EXECUTIVE EMPLOYMENT AGREEMENT (AMENDED AND RESTATED CHANGE OF CONTROL AGREEMENT)
EXHIBIT
10.1
(AMENDED
AND RESTATED CHANGE OF CONTROL AGREEMENT)
This
Amended and Restated Executive Employment Agreement (this “Agreement”), by and
between Puget Sound Energy, Inc., a Washington corporation (the “Company”), and [Executive Name] (the “Executive” and,
together with the Company, the “Parties”), is dated
as of March [__], 2009, with employment
effective as of the Effective Date (as defined in Section 1).
WHEREAS,
pursuant to that certain Agreement and Plan of Merger (the “Merger Agreement”),
dated as of October 25, 2007, by and among Puget Energy, Inc., a Washington
corporation (“Puget”), Padua
Holdings LLC (now Puget Holdings LLC), a Delaware limited liability company (the
“Parent”),
Padua Intermediate Holdings Inc. (now Puget Intermediate Holdings Inc.), a
Washington corporation and wholly owned subsidiary of the Parent, and Padua
Merger Sub Inc. (which later changed its name to Puget Merger Sub Inc.), a
Washington corporation and a wholly owned subsidiary of Padua Intermediate
Holdings Inc (“Merger
Sub”), Merger Sub shall merge with and into Puget, and Puget will become
a wholly owned indirect subsidiary of the Parent (the “Merger”);
WHEREAS,
the Company and the Executive are parties to a Change of Control Agreement,
dated as of [__________] [, as amended and restated
on [__________] ] (the “Original Agreement”);
and
WHEREAS,
in connection with the Merger, the Company and the Executive desire to amend and
restate the Original Agreement so that the Original Agreement will be replaced
in its entirety with this Agreement;
WHEREAS,
the Parties hereby agree to amend and restate the Original Agreement in its
entirety pursuant to the terms and conditions herein provided;-
NOW,
THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. Certain
Definitions
(a) “Accrued Obligations”
is defined in Section 5(a)(i)(A).
(b) “Annual Base Salary”
is defined in Section 3(b)(i).
(c) “Annual Bonus” is
defined in Section 3(b)(ii).
(d) “Board” means the
Board of Directors of the Company.
(e) “Cause” is defined in
Section 4(b)
(f) “Change in Control”
means, following the Effective Date, a change in beneficial ownership or control
of the Company effected through a transaction or series of transactions (other
than an offering of Common Stock to the general public through a registration
statement filed with the Securities and Exchange Commission) whereby any
“person” or related “group” of “persons” (as such terms are used in Sections
13(d) and 14(d)(2) of the Exchange Act) (other than the Company, any of its
subsidiaries, an employee benefit plan maintained by the Company or any of its
subsidiaries, any Member (as defined in that certain Amended and Restated
Limited Liability Company Agreement of Puget Holdings LLC, dated as of February
6, 2009) or a “person” that, prior to such transaction, directly or indirectly
controls, is controlled by, or is under common control with, the Company or a
Member) directly or indirectly acquires (x) beneficial ownership (within the
meaning of Rule 13d-3 under the Exchange Act) of securities of the Company
possessing more than 55% of the total combined voting power of the Company’s
securities outstanding immediately after such acquisition or (y) all or
substantially all of the assets of the Company. For the avoidance of
doubt, the Merger shall not constitute a Change in Control for purposes of this
Agreement.
(g) “Code” means the
Internal Revenue Code of 1986, as amended.
(h) “Date of Termination”
is defined in Section 4(f).
(i) “Disability” is
defined in Section 4(a).
(j) “Disability Effective
Date” is defined in Section 4(a).
(k) “Effective Date” means
the date on which occurs the “Effective Time” as defined in the Merger
Agreement.
(l) “Employment Period” is
defined in Section 2.
(m) “Exchange Act” means
the Securities Exchange Act of 1934, as amended.
(n) “Good Reason” is
defined in Section 4(d).
(o) “Incentive Plan” means
the Long Term Incentive Plan to be established by the Company, or any successor
plan, as defined in Section 3(b)(iii).
(p) “Notice of
Termination” is defined in Section 4(e).
(q) “Other Benefits” is
defined in Section 5(a)(iii).
(r) “Retirement Plan”
means the Company’s qualified pension plan or any successor plan
thereto.
(s) “SERP” means the
Company’s Supplemental Executive Retirement Plan or any other supplemental
and/or excess retirement plan or agreement of the Company and its affiliated
companies providing benefits for the Executive.
(t) “Welfare Benefit
Continuation” is defined in Section 5(a)(ii).
2. Employment
Period
The
Company hereby agrees to continue the Executive in its employ, and the Executive
hereby agrees to remain in the employ of the Company, in accordance with the
terms and provisions of this Agreement, for the period commencing on the
Effective Date and ending on the second anniversary of such date (the “Employment Period”),
in the executive capacity of
[Title/Position] or in another officer-level position of the Company and,
subject to the general supervision of the Board as required by the Washington
Business Corporation Act, such other duties and responsibilities as are not
inconsistent with the express terms of this Agreement. The Company
agrees that it will not take any action, or make any demands on the Executive,
that may be deemed to arbitrarily, unreasonably or unnecessarily interfere with
the performance of the services to be rendered by the Executive
hereunder. In the event that the Merger does not occur, this
Agreement shall be void ab
initio. Notwithstanding the foregoing, if a Change in Control
occurs at any time following the Employment Period, during which the Executive
remains employed by the Company, the Company shall cause the purchaser of or
successor to the Company to assume the provisions set forth in Sections 3, 4 and
5, including corresponding definitions (or to substitute substantially identical
provisions), subject to the other terms and conditions therein other than with
respect to the Employment Period, and to honor such provisions for a period of
not less than two years following the date of such Change in
Control.
3. Terms
of Employment
(a) Position and
Duties.
(i) During
the Employment Period, (A) the Executive’s position (including status, offices,
titles and reporting requirements), authority, duties and responsibilities shall
be in accordance with Section 2 and (B) the Executive’s services shall be
performed within the Seattle/Bellevue metropolitan area, except for required
travel on the Company’s business to the extent consistent with the Executive’s
duties as set forth in Section 2.
(ii) During
the Employment Period, and excluding any periods of paid time off to which the
Executive is entitled, the Executive agrees to devote reasonable attention and
time during normal business hours to the business and affairs of the Company
and, to the extent necessary to discharge the responsibilities assigned to the
Executive hereunder, to use the Executive’s reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period, it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable boards or committees,
(B) deliver lectures, fulfill speaking engagements or teach at educational
institutions, or (C) manage personal investments, so long as such
activities do not significantly interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that to the
extent that any such activities have been conducted by the Executive prior to
the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date
shall not thereafter be deemed to interfere with the performance of the
Executive’s responsibilities to the Company.
(b) Compensation.
(i) Base
Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”),
which shall be paid in equal installments on a monthly basis, at least equal to
12 times the highest monthly base salary paid or payable to the Executive by the
Company and its affiliated companies with respect to the 12-month period
immediately preceding the month in which the Effective Date
occurs. For purposes of this Agreement, Annual Base Salary shall not
include any payments by the Company on the Executive’s behalf pursuant to any
incentive, savings or retirement plans, any welfare benefit plans or any fringe
benefit plans, in each case, of the Company or any affiliated company, of the
type identified in paragraph (iii), (v), (vi) or (viii) of this Section 3(b),
any reimbursement of expenses by the Company or any affiliated company in
accordance with paragraph (vii) of this Section 3(b), or any other amounts
paid under paragraph (iv), (ix) or (x) of this Section 3(b). During
the Employment Period, the Annual Base Salary shall be reviewed at least
annually and shall be increased at any time and from time to time as shall be
substantially consistent with increases in base salary generally awarded in the
ordinary course of business to other peer executives of the Company and its
affiliated companies. Any increase in Annual Base Salary shall not
serve to limit or reduce any other obligation to the Executive under this
Agreement. Annual Base Salary shall not be reduced after any such
increase, and the term Annual Base Salary as utilized in this Agreement shall
refer to Annual Base Salary as so increased.
(ii) Annual
Bonus. In addition to Annual Base Salary, the Executive shall
be eligible to receive, for each fiscal year ending during the Employment
Period, a performance-based annual bonus (the “Annual Bonus”)
payable in cash based on achievement of performance measures to be determined by
the Board consistent with past practice. The target-level Annual
Bonus for each fiscal year ending during the Employment Period shall be at least
equal to the greater of (A) the Executive’s target annual bonus in effect on the
Effective Date and (B) the average (annualized for any fiscal year in which the
Executive has been employed by the Company for less than 12 full months) target
bonus for which the Executive was eligible in the three fiscal years immediately
preceding the fiscal year in which the Effective Date occurs. Each
such Annual Bonus earned shall be paid no later than the 15th day of the third
month of the fiscal year next following the fiscal year for which the Annual
Bonus is earned unless the Executive shall have timely elected to defer the
receipt of such Annual Bonus in accordance with the terms of the Company’s then
applicable deferred compensation plan. Notwithstanding the foregoing,
except as set forth in Section 5, no such Annual Bonus shall be payable with
respect to any fiscal year unless the Executive remains continuously employed
with the Company during the period beginning on the Effective Date and ending on
the last day of such fiscal year; provided that if the Executive voluntarily
retires in good standing after having attained age 55 with a minimum of five
years of service with the Company, the Executive shall, at the time the bonus
would otherwise be payable pursuant to this Section 3(b)(ii), be eligible to
receive a bonus in an amount, if any, equal to the product of (C) the amount of
bonus the Executive would have received for such year based on the Company’s
achievement of the applicable performance goals and (D) the ratio of (1)
the number of days elapsed in the calendar year prior to such retirement and (2)
365.
(iii) Incentive, Savings and
Retirement Plans. During the Employment Period, the Executive
shall be entitled to participate in the Long Term Incentive Plan to be
established by the Company (the “Incentive Plan”) and
all other incentive, savings and retirement plans, practices, policies and
programs applicable generally to other peer executives of the Company and its
affiliated companies (including, without limitation, the plans in effect on the
date of this Agreement or any successor plans), but in no event shall such
plans, practices, policies and programs (except the Company’s qualified pension
plans) provide the Executive with incentive opportunities (measured with respect
to both regular and special incentive opportunities, to the extent, if any, that
such distinction is applicable), savings opportunities and retirement benefit
opportunities that are less favorable, in the aggregate, than the most favorable
of those provided by the Company and its affiliated companies for the Executive
under such plans, practices, policies and programs as in effect at any time
during the 90-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other executives of the Company and its affiliated
companies.
(iv) Performance
Bonuses. Subject to the terms and conditions of this Section
3(b)(iv), the Executive shall be eligible to receive performance bonuses (the
“Merger Performance
Bonuses”) from the Company within 30 days following the first and second
anniversaries of the Effective Date. Each Merger Performance Bonus
shall be an amount equal to 100% of the Executive’s then current Annual Base
Salary, and shall be payable if (A) the Company achieves specified minimum
Service Quality Index performance goals established with respect to each of 2009
and 2010 by the Compensation and Leadership Development Committee of the Board
(the “Compensation
Committee”) in its sole discretion, and (B) the Executive remains in
continuous employment with the Company through the first and second
anniversaries of the Effective Date, as applicable. Notwithstanding
the foregoing (x) if the Executive’s employment is terminated without Cause or
for Good Reason prior to the first anniversary of the Effective Date, the
Executive shall be eligible to receive any Merger Performance Bonuses that would
have been payable on the first and second anniversaries of the Effective Date
based on the Company’s actual performance had the Executive continued in
employment with the Company through such dates, and (y) if the Executive’s
employment is terminated without Cause or for Good Reason during the period
beginning on the first anniversary of the Effective Date and ending on the last
day of the Employment Period, the Executive shall be eligible to receive any
Merger Performance Bonuses that would have been payable on the second
anniversary of the Effective Date based on the Company’s actual performance had
the Executive continued in employment with the Company through such
date.
(v) Long Term Incentive
Plan. During the Employment Period, the Executive shall be
eligible to participate in the Incentive Plan with a target award at least equal
to the target award that applied for the comparable performance period
immediately preceding the Effective Date, and pursuant to such terms as shall be
determined by the Board or the Compensation Committee.
(vi) Welfare Benefit
Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in
and shall receive all benefits under welfare benefit plans, practices, policies
and programs provided by the Company and its affiliated companies (including,
without limitation, medical, dental, disability, salary continuance, life, group
life, accidental death and travel accident insurance plans and programs) to the
extent applicable generally to other peer executives of the Company and its
affiliated companies, but in no event shall such plans, practices, policies and
programs provide the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer
executives of the Company and its affiliated companies.
(vii) Expenses. Subject
to Section 5(e), during the Employment Period, the Executive shall be entitled
to receive prompt reimbursement for all reasonable business expenses incurred by
the Executive in accordance with the most favorable policies, practices and
procedures of the Company and its affiliated companies in effect for the
Executive at any time during the 90-day period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally at
any time thereafter with respect to other peer executives of the Company and its
affiliated companies.
(viii) Fringe
Benefits. Subject to Section 5(e), during the Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, policies and programs of the Company and
its affiliated companies in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.
(ix) Office and Support
Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other
appointments, and to personal secretarial and other assistance, at least equal
to the most favorable of the foregoing provided to the Executive by the Company
and its affiliated companies at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as provided
generally at any time thereafter with respect to other peer executives of the
Company and its affiliated companies.
(x) Vacation. During
the Employment Period, the Executive shall be entitled to paid vacation in
accordance with the most favorable plans, practices, policies and programs of
the Company and its affiliated companies as in effect for the Executive at any
time during the 90-day period immediately preceding the Effective Date or, if
more favorable to the Executive, as in effect generally at any time thereafter
with respect to other peer executives of the Company and its affiliated
companies.
4. Termination
of Employment
(a) Death or
Disability. The Executive’s employment shall terminate
automatically upon the Executive’s death during the Employment
Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may give to the Executive written
notice in accordance with Section 12(b) of its intention to terminate the
Executive’s employment. In such event, the Executive’s employment
with the Company shall terminate effective on the 30th day after receipt of such
notice by the Executive (the “Disability Effective
Date”), provided that, within the 30 days after such receipt, the
Executive shall not have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “Disability” means a
physical or mental condition that renders the Executive unable or incompetent to
carry out the Executive’s material job responsibilities or the material duties
to which the Executive was assigned at the time the disability was incurred,
which has lasted for at least three months and which, in the opinion of a
physician mutually agreed upon by the Company and Executive (provided that
neither party shall unreasonably withhold agreement), is expected to last for an
indefinite duration or a continuous duration in excess of 12
months.
(b) Cause. The
Company may terminate the Executive’s employment during the Employment Period
for Cause. For purposes of this Agreement, “Cause” means (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
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 the
Executive by the Board, which 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 gross
misconduct materially and demonstrably injurious to the Company, as determined
by the Board after notice to the Executive and an opportunity for a
hearing. No act or failure to act on the Executive’s part shall be
considered “willful” unless the Executive has acted or failed to act with an
absence of good faith and without a reasonable belief that the Executive’s
action or failure to act was in the best interests of the Company.
(c) Without
Cause. The Company may terminate the Executive’s employment at
any time during the Employment Period without Cause.
(d) Good
Reason. The Executive’s employment may be terminated during
the Employment Period by the Executive for Good Reason. For purposes
of this Agreement, “Good Reason”
means:
(i) the
assignment of the Executive to a nonofficer position with the Company, which the
Parties acknowledge and agree would constitute a material reduction in the
Executive’s authority, duties or responsibilities;
(ii) a
material diminution in the Executive’s total compensation opportunities
hereunder;
(iii) the
Company’s requiring the Executive to be based at any location other than that
described in Section 3(a)(i)(B), which represents a material change from such
location, unless the Executive consents to such relocation; or
(iv) any
material breach of this Agreement by the Company, including, without limitation,
a failure of the Company to comply with and satisfy Section 11(c);
provided
that none of the foregoing conditions or events shall constitute Good Reason
unless the Company has not remedied the alleged violation(s) within 60 days
following the Company’s receipt of written notice from the Executive, in
accordance with Section 4(e), that the Executive believes in good faith that
such condition constitutes Good Reason.
For the
avoidance of doubt, the Executive acknowledges and agrees that the Parties’
entering into this Agreement and the Executive’s employment pursuant to the
terms hereof shall not constitute Good Reason for purposes of the Original
Agreement.
(e) Notice of
Termination. Any termination by the Company for Cause or
without Cause or by the Executive for Good Reason must be communicated by Notice
of Termination to the other party hereto given in accordance with Section
12(b). For purposes of this Agreement, a “Notice of
Termination” means a written notice by the Executive that (i) indicates
the specific termination provision in this Agreement relied on, (ii) to the
extent applicable, sets forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of the Executive’s employment under
the provision so indicated, and (iii) if the Date of Termination is other than
the date of receipt of such notice, specifies the termination date (which date
shall be no later than 15 days after the giving of such notice). The
failure by the Executive or the Company to set forth in the Notice of
Termination any fact or circumstance that contributes to a showing of Good
Reason or Cause shall not waive any right of the Executive or the Company
hereunder or preclude the Executive or the Company from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights
hereunder. Notwithstanding anything herein to the contrary, in the
event of the Executive’s termination of employment for Good Reason, the
Executive shall provide the Notice of Termination no later than 90 days
following the initial existence of the condition or occurrence of the event
purported to constitute Good Reason, and such Notice of Termination shall
specify a Date of Termination that is no later than 15 days after the date of
such Notice of Termination (and in no event later than two years following the
initial existence of such condition or occurrence of such event).
(f) Date of
Termination. “Date of Termination”
means (i) if the Executive’s employment is terminated by the Company, whether
for Cause or without Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, and (ii) if the Executive’s employment is terminated by reason of
death or Disability, the date of death of the Executive or the Disability
Effective Date, as the case may be.
5. Obligations
of the Company Upon Termination
(a) Good Reason; Without
Cause. If, during the Employment Period, the Company shall
terminate the Executive’s employment without Cause or the Executive shall
terminate employment for Good Reason, subject to Section 4(e):
(i) The
Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts:
(A) the
sum of (1) the accrued but unpaid amount of the Executive’s Annual Base Salary
through the Date of Termination, and (2) a pro rata portion of the Executive’s
Annual Bonus for the year in which the Date of Termination occurs, based on the
number of days of employment that year up to the Date of Termination divided by
365 days (the sum of the amounts described in clauses (1) and (2) shall be
hereinafter referred to as the “Accrued
Obligations”); and
(B) the
amount equal to three times the sum of (x) Annual Base Salary and (y) the Annual
Bonus for which the Executive was eligible for the year in which the Date of
Termination occurs; and
(C) a
separate lump-sum supplemental retirement benefit equal to the difference
between (1) the actuarial equivalent (utilizing for this purpose the actuarial
assumptions utilized with respect to the Retirement Plan during the 90-day
period immediately preceding the Effective Date) of the benefit payable under
the Retirement Plan and any SERP providing benefits for the Executive that the
Executive would receive if the Executive’s employment continued at the
compensation level provided for in Section 3(b)(i) and Section 3(b)(ii) for the
remainder of the Employment Period, assuming for this purpose that all accrued
normal and early retirement benefits are fully vested and that benefit accrual
formulas are no less advantageous to the Executive than those in effect during
the 90-day period immediately preceding the Effective Date, and (2) the
actuarial equivalent (utilizing for this purpose the actuarial assumptions
utilized with respect to the Retirement Plan during the 90-day period
immediately preceding the Effective Date) of the Executive’s actual benefit
(paid or payable), if any, under the Retirement Plan and the SERP;
and
(D) any
amounts payable pursuant to the third sentence of Section 3(b)(iv);
and
(ii) For
the remainder of the Employment Period, or such longer period as any plan,
practice, policy or program may provide, the Company shall continue group
medical, dental, disability and life insurance benefits to the Executive and/or
the Executive’s family at least equal to those that would have been provided to
them in accordance with the plans, practices, policies and programs described in
Section 3(b)(vi) if the Executive’s employment had not been terminated in
accordance with the most favorable plans, practices, policies or programs of the
Company and its affiliated companies as in effect and applicable generally to
other executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives of
the Company and its affiliated companies and their families; provided, however,
that if the Executive becomes re-employed with another employer and is eligible
to receive group medical or dental benefits under another employer-provided
plan, the group medical or dental benefits described herein shall be secondary
to those provided under such other plan during such applicable period of
eligibility (such continuation of such benefits for the applicable period herein
set forth shall be hereinafter referred to as “Welfare Benefit
Continuation”). During the period the Executive and/or the
Executive’s family is eligible to receive continued medical or dental
continuation coverage under the Company’s group medical and dental benefit plans
in accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985,
as amended (“COBRA”), the Company
shall pay the portion of the Executive’s premium payments necessary to satisfy
the requirements of the first sentence of this Section 5(a)(ii). With
respect to any period afterward in which the Executive and/or the Executive’s
family ceases to be eligible for COBRA coverage, and with respect to disability
and life insurance benefits for the remainder of the Employment Period, the
Executive and/or the Executive’s family shall pay to the Company, on an
after-tax basis, an amount equal to the full premium cost of medical, dental,
disability and life insurance benefits coverage. Within 30 days of
such payment, subject to Section 5(e), the Company shall pay to the Executive or
the Executive’s family in cash (less required withholding) an amount equal to
(A) the portion of the Executive’s premium payments necessary to satisfy the
requirements of the first sentence of this Section 5(a)(ii), less any premium
amount that would have been payable by the Executive or the Executive’s family
if the Executive or the Executive’s family were participants in the plans,
practices, policies and programs, plus (B) an additional amount equal to the
federal, state and local income and payroll taxes that the Executive incurs on
each with respect to such payment. For purposes of determining
eligibility of the Executive for retiree benefits Pursuant to such plans,
practices, policies and programs, the Executive shall be considered to have
remained employed until the end of the Employment Period and to have retired on
the last day of such period; provided, however, that the Executive shall be
entitled to the more favorable of the retiree benefits in effect on the Date of
Termination or the retiree benefits in effect on the date that would have been
the last date of the Employment Period if the Executive had remained employed;
and
(iii) To
the extent due and not theretofore paid or provided through the Date of
Termination, the Company shall timely pay or provide to the Executive and/or the
Executive’s family any other amounts or benefits required to be paid or provided
or which the Executive and/or the Executive’s family is eligible to receive
pursuant to this Agreement and under any plan, practice, policy or program or
contract or agreement of the Company and its affiliated companies as in effect
and applicable generally to other peer executives and their families during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally thereafter with respect to other peer
executives of the Company and its affiliated companies and their families (such
other amounts and benefits shall be hereinafter referred to as the “Other
Benefits”).
(b) Death. If
the Executive’s employment is terminated by reason of the Executive’s death
during the Employment Period, this Agreement shall terminate without further
obligations to the Executive’s legal representatives under this Agreement, other
than for payment of Accrued Obligations (which shall be paid to the Executive’s
estate or beneficiary, as applicable, in a lump sum in cash within 30 days of
the Date of Termination) and the timely payment or provision of the Welfare
Benefit Continuation and Other Benefits.
(c) Disability or
Retirement. If the Executive’s employment is terminated during
the Employment Period by reason of the Executive’s Disability or the Executive’s
retirement under the conditions described in Section 3(b)(ii), this Agreement
shall terminate without further obligations to the Executive, other than for
payment of Accrued Obligations (which shall be paid to the Executive in a lump
sum in cash within 30 days of the Date of Termination) and the timely payment or
provision of the Welfare Benefit Continuation (except in the case of retirement
as described above) and Other Benefits.
(d) Cause; Other Than for Good
Reason. If the Executive’s employment shall be terminated for
Cause during the Employment Period, this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay the
Executive’s Annual Base Salary through the Date of Termination, plus the amount
of any compensation previously deferred by the Executive, in each case to the
extent theretofore unpaid. If the Executive terminates employment
during the Employment Period, other than (i) for Good Reason or (ii) by reason
of the Executive’s retirement under the conditions described in Section
3(b)(ii), then this Agreement shall terminate without further obligations to the
Executive other than the obligation to pay the Executive’s Annual Base Salary
through the Date of Termination, plus the amount of any compensation previously
deferred by the Executive, in each case to the extent theretofore unpaid (which
shall be paid to the Executive in a lump sum in cash within 30 days of the Date
of Termination) and the timely payment or provision of Other
Benefits.
(e) Payment
Procedures. Notwithstanding anything herein to the contrary,
(A) no amount shall be payable pursuant to this Section 5 unless the Executive’s
termination of employment constitutes a “separation from service” within the
meaning of Treasury Regulation Section 1.409A-1(h), (B) no portion of the
payments and benefits provided under Sections 5(a)(i)(B)-(C) and Section
5(a)(ii) shall be paid or provided unless, on or prior to the 60th day following
the Date of Termination, the Executive timely executes a general waiver and
release of claims agreement substantially in the form attached hereto as Annex A (which waiver
and release of claims agreement shall be provided by the Company to the
Executive on or prior to the seventh day following termination), such release
shall not have been revoked by the Executive (and the applicable revocation
period shall have expired) prior to such sixtieth (60th) day, and (C) as of the
first date on which the Executive violates any covenant contained in Section 8,
any remaining unpaid portion of the payments and benefits provided under
Sections 5(a)(i)(B)-(C) and Section 5(a)(ii) shall thereupon be
forfeited. To the extent that any reimbursement of any expense under
this Section 5 or in-kind benefits provided under this Agreement are deemed
to constitute taxable compensation to the Executive, such amounts will be
reimbursed or provided no later than December 31 of the year following the year
in which the expense was incurred. The amount of any such expenses
reimbursed or in-kind benefits provided in one year shall not affect the
expenses or in-kind benefits eligible for reimbursement or payment in any
subsequent year, and the Executive’s right to such reimbursement or payment of
any such expenses will not be subject to liquidation or exchange for any other
benefit.
6. Nonexclusively
of Rights
Nothing
in this Agreement shall prevent or limit the Executive’s continuing or future
participation in any written plan provided by the Company or any of its
affiliated companies for executives generally and for which the Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as the
Executive may have under any written contract with the Company or any of its
affiliated companies. Amounts that are vested benefits or that the
Executive is otherwise entitled to receive under any such plan or contract with
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan or contract except as
explicitly modified by this Agreement.
7. Full
Settlement; Resolution of Disputes
(a) The
Company’s obligation to make the payments provided for in this Agreement and
otherwise to perform its obligations hereunder shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim, right or action that
the Company may have against the Executive or others. In no event
shall the Executive be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any of
the provisions of this Agreement, and, except as provided in Section 5(a)(ii),
such amounts shall not be reduced whether or not the Executive obtains other
employment. Subject to Section 5(e) of this Agreement, the Company
agrees to pay promptly upon invoice, to the full extent permitted by law, all
legal fees and expenses that the Executive may incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Executive or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Executive about the amount of any payment pursuant to this
Agreement).
(b) If
there shall be any dispute between the Company and the Executive (i) in the
event of any termination of the Executive’s employment by the Company, whether
such termination was for Cause, or (ii) in the event of any termination of
employment by the Executive, whether Good Reason existed, then, unless and until
there is a final, nonappealable judgment by a court of competent jurisdiction
declaring that such termination was not for Cause or that the determination by
the Executive of the existence of Good Reason was not made in good faith, the
Company shall pay all amounts (other than, to the extent the payment is a
disputed payment within the meaning of Treasury Regulation Section 1.409A-2(g),
the amounts provided under Section 5(a)(i)(A)), and provide all benefits, to the
Executive and/or the Executive’s family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
5(a) as though such termination were by the Company without Cause or by the
Executive with Good Reason; provided, however, that the Company shall not be
required to pay any disputed amounts pursuant to this Section 7(b) except upon
receipt of an undertaking by or on behalf of the Executive to repay all such
amounts to which the Executive is ultimately adjudged by such court not to be
entitled.
8. Restrictive
Covenants
(a) The
Executive shall not, at any time during the Employment Period or during the
12-month period immediately following the Date of Termination (the “Restricted Period”),
directly or indirectly engage in, have any equity interest in, or manage or
operate any person, firm, corporation, partnership, business or entity (whether
as director, officer, employee, agent, representative, partner, security holder,
consultant or otherwise) that engages in (either directly or through any
subsidiary or affiliate thereof) any business or activity relating to selling or
distributing electric power or natural gas in the state of Washington in
competition with the Company. Notwithstanding the foregoing, the
Executive shall be permitted to acquire a passive stock or equity interest in
such a business; provided that such stock or other equity interest acquired is
not more than 5% of the outstanding interest in such business.
(b) The
Executive shall not, at any time during the Employment Period or the Restricted
Period, (i) directly or indirectly, either for himself or on behalf of any other
entity, recruit or otherwise solicit or induce any employee, customer,
subscriber or supplier of the Company to terminate his, her or its employment or
arrangement with the Company, or otherwise change his, her or its relationship
with the Company, or (ii) either for himself or on behalf of any other entity,
hire, or cause to be hired, any person who was employed by the Company at any
time during the 12-month period immediately prior to the Date of Termination or
who thereafter becomes employed by the Company.
(c) The
provisions contained in Section 8(a) and Section 8(b) may be altered and/or
waived with the prior written consent of the Board.
(d) The
Executive shall hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating to the Company or
any of its affiliated companies, and their respective businesses, that shall
have been obtained by the Executive during the Executive’s employment by the
Company or any of its affiliated companies and that shall not be or become
public knowledge (other than by acts by the Executive or representatives of the
Executive in violation of this Agreement). After termination of the
Executive’s employment with the Company, the Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
(e) Upon
termination of the Executive’s employment with the Company for any reason, the
Executive will promptly deliver to the Company all correspondence, electronic
data, drawings, manuals, letters, notes, notebooks, reports, programs, plans,
proposals, financial documents or any other documents concerning the Company’s
customers, business plans, marketing strategies, products or
processes.
(f) The
Executive may respond to a lawful and valid subpoena or other legal process but
shall give the Company the earliest possible notice thereof, and shall, as much
in advance of the return date as possible, make available to the Company and its
counsel the documents and other information sought, and shall assist such
counsel in resisting or otherwise responding to such process.
(g) The
Executive agrees not to disparage the Company, any of its products or practices,
or any of its directors, officers, agents, representatives, shareholders or
affiliates, either orally or in writing, at any time; provided that the
Executive may confer in confidence with the Executive’s legal representatives
and make truthful statements as required by law.
(h) In
the event the terms of this Section 8 shall be determined by any court of
competent jurisdiction to be unenforceable by reason of its extending for too
great a period of time or over too great a geographical area or by reason of its
being too extensive in any other respect, it will be interpreted to extend only
over the maximum period of time for which it may be enforceable, over the
maximum geographical area as to which it may be enforceable, or to the maximum
extent in all other respects as to which it may be enforceable, all as
determined by such court in such action.
(i) As
used in this Section 8, the term “Company” shall include the Company, its
parents, related entities, and any of its direct or indirect
subsidiaries.
(j) The
Executive recognizes and acknowledges that a breach of the covenants contained
in this Section 8 will cause irreparable damage to the Company and its goodwill,
the exact amount of which will be difficult or impossible to ascertain, and that
the remedies at law for any such breach will be
inadequate. Accordingly, the Executive agrees that in the event of a
breach of any of the covenants contained in this Section 8, in addition to any
other remedy which may be available at law or in equity, the Company will be
entitled to specific performance and injunctive relief. In addition,
in the event that the Executive violates any of the covenants set forth in this
Section 8, (i) the Executive shall be required to pay to the Company in a single
lump sum an amount equal to the aggregate total of the amounts the Executive has
received pursuant to Sections 5(a)(i)(A)-(C) within 30 days following the date
of such violation, and (ii) the Company shall no longer be required to continue
benefits to the Executive and/or the Executive’s family pursuant to Section
5(a)(ii).
9. Excise
Taxes
Notwithstanding
any other provisions of this Agreement, if any payments or distributions in the
nature of compensation are made to or for the benefit of the Executive in
connection with the Merger or any other transaction contemplated under the
Merger Agreement, whether paid or payable pursuant to this Agreement or
otherwise (including the vesting of stock options, the lapse of restrictions on
restricted stock and any other events that result in a “payment in the nature of
compensation” within the meaning of Section 280G of the Code), that are
characterized as “excess parachute payments” (as defined in Section 280G(b)(1)
of the Code or any successor provision), then the Company shall pay to the
Executive an additional amount (the “Gross-Up Payment”)
equal to the excise taxes imposed by Section 4999 of the Code, or any successor
provision, on the Executive’s excess parachute payments (the “Parachute Tax”) plus
an amount equal to the federal and (if applicable) state income and excise
taxes, including, without limitation, FICA and Medicare taxes or other taxes
that will be payable by the Executive as a result of this additional
payment. Notwithstanding anything to the contrary in this Agreement,
the Company shall pay the Gross-Up Payment to the Executive no later than the
end of the calendar year following the calendar year in which the related
Parachute Tax is remitted to the relevant taxing authorities. In the
event a Change in Control occurs after the Effective Date and no stock of the
Company is tradable on an established securities market or otherwise immediately
before such Change in Control (within the meaning of Section 280G(b)(5)(A)(ii)
of the Code), then to the extent that the Executive would otherwise be eligible
to receive any excess parachute payment that would be subject to the Parachute
Tax in connection with such Change in Control, the Executive shall agree to
execute a waiver of a portion of the excess parachute payments such that all
nonwaived payments would not be subject to the Parachute Tax; provided that the
Company agrees to seek, but shall not be required to obtain, approval from its
shareholders in a manner that complies with Section 280G(b)(5)(B) of the Code
and Treasury Regulation Section 1.280G-1 such that if such shareholder approval
is obtained the waived payments shall be restored.
10. Section
409A
(a) The
Parties hereto acknowledge and agree that, to the extent applicable, this
Agreement shall be interpreted in accordance with, and incorporate the terms and
conditions required by, Section 409A of the Code and the Department of Treasury
regulations and other interpretive guidance issued thereunder, including,
without limitation, any such regulations or other guidance that may be issued
after the Effective Date. Notwithstanding any provision of this
Agreement to the contrary, in the event that the Company determines that any
amounts payable hereunder will be immediately taxable to the Executive under
Section 409A of the Code and related Department of Treasury guidance, the
Company reserves the right (without any obligation to do so or to indemnify the
Executive for failure to do so) to adopt such limited amendments to this
Agreement and appropriate policies and procedures, including amendments and
policies with retroactive effect, that the Company reasonably determines are
necessary or appropriate to (i) exempt the compensation and benefits payable
under this Agreement from Section 409A of the Code and/or preserve the intended
tax treatment of the compensation and benefits provided with respect to this
Agreement or (ii) comply with the requirements of Section 409A of the Code, and
to the maximum extent possible payments and benefits made hereunder shall be
considered short-term deferrals within the meaning of Treasury Regulation
Section 1.409A-1(b)(4) or subject to the exception from Section 409A of the Code
set forth in Treasury Regulation Section
1.409A-1(b)(9)(iii). Notwithstanding the foregoing, no provision of
this Agreement shall be interpreted or construed to transfer any liability for
failure to comply with the requirements of Section 409A of the Code from the
Executive or any other individual to the Company or any of its affiliates,
employees or agents.
(b) Notwithstanding
any provision to the contrary in this Agreement, if the Executive is deemed at
the time of the Executive’s separation from service to be a “specified employee”
for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed
commencement of any portion of the termination benefits to which the Executive
is entitled under this Agreement is required in order to avoid a prohibited
distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of the
Executive’s termination benefits shall not be provided to the Executive prior to
the earlier of (i) the expiration of the six-month period measured from the date
of the Executive’s “separation from service” with the Company (as such term is
defined in the Treasury Regulations issued under Section 409A of the Code) or
(ii) the date of the Executive’s death. Upon the earlier of such
dates, all payments deferred pursuant to this Section 10(b) shall be paid in a
lump sum to the Executive, and any remaining payments due under this Agreement
shall be paid as otherwise provided herein.
(c) For
purposes of Section 409A of the Code, the Executive’s right to receive
installment payments pursuant to Sections 5(a)(i)(A)-(C) shall be treated as a
right to receive a series of separate and distinct payments. The
determination of whether the Executive is a “specified employee” for purposes of
Section 409A(a)(2)(B)(i) of the Code as of the time of the Executive’s
separation from service shall be made by the Company in accordance with the
terms of Section 409A of the Code and applicable guidance thereunder (including,
without limitation, Treasury Regulation Section 1.409A-1(i) and any successor
provision thereto).
11. Successors
(a) This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive’s legal
representatives.
(b) This
Agreement shall inure to the benefit of and be binding on the Company and its
successors and assigns.
(c) The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all the business
and/or assets of the Company to assume expressly 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. The
Company shall provide such successor with at least ten days’ prior written
notice of the requirements of this Section 11(c). As used in this
Agreement, the term “Company” shall mean
the Company as hereinbefore defined and any successor to its business and/or
assets as aforesaid that assumes and agrees to perform this Agreement by
operation of law, or otherwise.
12. Miscellaneous
(a) This
Agreement shall be governed by and construed in accordance with the laws of the
state of Washington, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement contains the
entire understanding of the Parties with regard to the subject matter of this
Agreement and fully supersedes any and all prior discussions, negotiations,
commitments and understandings related thereto (including the Original
Agreement). This Agreement may not be amended or modified otherwise
than by a written agreement executed by the Parties hereto or their respective
successors and legal representatives.
(b) All
notices and other communications hereunder shall be in writing and shall be
given by hand delivered to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the
Executive:
[Executive
Name]
[Title/Position]
Puget
Sound Energy, Inc., PSE-12
X.X. Xxx
00000
Xxxxxxxx,
XX 00000-0000
If to the
Company:
Puget
Sound Energy, Inc.
X.X. Xxx
00000
Xxxxxxxx,
XX 00000-0000
or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
(d) The
Company may withhold from any amounts payable under this Agreement such federal,
state or local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(e) The
Executive’s or the Company’s failure to insist on strict compliance with any
provision hereof or any other provision of this Agreement or the failure to
assert any right the Executive or the Company may have hereunder, including,
without limitation, the right of the Executive to terminate employment for Good
Reason pursuant to Section 4(d)(i)-(iv), shall not be deemed to be a waiver of
such provision or right or any other provision or right of this
Agreement.
(f) The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and may be terminated by
either the Executive or the Company at any time.
(g) This
Agreement may be executed in counterparts, each of which counterparts shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
[Signature Page
Follows]
IN
WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and,
pursuant to authorization from the Board, the Company has caused this Agreement
to be executed in its name and on its behalf, all as of the day and year first
above written.
|
PUGET
SOUND ENERGY, INC.
/s/
By: Xxxxxxx
X. Xxxxxxxx
Its
President and Chief Executive Officer
|
||
|
/s/
By:
[Executive
Name]
[Title/Position]
|
ANNEX
A
Form
of Release
______________________
(the “Executive”)
represents that the Executive has not filed any complaints, charges or lawsuits
against Puget Sound Energy, Inc. (“PSE”) or any of its
parents, affiliates or related and subsidiary entities (collectively, the “Company”), with any
governmental agency or any court. The Executive expressly waives all
claims against the Company and releases the Company, and any of its past,
present or future parents, and affiliated, related and/or subsidiary entities,
and all of the past and present directors, shareholders, officers, general or
limited partners, employees, agents and attorneys, and agents and
representatives of such entities, and employee benefit plans in which the
Executive is or has been a participant by virtue of the Executive’s employment
with the Company (collectively, the “Releasees”), from any
claims that the Executive may have against the Company, or the former Puget
Sound Power & Light Company, Washington Natural Gas Company or Washington
Energy Company. It is understood that this release includes, but is
not limited to, any claims arising directly or indirectly out of, relating to,
or in any other way involving in any manner whatsoever, (a) the Executive’s
employment with the Company or its subsidiaries or the termination thereof or
(b) the Executive’s status at any time as a holder of any securities of the
Company, including any claims for wages, employment benefits or damages of any
kind whatsoever arising out of any contract, express or implied, any covenant of
good faith and fair dealing, express or implied, any legal restriction on the
Company’s right to terminate employment, or any federal, state or other
governmental statute or ordinance, including, without limitation, Title VII of
the Civil Rights Act of 1964, the federal Age Discrimination in Employment Act,
the Americans with Disabilities Act, the Family and Medical Leave Act, the
Employee Retirement Income Security Act of 1974, the Washington Law Against
Discrimination, the Washington Family and Parental Leave Acts, or any other
legal limitation on the employment relationship (this “Release”);provided,
however, notwithstanding anything to the contrary set forth herein, that this
general release shall not extend (x) to benefit claims under employee pension
benefit plans in which the Executive is a participant by virtue of the
Executive’s employment with the Company or its subsidiaries or to benefit claims
under employee welfare benefit plans for occurrences (e.g., medical care, death
or onset of disability) arising after the execution of this Release by the
Executive, and (y) to any executory obligations assumed by the Company under
that certain Executive Employment Agreement (Amended and Restated Change of
Control Agreement), dated as of January [__], 2009, by and between the
Company and the Executive.
The
Executive understands that this Release includes a release of claims arising
under the Age Discrimination in Employment Act (ADEA). The Executive
understands and warrants that he/she has been given a period of [21 + 7][45 + 7] days to
review and consider this Release. The Executive further warrants that
the Executive understands that, with respect to the release of age
discrimination claims only, the Executive has a period of seven (7) days after
execution of this Release to revoke the release of age discrimination claims by
notice in writing to the Company.
The
Executive is hereby advised to consult with an attorney prior to executing this
Release. By the Executive’s signature below, the Executive warrants
that the Executive has had the opportunity to do so and to be fully and fairly
advised by that legal counsel as to the terms of this Release.
