ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 18th day of
October , 1995, by and between Orange and Rockland
Utilities, Inc. (the "Company") and D. Xxxxx Xxxxxxx (the
"Employee").
W I T N E S S E T H T H A T:
WHEREAS, the Employee is an integral part of
the Company's management who participates in the decision
making process relative to planning and policy for the
Company;
WHEREAS, the Company wishes to encourage the
employee to continue his services with the Company for
the period during and after an actual or threatened
Change in Control;
WHEREAS, the Board of Directors of the Company,
at its meeting on July 14, 1994, determined that it would
be in the best interests of the Company and its share-
holders to assure continuity in the management of the
Company's administration and operations in the event of a
Change in Control by entering into a severance agreement
with the Employee; and
WHEREAS, the Company has previously entered
into letter agreements with the Employee dated July 14,
1994, September 29, 1994 and April 6, 1995 (the "Letter
Agreements");
NOW THEREFORE, it is hereby agreed by and
between the parties hereto as follows:
1. Definitions.
"Board" shall mean the Board of Directors of
the Company.
"Cause" shall mean (a) the Employee's convic-
tion of a felony or (b) the Employee's fraud or xxxxxx-
xxxx which has resulted or is likely to result in materi-
al economic damage to the Company, as determined in good
faith by a vote of 2/3 of the non-employee directors of
the Company at a meeting of the Board of Directors at
which the Employee is provided an opportunity to be
heard.
"Change in Control": shall mean:
(i) either (A) receipt by the Company of
a report on Schedule 13D, or an amendment to such a
report, filed with the Securities and Exchange Commission
pursuant to Section 13(d) of the Securities Exchange Act
of 1934 (the "1934 Act") disclosing that any person,
group, corporation or other entity is the beneficial
owner, directly or indirectly, of twenty (20) percent or
more of the outstanding stock of the Company or (B)
actual knowledge by the Company of facts, on the basis of
which any Person is required to file such a report on
Schedule 13D, or an amendment to make such a report, with
the SEC (or would be required to file such a report or
amendment upon the lapse of the applicable period of time
specified in Section 13(d) of the 0000 Xxx) disclosing
that such Person is the beneficial owner, directly or
indirectly, of twenty (20) percent or more of the out-
standing stock of the Company;
(ii) purchase by any person (as defined in
Section 13(d) of the 1934 Act), corporation or other
entity, other than the Company or a wholly-owned subsid-
iary of the Company, of shares pursuant to a tender or
exchange offer to acquire any stock of the Company (or
securities convertible into stock) for cash, securities
or any other consideration provided that, after consumma-
tion of the offer, such person, group, corporation or
other entity is the beneficial owner (as defined in Rule
13d-3 under the 1934 Act), directly or indirectly, of
twenty (20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph (d) of
Rule 13d-3 under the 1934 Act in the case of rights to
acquire stock);
(iii) approval by the stockholders of the
Company of (a) any consolidation or merger of the Company
in which the Company is not the continuing or surviving
corporation or pursuant to which shares of stock of the
Company would be converted into cash, securities or other
property, other than a consolidation or merger of the
Company in which holders of its stock immediately prior
to the consolidation or merger have substantially the
same proportionate ownership of common stock of the
surviving corporation immediately after the consolidation
or merger as immediately before, or (b) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Company; or
(iv) a change in the majority of the
members of the Board within a 24-month period unless the
election or nomination for election by the Company's
stockholders of each new director was approved by the
vote of two-thirds of the directors then still in office
who were in office at the beginning of the 24-month
period.
"Good Reason" shall mean a determination
by the Employee in good faith that there has been any (i)
material change by the Company of the Employee's func-
tions, duties or responsibilities which change would
cause the Employee's position with the Company to become
of less dignity, responsibility, importance, prestige or
scope including, without limitation, the assignment to
the Employee of duties and responsibilities inconsistent
with his positions; (ii) assignment or reassignment by
the Company of the Employee without the Employee's con-
sent, to another place of employment more that 50 miles
from the Employee's current place of employment; (iii)
liquidation, dissolution, consolidation or merger of the
Company which has not been approved by a majority of
those members of the Board who were members of the Board
prior to the Change in Control, or transfer of all or
substantially all of its assets, other than a transaction
or series of transactions in which the resulting or
surviving transferee entity has, in the aggregate, a net
worth at least equal to that of the Company and assumes
this Agreement and all obligations and undertakings of
the Company hereunder; or (iv) reduction in the
Employee's total compensation or any component thereof;
by written notice to the Company, specifying the event
relied upon for such termination and given at any time
within 6 months after the occurrence of such event.
2. Term.
This Agreement shall be effective as of the
date above written and shall continue thereafter for a
period of 24 full calendar months following the date of
an occurrence of a Change in Control.
3. Severance Benefit.
a. In the event of any termination of
the Employee's employment hereunder at any time during
the 24-month period immediately following a Change in
Control (x) by the Employee for Good Reason, or (y) by
the Company for any reason other than Cause, then, within
5 business days after any such termination, the Company
shall pay to the Employee or the estate of the Employee
as severance pay, a lump sum cash amount equal to three
times the Employee's "base amount" as defined and deter-
mined under section 280G of the Internal Revenue Code of
1986, as amended (the "Code"), less one dollar ("2.99
times the base amount").
b. For a period of 24 months (commencing
with the month in which termination of employment as de-
scribed in paragraph 3a above shall have occurred), the
Employee shall be entitled to all benefits under the
Company's welfare benefit plans as if the Employee were
still employed during such period, at the same level of
benefits as existed immediately prior to the Change in
Control, and if and to the extent that such benefits
shall not be payable or provided under any such plan, the
Company shall pay or provide such benefits on an individ-
ual basis. The benefits provided in accordance with this
paragraph 3b shall be secondary to any comparable bene-
fits provided by another employer.
c. From and after the occurrence of a
Change in Control (as defined in the Officers' Supplemen-
tal Retirement Plan of Orange and Rockland Utilities,
Inc. as Amended and Restated (the "SERP")), notwithstand-
ing any provision of the SERP to the contrary, (i) the
Benefit Formula Percentage applicable to the Employee
under the SERP shall be deemed to be 70% and (ii) the
Employee shall be treated as having completed 20 years of
Service for purposes of Section 2(8) of the SERP. Not-
withstanding any provision of the SERP to the contrary,
upon the termination of the Employee's employment by the
Employee for Good Reason (as defined in the SERP) or by
the Company, in either case at any time following the
occurrence of a Change in Control (as defined in the
SERP), the Employee shall be deemed to have satisfied all
of the requirements for a Normal Retirement Allowance
pursuant to Section 6(D) of the SERP and the Employee
shall, accordingly, be entitled to commence receipt of
such Normal Retirement Allowance, without reduction on
account of his age, immediately following such termina-
tion of employment.
d. Notwithstanding anything else herein
to the contrary, to the extent that the Employee is
entitled to receive severance payments from another
Company severance plan, arrangement or program, the pay-
ments to be made pursuant to paragraph 3a hereof shall be
correspondingly reduced before implementation of para-
graph e below, and, if necessary, the Employee shall make
an appropriate refund to the Employer without interest.
e. If Independent Tax Counsel shall
determine that the aggregate payments made to the Employ-
ee pursuant to paragraphs 3a, b and c above and any other
payments to the Employee from the Company which consti-
tute "parachute payments" as defined in section 280G of
the Internal Revenue Code of 1986, as amended (the
"Code") (or any successor thereto) ("Parachute Payments")
would be subject to the excise tax imposed by section
4999 of the Code (the "Excise Tax"), then the lump sum
cash payment payable to the Employee under paragraph 3a
above shall be reduced to an amount and to the extent
necessary so that such payment would not be subject to
the Excise Tax. Notwithstanding the preceding sentence,
in the event of a Change in Control that occurs prior to
January 1, 1999, the Employee shall be entitled to all
payments under paragraphs 3a, b and c above and any other
Parachute Payments unless the total of such payments,
after giving effect to the Excise Tax, is less than the
amount to which the Employee would have been entitled
under the preceding sentence. For purposes of this para-
graph 3e, "Independent Tax Counsel" shall mean a lawyer
with expertise in the area of executive compensation tax
law, who shall be selected by the Employee and shall be
reasonably acceptable to the Company, and whose fees and
disbursements shall be paid by the Company.
f. If it is established pursuant to a
final determination of a court or a final Internal Reve-
nue Service proceeding that, notwithstanding the good
faith of the Employee and the Company in applying the
terms of this Agreement, any part of the aggregate pay-
ments paid to the Employee under this Agreement consti-
tutes an "excess parachute payment" for purposes of
sections 280G and 4999 of the Code, then the amount equal
to the excess shall be deemed for all purposes to be a
loan from the Company to the Employee made on the date of
receipt. The Employee shall have an obligation to repay
such loan to the Company within six months of demand,
together with interest thereon at the lowest applicable
Federal rate (as defined in section 1274(d) of the Code)
from the date of the Employee's receipt until the date of
such repayment. If it is determined for any reason that
the amount described in paragraph a or b above in incor-
rectly calculated or reduced, the Company shall pay to
the Employee the increased amount, if any, necessary so
that, after such an adjustment, the Employee shall have
received or be entitled to receive the maximum payments
that he may receive without any such payment constituting
an "excess parachute payment."
4. Source of Payments.
All payments provided for in paragraph 3 above
shall be paid in cash from the general funds of the
Company; provided, however, that such payments shall be
reduced by the amount of any payments made to the Employ-
ee or his or her dependents, beneficiaries or estate from
any trust or special or separate fund established by the
Company to assure such payments. The Company shall not
be required to establish a special or separate fund or
other segregation of assets to assure such payments, and,
if the Company shall make any investments to aid it in
meeting its obligations hereunder, the Employee shall
have no right, title or interest whatever in or to any
such investments except as may otherwise be expressly
provided in a separate written instrument relating to
such investments. Nothing contained in this Agreement,
and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or
a fiduciary relationship, between the Company and the
Employee or any other person. To the extent that any
person acquires a right to receive payments from the
Company such right shall be no greater than the right of
an unsecured creditor of the Company.
5. Litigation Expenses; Arbitration.
a. In the event of any litigation or
other proceeding between the Company and the Employee
with respect to the subject matter of this Agreement and
the enforcement of rights hereunder, the Company shall
reimburse the Employee for all reasonable costs and
expenses relating to such litigation or other proceeding
as they are incurred, including reasonable attorneys fees
and expenses, regardless of whether such litigation
results in any settlement or judgment or order in favor
of any party; provided, however, that any claim or action
initiated by the Employee relating to this Agreement
shall have been made or brought after reasonable inquiry
and shall be well grounded in fact and warranted by
existing law or a good faith argument for the extension,
modification, or reversal of existing law, and that it is
not interposed for any improper purpose, such as to
harass or to cause unnecessary delay or needless increase
in the cost of litigation. The obligation of the Company
under this paragraph 5 shall survive the termination for
any reason of this Agreement (whether such termination is
by the Company, by the Employee, upon the expiration of
this Agreement or otherwise).
b. In the event of any dispute or dif-
xxxxxxx between the Company and the Employee with respect
to the subject matter of this Agreement and the enforce-
ment of rights hereunder, the Employee may, in his or her
sole discretion by notice to the Company, require such
dispute or difference to be submitted to arbitration.
The arbitrator or arbitrators shall be selected by agree-
ment of the parties or, if they cannot agree on an arbi-
trator or arbitrators within 30 days after the Employee
had notified the Company of his or her desire to have the
question settled by arbitration, then the arbitrator or
arbitrators shall be selected by the American Arbitration
Association (the "AAA") in New York, New York upon the
application of the Employee. The determination reached
in such arbitration shall be final and binding on both
parties without any right of appeal or further dispute.
Execution of the determination by such arbitrator may be
sought in any court of competent jurisdiction. The
arbitrators shall not be bound by judicial formalities
and may abstain from following the strict rules of evi-
dence and shall interpret this Agreement as an honorable
engagement and not merely as a legal obligation. Unless
otherwise agreed by the parties, any such arbitration
shall take place in New York, New York, and shall be
conducted in accordance with the Rules of AAA.
6. Income Tax Withholding.
The Company may withhold from any payments made
under this Agreement all federal, state, city or other
taxes as shall be required pursuant to any law or govern-
mental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understand-
ing between the Company and the Employee with respect to
the subject matter hereof, i.e., benefits payable to the
Employee upon termination of employment following a
Change in Control, and supersedes any prior severance
agreement between the Company and the Employee, except
that this Agreement shall not affect or operate to reduce
any benefit or compensation inuring to the Employee of
any kind elsewhere provided and not expressly provided
for in this Agreement and this Agreement shall not super-
sede the Letter Agreements entered into on July 14, 1994
and September 29, 1994.
8. Severability.
If, for any reason, any one or more of the
provisions or part of a provision contained in this
Agreement shall be held to be invalid, illegal or unen-
forceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision or
part of a provision of this Agreement not held so inval-
id, illegal or unenforceable, and each other provision or
part of a provision shall to the full extent consistent
with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to
the full extent permitted by law any prior agreement
between the Company and the Employee shall be deemed
reinstated as if this Agreement had not been executed.
9. Consolidation, Merger, or Sale of Assets.
If the Company consolidates or merges into or
with, or transfers all or substantially all of its assets
to, another corporation with a net worth at least equal
to that of the Company and which assumes this Agreement
and all obligations and undertakings of the Company
hereunder, the term "the Company," as used herein shall
mean such other corporation and this Agreement shall
continue in full force and effect.
10. Notices.
All notices, requests, demands and other commu-
nications required or permitted hereunder shall be given
in writing and shall be deemed to have been duly given if
delivered or mailed, postage prepaid, first class, if to
the Employee to the address shown in the personnel re-
cords of the Company and, if to the Company, as follows:
Orange and Rockland Utilities, Inc.
Xxx Xxxx Xxxx Xxxxx
Xxxxx Xxxxx, Xxx Xxxx 00000
Attention: Vice President and
General Counsel
or to such other address as either party shall have
previously specified in writing to the other.
11. No Attachment.
Except as required by law, no right to receive
payments under this Agreement shall be subject to antici-
pation, commutation, alienation, sale assignment, encum-
brance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by
operation of law, and any attempt, voluntary or involun-
tary, to effect any such action shall be null, void and
of no effect.
12. Binding Agreement.
This Agreement shall be binding upon, and shall
inure to the benefit of, the Employee and the Company and
their respective permitted successors and assigns.
13. Modification and Waiver.
This Agreement may not be modified or amended
except by an instrument in writing signed by the parties
hereto. No term or condition of this Agreement shall be
deemed to have been waived, nor shall there be any es-
xxxxxx against the enforcement of any provision of this
Agreement except by written instrument signed by the
party charged with such waiver or estoppel. No such
written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived
and shall not constitute a waiver of such term or condi-
tion for the future or as to any act other than that
specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agree-
ment are included solely for convenience of reference and
shall not in any way affect the meaning or interpretation
of any of the provisions of this Agreement.
15. Governing Law.
This Agreement and its validity, interpreta-
tion, performance, and enforcement shall be governed by
the laws of the State of New York without giving effect
to the choice of law provisions in effect in such State.
IN WITNESS WHEREOF, the Company has caused this
Agreement to be executed by its officers thereunto duly
authorized, and the Employee has signed this Agreement,
all effective as of the date first above written.
ORANGE AND ROCKLAND UTILITIES, INC.
By: /s/Xxxxx X'Xxxxx, Xx.
Chairman, Compensation Committee
/s/X.X. Xxxxxxx
D. Xxxxx Xxxxxxx
