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AGREEMENT EXHIBIT 10.120
THIS AGREEMENT ("Agreement") is made and entered into as of the 18th
day of October, 1996 between PUGET SOUND POWER & LIGHT COMPANY, a Washington
corporation (the "Company"), and XXXX X. XXXXXXXX ("Employee"). The term
"Parties" refers to the Company and the Employee.
RECITALS
A. Employee is currently serving as Senior Vice President Customer
Operations of the Company.
B. Pursuant to an Agreement and Plan of Merger, dated as of October
18, 1995 (the "Merger Agreement"), Washington Energy Company and Washington
Natural Gas Company have agreed to merge with and into the Company (the
"Merger").
C. The Company recognizes that the Merger Agreement and the Merger may
have an adverse effect upon its retention of key management personnel and
may create distractions which interfere with their ability to function most
effectively. In light of these concerns, the Company has determined that it
is appropriate to offer additional security to certain key senior management
personnel to induce them to remain in the employ of the Company and to
encourage a high level of effective management in the best interests of the
Company and its shareholders.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, and for other good and valuable consideration, the Parties
agree as follows:
1. Severance Benefits Payable in the Event of Termination of Employment
The Company agrees to provide to Employee the following benefits if
Employee does not voluntarily terminate her employment with the Company
prior to the consummation of the Merger pursuant to the terms of the Merger
Agreement (the "Effective Date") and Employee's employment is thereafter
terminated within three years following the Effective Date by Employee for
Good Reason (as hereafter defined) or by the Company other than for Cause
(as hereafter defined), death or disability.
(a) Employee's full base salary earned through the termination
date, plus payment for all accrued vacation and any deferred compensation to
which Employee is entitled for the fiscal year most recently ended prior to
Employee's termination, and Employee's pro rata share of any compensation
under any Company plan which has accrued through the date of termination,
regardless of whether or not pursuant to the terms of the plan such amounts
are vested or are payable in the year of termination; plus
(b) An amount equal to three times the greater of (i) the sum of
Employee's annual base salary in 1996 plus the bonus paid to Employee in
1996 or (ii) the sum of Employee's annual base salary at the rate in effect
as of the date of termination, plus the amount of any additional
compensation awarded to Employee for the calendar year most recently ended
(whether or not fully paid).
(c) The Company shall maintain in full force and effect for the
three years following the date of termination all employee benefit plans,
programs and policies, including any life or health insurance plans, in
which Employee was entitled to participate immediately prior to termination,
provided that Employee is qualified to participate under the general terms
and provisions of such plans, programs and policies. In the event that
Employee's continued participation in any such plan, program or policy is
not possible under its terms and conditions, the Company shall at its option
either arrange for Employee to receive benefits substantially similar to
those which Employee would have been entitled to receive under each plan,
program or policy, or pay to employee an amount equal to the premiums that
the Company would pay on Employee's behalf for participation in such plan,
program or policy. At the end of the period of coverage, Employee will have
the option to receive an assignment at no cost, and with no apportionment of
prepaid premiums, of any assignable insurance policies owned by the Company
and relating to Employee, and to take advantage of any conversion privileges
pertinent to the benefits available under Company policies.
(d) In addition to the regular payment of benefits to which
Employee is entitled under the retirement plans or programs in effect on the
date of Employee's termination, which shall not be affected by such
termination, the Company shall pay to Employee in cash at age 65 or at such
earlier retirement date as Employee may elect pursuant to the plans, an
amount equal to the actuarial equivalent of the additional retirement
compensation to which Employee would have been entitled under the terms of
such retirement plans or programs (without regard to vesting) had Employee
continued in the employ of the Company for an additional three years at
Employee's base salary rate as of the date of termination. For purposes of
this calculation, the actuarial equivalent shall be determined by assuming
survival to age 80.
(e) Employee shall waive all rights to receive shares of common
stock of the Company issuable upon exercise of options or similar rights, if
any, granted to Employee under the Company's stock option or similar equity
plans. In return for that waiver, Employee shall be entitled to receive,
within 30 days following the date of termination, a payment equal to the
difference between the exercise price of all options or similar rights held
by Employee, whether or not then fully exercisable, and the higher of (i)
the closing price of the common stock on the New York Stock Exchange on the
date of termination or (ii) the highest price per share actually paid in
connection with any change of control of the Company.
(f) Notwithstanding any other provisions of this Agreement, if any
payments or benefits under this Agreement, together with any other Parachute
Payments (as defined under Internal Revenue Code Section 280(G)(b)(2)) made
by the Company to Employee, if any, are characterized as Excess Parachute
Payments (as defined in Internal Revenue Code, Section 280(G)(b)(1)), then
the Company shall pay to Employee, in addition to the payments to be
received under this Section, an amount equal to the excise taxes imposed by
Section 4999 of the Code on Employee's Excess Parachute Payments, plus an
amount equal to the federal and, if applicable, state income taxes which
will be payable by Employee as a result of this additional payment.
Employee shall not be required to mitigate the amount of any payment due
hereunder by seeking other employment and, except as provided in the next
sentence, the payments due hereunder shall not be affected by any other
employment which Employee may obtain. If Employee accepts a position with
another employer during the period for payment of employee benefits under
Section 1(c), then the Company's obligation to pay such employee benefits
will cease as of the date of Employee's new employment, provided, however,
that the Company will continue such benefits for the full period to the
extent that they exceed the comparable benefits from such other employment.
2. Retention Incentive Benefit
To induce Employee to remain in the employ of the Company for an
extended period following the Effective Date of the Merger, the Company
agrees to accrue an Incentive Benefit based upon continued employment. One
third of the Incentive Benefit will become vested if Employee continues to
be employed by the Company for a period of one year subsequent to the
Effective Date, an additional one third of the Incentive Benefit will become
vested if Employee continues to be employed by the Company for a period of
three years subsequent to the Effective Date, and the final one third of the
Incentive Benefit will become vested if Employee continues to be employed by
the Company for a period of five years subsequent to the Effective Date.
The total Incentive Benefit will be an amount equal to three times the sum
of Employee's annual base salary in 1996 plus the bonus paid to Employee in
1996. The portion of the Incentive Benefit which has become vested will be
paid to Employee or her heirs in equal monthly installments (less any
required tax withholding) over a three-year period commencing on the date
that Employee's employment with the Company eventually terminates for any
reason, whether by normal retirement, early retirement, death, disability,
voluntary resignation, or involuntary termination. Payments of the vested
Incentive Benefit shall not reduce any amounts otherwise payable to
Employee, whether under the Company's Supplemental Retirement Plan for
Officers or otherwise.
3. Termination for Cause
If the Board of Directors of the Company terminates Employee's
employment for Cause, then the Company shall be obligated to pay to Employee
under Section 1 of this Agreement only her current base salary plus accrued
vacation and any other compensation actually accrued through the date of
termination. Incentive Benefits which have become vested pursuant to
Section 2 of this Agreement shall not be adversely affected by a subsequent
termination for Cause. For the purposes of this Agreement, "Cause" shall
mean (a) the willful and continued failure by Employee to substantially
perform her duties with the Company (other than any such failure resulting
from incapacity due to physical or mental illness), for a period of 30 days
after written notice of demand for substantial performance has been
delivered to Employee by the Board of Directors which specifically
identifies the manner in which the Board believes that Employee has not
substantially performed her duties, or (b) the willful engaging by Employee
in gross misconduct materially and demonstrably injurious to the Company, as
determined by the Board of Directors after notice to Employee and an
opportunity for a hearing. No act, nor failure to act, on Employee's part
shall be considered "willful" unless Employee has acted or failed to act
with an absence of good faith and without a reasonable belief that the
action or failure to act was in the best interests of the Company.
4. Good Reason
Employee may regard the happening of one or more of the following
events as a constructive termination which will constitute Good Reason
entitling Employee to terminate employment with the Company and receive the
benefits set forth in Section 1 of this Agreement:
(a) Without Employee's written consent, a significant reduction in
the scope of Employee's job responsibilities, the assignment to Employee of
duties not customarily performed by senior executives of the Company and
inconsistent with Employee's position as a senior executive as of the date
of this Agreement; or the failure of the Company to provide Employee with
the normal perquisites of a senior executive of the Company, including but
not limited to an office and appropriate support services.
(b) A reduction by the Company in Employee's base salary as in
effect as of the date of this Agreement unless such reduction is applied to
all officers of the Company, does not exceed the average percentage
reduction in base salary for all officers and is not greater than a
reduction of 25%, or the failure by the Company to increase such base salary
each year following the Effective Date of the Merger by an amount which
equals at least one-half, on a percentage basis, the average percentage
increase in base for all senior officers of the Company (excluding the Chief
Executive Officer) during the prior two calendar years.
(c) Failure by the Company to maintain any employee benefits to
which Employee is entitled prior to the date of this Agreement at a level
equal to or greater than those now in effect, through the continuation of
the same or substantially similar programs and policies, or the taking of
any action by the Company that would adversely affect Employee's
participation in or materially reduce Employee's benefits under any such
plans, programs or policies, or deprive Employee of any fringe benefits
enjoyed by Employee as of the date of this Agreement, unless in each case
such a reduction in benefits is nondiscriminatory as to Employee and is
applied generally to all officers of the Company.
(d) The failure by the Company to provide Employee with the number
of paid vacation days to which Employee would be entitled as a salaried
employee of the Company, its subsidiaries or affiliates or any parent or
successor of the Company on a nondiscriminatory basis.
(e) The requirement by the Company that Employee relocate her
residence or office anywhere outside of the Seattle/Bellevue metropolitan
area, except for required travel on the Company's business to the extent
consistent with Employee's duties.
(f) Any purported termination of employment by the Company other
than for Cause as defined in this Agreement, or death or disability.
The Company and Employee acknowledge and agree that the organizational and
management changes which the Company plans to implement following the
Effective Date of the Merger will entail a significant reduction in the
scope of Employee's current job responsibilities and will therefore
constitute Good Reason entitling Employee, if she so chooses, to voluntarily
terminate her employment and to receive the benefits set forth in Section 1
of this Agreement.
5. Payments and Disputes
For purposes of this Agreement, the date of termination will be the
date written notice of termination is given by Employee or the Company. If
termination is under circumstances entitling Employee to the benefits of
Section 1, then the amounts specified in Sections 1(a) and 1(b) will be paid
no more than ten business days after the date of termination. In the event
that any payments due hereunder shall be delayed for any reason for more
than ten business days from the date due, the amounts due shall bear
interest at the rate of 12% per annum until paid.
In the event the Company wishes to contest or dispute a termination for
Good Reason by Employee, it must give written notice of such dispute within
30days after the date of termination. If Employee wishes to contest or
dispute a termination for Cause by the Company, Employee must give written
notice of such dispute within 30 days of receiving a written notice of
termination or, if no notice is provided, within 30 days after the date of
actual termination by the Company.
Any dispute between the Parties hereto with respect to any of the
matters set forth herein shall be submitted to binding arbitration in city
of Seattle, state of Washington. Either Party may commence the arbitration
by delivery of a written notice to the other, describing the issue in
dispute and its position with regard to the issue. If the Parties are
unable to agree on an arbitrator within 30 days following delivery of such
notice, the arbitrator shall be selected by a Judge of the Superior Court of
the State of Washington for King County upon three days' notice. Discovery
shall be allowed in connection with any such arbitration to the same extent
permitted by the Washington Rules of Civil Procedure but either Party may
petition the arbitrator to limit the scope of such discovery, in which event
the arbitrator shall determine the extent of discovery allowable in
connection with the dispute in question. Except as otherwise provided
herein, the arbitration shall be conducted in accordance with the rules of
the American Arbitration Association then in effect for expedited
proceedings. The award of the arbitrator shall be final and binding, and
judgment upon an award may be entered in any court of competent
jurisdiction. The arbitrator shall hold a hearing, at which the Parties may
present evidence and argument, within 30 days of his or her appointment, and
shall issue an award within 15 days of the close of the hearing. The
Company will pay all fees and expenses, including attorneys' fees and the
cost of the arbitrator, incurred by Employee in good faith in contesting or
disputing any termination for Cause or in seeking to obtain or enforce any
right or benefit provided by this Agreement.
6. Notices
All notices or other communications required or permitted by this
Agreement shall be in writing and shall be sufficiently given if personally
delivered or if sent by certified mail, postage prepaid, addressed as
follows:
If to Employee, to:
Xxxx X. Xxxxxxxx
_________________
_________________
If to the Company:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Chief Executive Officer
Facsimile: (000) 000-0000
Any such mailed notice or communication shall be deemed to have been
given three days after the date mailed. Any address may be changed by
giving written notice of such change in the manner provided herein for
giving notice.
7. Entire Agreement
This Agreement contains the entire understanding of the Parties with
regard to the subject matter of this Agreement and may only be changed by
written agreement signed by both Parties. Any and all prior discussions,
negotiations, commitments and understandings related thereto are merged
herein.
8. Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
Parties, and their successors, legal representatives and heirs, including
any successor to the Company's business or assets by merger, consolidation,
sale of assets or otherwise.
9. Governing Law
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the state of Washington, without giving effect
to principles and provisions thereof relating to conflict or choice of laws
and irrespective of the fact that any one of the Parties is now or may
become a resident of a different state.
10. Validity
In case any term of this Agreement shall be invalid, illegal or
unenforceable, in whole or in part, the validity of any of the other terms
of this Agreement shall not in any way be affected thereby.
11. Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the
date first written above.
PUGET SOUND POWER & LIGHT COMPANY
By /s/ Xxxxxxx X. Xxxxxxxxx
--------------------
Its President and Chief Executive Officer
/s/ Xxxx X. Xxxxxxxx
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XXXX X. XXXXXXXX
