shall be effective.
The Executive's right to terminate the
Executive's employment for Good Reason shall not be
affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment
shall not constitute consent to, or a waiver of rights
with respect to, any act or failure to act constituting
Good Reason hereunder.
For purposes of any determination regarding the
existence of Good Reason, any claim by the Executive that
Good Reason exists shall be presumed to be correct unless
the Company establishes to the Board by clear and con-
vincing evidence that Good Reason does not exist.
(N) "Gross-Up Payment" shall have the meaning
set forth in Section 6.2 hereof.
(O) "Notice of Termination" shall have the
meaning stated in Section 7.1 hereof.
(P) "Pension Plan" shall mean any tax-quali-
fied, supplemental or excess benefit pension plan main-
tained by the Company and any other agreement entered
into between the Executive and the Company which is
designed to provide the Executive with supplemental
retirement benefits.
(Q) "Person" shall have the meaning given in
Section 3(a)(9) of the Exchange Act, as modified and used
in Sections 13(d) and 14(d) thereof, except that such
term shall not include (i) the Company or any of its
affiliates (as defined in Rule 12b-2 promulgated under
the Exchange Act), (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its affiliates, (iii) an underwriter
temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in sub-
stantially the same proportions as their ownership of
stock of the Company.
(R) "Potential Change in Control" shall be
deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:
(I) the Company enters into an
agreement, the consummation of which would
result in the occurrence of a Change in Con-
trol;
(II) the Company or any Person pub-
licly announces an intention to take or to
consider taking actions which, if consummated,
would constitute a Change in Control;
(III) any Person becomes the Benefi-
cial Owner, directly or indirectly, of securi-
ties of the Company representing 10% or more of
either the then outstanding shares of common
stock of the Company or the combined voting
power of the Company's then outstanding securi-
ties; or
(IV) the Board adopts a resolution
to the effect that, for purposes of this Agree-
ment, a Potential Change in Control has oc-
curred.
(S) "Retirement" shall be deemed the reason
for the termination of the Executive's employment if such
employment is terminated in accordance with the Company's
retirement policy generally applicable to its salaried
employees, as in effect immediately prior to the Change
in Control, or in accordance with any retirement arrange-
ment established with the Executive's consent with re-
spect to the Executive.
(T) "Severance Payments" shall mean those
payments described in Section 6.1 hereof.
(U) "Total Payments" shall mean those payments
described in Section 6.2 hereof.
ORANGE AND ROCKLAND UTILITIES, INC.
By:
Name: Xxxxx X. X'Xxxxx, Xx.
Title: Chairman of the
Compensation Committee
R. Xxx Xxxxx
EXHIBIT A
ILLUSTRATION 1
Facts:
Executive has been employed for either (i) 3 years in the
case of the illustation shown in column (A) below or (ii)
8 years in the case of the illustration shown in column
(B) below (i.e., he has 3 or 8 years of Service, respec-
tively, under the SERP) and his termination of employment
is either (i) by the Company for Cause, (ii) by him other
than for Good Reason or (iii) by reason of death or
Disability.
Result:
The Executive's years of Service for purposes of deter-
mining the Executive's Benefit Formula Percentage under
the SERP and for purposes of Section 2(8) of the SERP
(relating to the extent to which incentive compensation
is included in the calculation of benefits under the
SERP) is equal to the greater of (i) or (ii)(c) below,
i.e., 10 in the case of the illustration shown in column
(A) below and 13 in the case of the illustration shown in
column (B) below.
Calculation:
(A) (B)
(i) the number 10 l0 10
(ii) (a) number of years of Service
under the SERP 3 8
(b) lesser of (1) 5 or (2) 3 5
Executive's number of years
of Service under the SERP
(c) sum of (a) and (b) 6 13
ILLUSTRATION 2
Facts:
Executive has been employed for either (i) 1 year in the
case of the illustation shown in column (A) below or (ii)
3 years in the case of the illustration shown in column
(B) below (i.e., he has 1 or 3 years of Service, respec-
tively, under the SERP) and his termination of employment
is either (i) by the Company without Cause or (ii) by him
for Good Reason.
Result:
The Executive's years of Service for purposes of deter-
mining the Executive's Benefit Formula Percentage under
the SERP and for purposes of Section 2(8) of the SERP
(relating to the extent to which incentive compensation
is included in the calculation of benefits under the
SERP) is equal to the greater of (i) or (ii)(d) below,
i.e., 10 in the case of the illustration shown in column
(A) below and 11 in the case of the illustration shown in
column (B) below.
Calculation:
(A) (B)
(i) the number 10 l0 10
(ii) (a) number of years of Service
under the SERP 1 3
(b) lesser of (1) 5 or (2) sum of 4 5
Executive's number of years
of Service under the SERP and
the number 3
(c) the number 3 3 3
(d) sum of (a), (b) and (c) 8 11
EXHIBIT B
Illustration 1
Facts:
Five Year Average Compensation (Base Amount) $100,000
Safe Harbor Amount (3x Base Amount minus $1) $299,999
Unadjusted Severance Benefit $299,999 or less
Result:
Full Unadjusted Severance Benefit is paid without adjustment.
Explanation:
No excise tax is due because the Unadjusted Severance Benefit
does not exceed the Safe Harbor Amount. Accordingly, the full
Unadjusted Severance Benefit is paid without reduction and with-
out a gross up payment.
____________________
Each of the following illustrations assumes that the highest
marginal rate of federal, state and local income and employ-
ment tax in the state and locality of the Executive's resi-
dence (net of the maximum reduction in federal income taxes
which could be obtained from deduction of the state and
local taxes) is 40%.
Illustration 2
Facts:
Five Year Average Compensation (Base Amount) $100,000
Safe Harbor Amount (3x Base Amount minus $1) $299,999
Unadjusted Severance Benefit $390,000
Amount of Unadjusted Severance Benefit subject
to excise tax (Unadjusted Severance Benefit
minus Base Amount) $290,000
Income tax on Unadjusted Severance Benefit
(40% of $390,000) $156,000
Income tax if benefit reduced (40% of $299,999) $119,999
Excise tax on Unadjusted Severance Benefit
(20% of $290,000) $ 58,000
Net amount of Unadjusted Severance Benefit $176,000
Net amount of Reduced Severance Benefit $180,000
Result:
The Unadjusted Severance Benefit is reduced and only an amount
equal to the Safe Harbor Amount is paid.
Explanation:
The Unadjusted Severance Benefit exceeds the Safe Harbor Amount.
Therefore, either the Unadjusted Severance Benefit is reduced to
the Safe Harbor Amount or a gross up payment is paid in addition
to the Unadjusted Severance Benefit. If the Unadjusted Severance
Benefit was paid, the net amount retained after all taxes would
be $176,000, i.e., the full amount of the Unadjusted Severance
Benefit ($390,000) reduced by applicable income taxes ($156,000
at the assumed 40% tax rate) and further reduced by the excise
tax ($58,000, calculated as 20% of the excess of the Unadjusted
Severance Benefit over the Base Amount). If only the portion of
the Unadjusted Severance Benefit not in excess of the Safe Harbor
Amount was paid, the net amount retained after all taxes would be
$180,000, i.e., the Safe Harbor Amount ($299,999) reduced by
applicable income taxes ($119,999 at the assumed 40% tax rate).
There would be no excise tax since the amount paid did not exceed
the Safe Harbor Amount. Since the net amount retained is in-
creased by reducing the amount paid to the Safe Harbor Amount,
the Unadjusted Severance Benefit is so reduced--only an amount
equal to the Safe Harbor Amount is paid and there is no gross up
payment.
Illustration 3
Facts:
Five Year Average Compensation (Base Amount) $100,000
Safe Harbor Amount (3x Base Amount minus $1) $299,999
Unadjusted Severance Benefit $410,000
Amount of Unadjusted Severance Benefit subject
to excise tax (Unadjusted Severance Benefit
minus Base Amount) $310,000
Income tax on Unadjusted Severance Benefit
(40% of $410,000) $164,000
Income tax if benefit reduced (40% of $299,999) $119,999
Excise tax on Unadjusted Severance Benefit
(20% of $310,000) $ 62,000
Net amount of Unadjusted Severance Benefit
(if no gross up) $184,000
Net amount of Reduced Severance Benefit $180,000
Gross up payment $155,000
Net amount of Unadjusted Severance Benefit -
with gross up (60% of $410,000) $246,000
Result:
The Unadjusted Severance Benefit is paid in full together with a
gross up payment that puts the individual in the same after-tax
position he would have been in had there been no excise applica-
ble to the Unadjusted Severance Benefit.
Explanation:
The Unadjusted Severance Benefit exceeds the Safe Harbor Amount.
Therefore, either the Unadjusted Severance Benefit is reduced to
the Safe Harbor Amount or a gross up payment is paid in addition
to the Unadjusted Severance Benefit. If the Unadjusted Severance
Benefit was paid, the net amount retained after all taxes would
be $184,000, i.e., the full amount of the Unadjusted Severance
Benefit ($410,000) reduced by applicable income taxes ($164,000
at the assumed 40% tax rate) and further reduced by the excise
tax ($62,000, calculated as 20% of the excess of the Unadjusted
Severance Benefit over the Base Amount). If only the portion of
the Unadjusted Severance Benefit not in excess of the Safe Harbor
Amount was paid, the net amount retained after all taxes would be
$180,000, i.e., the Safe Harbor Amount ($299,999) reduced by
applicable income taxes ($119,999 at the assumed 40% tax rate).
There would be no excise tax since the amount paid did not exceed
the Safe Harbor Amount. Since the net amount retained is not in-
creased by reducing the amount paid to the Safe Harbor Amount,
the Unadjusted Severance Benefit is paid in full together with
the gross up payment. The gross up payment would be $155,000.
This payment would itself be subject to taxes of $93,000 (40%
income tax and 20% excise tax), leaving $62,000 to pay the excise
tax on the Unadjusted Severance Benefit.
