LONG ISLAND LIGHTING COMPANY EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 1st day of March,
1997, by and between LONG ISLAND LIGHTING COMPANY, a New York corporation
(hereinafter referred to as the "Company"), and Xxxxxxx X. Xxxx (hereinafter
referred to as "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company in a key executive
capacity and the Executive's services are valuable to the conduct of the
business of the Company; and
WHEREAS, the Company recognizes that circumstances may arise in
which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing uncertainty about the Executive's future employment
with the Company without regard to the Executive's competence or past
contributions, which uncertainty may result in the loss of valuable services of
the Executive to the detriment of the Company and its shareholders, and the
Company and the Executive wish to provide reasonable security to the Executive
as an incentive for the continuation by Executive of his or her current
relationship with the Company.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements hereinafter set forth, the parties hereto mutually
covenant and agree as follows:
1. Definitions.
(A) Cause. "Cause" for termination by the Company of the Executive's
employment after a Change of Control of the Company shall, for purposes of this
Agreement, be limited to (i) the Executive's intentionally engaging in conduct
not in good faith which has caused demonstrable and serious financial injury to
the Company, all of which shall be evidenced by a determination in a binding and
final judgment, order or decree of a court or administrative agency of competent
jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an
action, suit or proceeding, whether civil, criminal, administrative or
investigative; (ii) conviction of a felony (as evidenced by binding and final
judgment, order or decree of a court of competent jurisdiction, in effect after
exhaustion of all rights of appeal) which substantially impairs the Executive's
ability to perform his duties or responsibilities; and (iii) continuing willful
and unreasonable refusal by the
Executive to perform the Executive's duties or responsibilities (unless such
duties or responsibilities have been significantly changed without the
Executive's consent).
(B) Change of Control. The term "Change of Control" means an event
which shall be deemed to have occurred if:
(i) any "person" as such term is used in Section 13(d) and 14(d) of
the Securities Exchange Act of 1934 (the "Exchange Act") (other than the
Company, any trustee or other fiduciary holding securities under any
employee benefit plan of the Company, or any company owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing 40% or
more of the combined voting power of the Company's then outstanding
securities;
during any period of two consecutive years, individuals who at the
beginning of such period constitute the Board, and any new director (other
than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (iii) or (iv)
herein) whose election by the Board or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3)
of the directors then still in office who either were directors at the
beginning of the period or whose election or nomination for election was
previously so approved, cease for any reason to constitute at least a
majority thereof;
the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately
after such merger or consolidation; provided, however, that a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no "person" (as hereinabove defined)
acquires more than 25% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change of Control; or
the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of, or the Company sells or disposes of, all or
substantially all of the Company's assets or all or substantially all of
the assets of the Company acquired for or used in the electric utility
business of the Company, or any such sale or disposition is effected
through condemnation proceedings.
The Chief Legal Officer shall notify the parties to this Agreement as to
whether and when a Change of Control has occurred. The preceding sentence shall
not preclude any other party to this Agreement from giving such notice.
(C) Company. Upon the occurrence of any merger or consolidation
described in Section 1(B)(iii) in which the Company is not the surviving entity
and which is not a Change of Control, "Company" shall thereafter for all
purposes hereof be deemed to mean such surviving entity and in such event
"Company" for purposes of Section 1(B)(ii) shall mean Long Island Lighting
Company prior to such event and such surviving entity thereafter.
(D) Notice of Termination. "Notice of Termination" shall mean a
notice delivered by the Company or the Executive, as the case may be, and
stating that the Executive's employment with the Company is terminated and the
reason why such employment is terminated.
(E) Limited Waiver. The waiver by the Company of a violation of any
provisions of this Agreement, whether express or implied, shall not operate or
be construed as a waiver of any subsequent violation of any such provision.
(F) Code. For purposes of this Agreement, the term "Code" means the
Internal Revenue Code of 1986, including any amendments thereto or successor tax
codes thereof. References to any section of the Code shall include any amended
or successor section of comparable import.
(G) Covered Termination. For purposes of this Agreement, the term
"Covered Termination" means any termination of the Executive's employment by the
Company, if the Termination Date is any date prior to the end of the Employment
Period and, if such termination is by the Executive, for a Good Reason as
defined below.
(H) Employment Period. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the date of a Change of Control
of the Company, and ending at 11:59 p.m. Eastern Time on the third anniversary
of such date.
(I) Good Reason. For purposes of this Agreement, the Executive shall
have a "Good Reason" for termination of employment after a Change of Control of
the Company in the event of significant adverse change, without the Executive's
written consent, in the Executive's status with the Company from such status in
effect immediately prior to the Change of Control of the Company.
(J) Person. For purposes of this Agreement, the term "Person" shall
mean any individual, firm, partnership, corporation or other entity, including
any successor (by merger or otherwise) of such entity, or a group of any of the
foregoing acting in concert.
(K) Termination Date.
(i) For purposes of this Agreement, the term "Termination Date"
means (a) if the Executive's employment is terminated by the Executive's
death, the date of death; (b) if the Executive's employment is terminated
by reason of voluntary early retirement, as agreed in writing by the
Company and the Executive, the date of such early retirement which is set
forth in such written agreement; (c) if the Executive's employment is
terminated for purposes of this Agreement by reason of disability, as
defined in the Retirement Income Plan of the Company (as in effect on the
date hereof), the earlier of thirty days after the Notice of Termination
is given or one day prior to the end of the Employment Period; (d) if the
Executive's employment is terminated by the Company (other than by reason
of disability) or by the Executive for Good Reason, the earlier of thirty
days after the Notice of Termination is given or one day prior to the end
of the Employment Period, except that if the Notice of Termination is
given on or prior to the third anniversary of the date of the Change of
Control of the Company, the Termination Date shall be deemed to have
occurred no later than the third anniversary of the date of the Change of
Control of the Company. Notwithstanding the foregoing:
If the party receiving the Notice of Termination notifies the other
party that a dispute exists concerning the termination and it is finally
determined that the reason asserted in such Notice of Termination did not
exist, then (a) if such Notice was delivered by the Executive, the
Executive will be deemed to have voluntarily terminated his employment and
(b) if delivered by the Company, the Company will be deemed to have
terminated the Executive other than by reason of death or disability.
2. Termination or Cancellation Prior to Change of Control. The
Company and the Executive shall each retain the right to terminate the
employment of the Executive at any time prior to a Change of Control of the
Company. In the event (A) the Executive's employment is terminated prior to a
Change of Control of the Company, or (B) no Change of Control of the Company
occurs prior to December 31, 1999, this Agreement shall be terminated and
canceled and of no further force and effect, and any and all rights and
obligations of the parties hereunder shall cease.
3. Benefits. If there is a Covered Termination, the
Executive shall be entitled to the following benefits:
(A) Accrued Benefits. The Executive shall be paid the amount of the
Executive's Accrued Benefits. For purposes of this Agreement, the Executive's
"Accrued Benefits" shall include the following amounts, payable as described
herein: (i) all base salary, and accrued vacation pay, for the time period
ending with the Termination Date; (ii) reimbursement for any and all monies or
other reimbursable costs advanced in connection with the Executive's employment
for reasonable and necessary expenses incurred by the Executive on behalf of the
Company for the time period ending with the Termination Date; (iii) any and all
other cash earned through the Termination Date and deferred at the election of
the Executive or pursuant to any deferred compensation plan then in effect, and
any increments thereon as determined under such plan; and (iv) a lump sum
payment of the bonus or incentive compensation otherwise payable to the
Executive with respect to the year in which termination occurs, or for the prior
year, under all bonus or incentive compensation plans in which the Executive is
a participant. Payment of Accrued Benefits shall be made promptly in accordance
with the Company's prevailing practice.
(B) Welfare Benefits.
(i) Until the third anniversary of the date of the Covered
Termination, the Executive shall continue to be covered, at the expense of the
Company, by the same or equivalent welfare benefits, including life insurance,
hospitalization, medical and dental coverage and disability benefits, as were
provided to the Executive immediately prior to the date of the Change of
Control.
In the case of benefits of a character described in Section
4980B of the Code, the Company shall reimburse the Executive for the cost of
coverage for such benefits until such third anniversary of the date of the
Covered Termination (which may be effected by paying the applicable
premium on behalf of the Executive and reporting it as income of the Executive
for federal and other applicable income tax purposes). The amount of such
payment shall be grossed up so that the net effect of such payment by the
Company, after giving effect to federal, state and local income taxes on
payments under this subdivision (ii), shall be the same as if the Company had
provided such coverage fully at its own expense as described in subdivision (i)
of this Section (B).
(C) Leased Automobile. For a period of 90 days from the date of a
Covered Termination, the Company shall continue to make available to the
Executive the leased automobile being provided for the Executive by the Company
at the date of the Change of Control (or in the case of a successor automobile,
such automobile) on the same basis and at the same cost to the Executive, if
any, as such automobile is provided on the Termination Date.
(D) Severance Payment. The Executive will be entitled to cash
compensation equal to three (3) years pay, calculated as described below,
payable in equal monthly installments. The aggregate cash compensation will be
calculated as the greater of three (3) times (i) the Executive's current rate of
base salary at the Termination Date or (ii) the Executive's highest annual rate
of base salary within one (1) year prior to the Change of Control. Cash
compensation paid pursuant to this provision shall be subject to appropriate
payroll deductions.
(E) Supplemental Death and Retirement Benefit Plan.
(i) An executive whose employment is terminated for any reason after
a Change of Control and who is not vested at the time of such termination
in the post-retirement benefits provided under the Supplemental Death and
Retirement Benefits Plan (SD&RB) shall become vested as of the date of a
Change of Control in the following percentage of such benefits.
The percentage referred to in subdivision (i) of this Section is the
percentage determined by multiplying 100 percent by a fraction, the
numerator of which is the Executive's period of service at the Executive's
Termination Date computed to the nearest whole month and then increased by
36 months, and the denominator of which is the years of service, or
partial years of service, computed to the nearest whole month, which the
Executive would have had at the first day of the month in which the
Executive's 65th birthday falls (but not greater than 100 percent), had
the Executive been continuously employed until such date. The percentage
so determined shall be multiplied by the number
of the Participant's Units of Participation in the SD&RB at the date of
any Change of Control to determine the Units available to the Participant
at the Termination Date and the provisions of the SD&RB shall be deemed to
be amended to the full extent necessary to give effect to the provisions
of this Section 3(E).
The percentage of the life insurance or annuity benefit provided
under the SD&RB for each Unit, or fraction thereof, shall become payable
at the end of the period described in (A) above during which the
pre-retirement death benefit provided under the SD&RB is continued.
If the Executive elects any annuity benefit provided under the
SD&RB, such benefit shall be elected within 90 days of the Termination
Date. With respect to the calculation of the amount of any annuity benefit
payable to the Executive under the SD&RB, the actuarial equivalent of the
normal form of benefit provided under the SD&RB shall be computed by
adding 36 months to the Executive's attained age, and with no reduction
for commencement before age 60 (determined after such addition), and a
reduction of four percent (4%) for each full year that the Executive is
under age 60 (determined after such addition). In addition to the options
available under the SD&RB, the Executive may elect to receive a lump sum
payment of the actuarial equivalent of any annuity option provided under
the SD&RB. Any such lump sum payment shall be determined by utilizing an
actuarial factor of 110.16 per $1 of monthly income as of the Termination
Date. The amount determined as of the Termination Date, whether in a lump
sum or annuity form, shall be actuarially increased to reflect the
interval between the Termination Date and the date of payment, based on
the rate of interest announced by Xxxxxx Guaranty Trust Company of New
York from time to time as its prime or base lending rate between the
Termination Date and the payment date.
(F) Tax Gross-Up.
(i) In the event that the Executive becomes entitled to payments in
connection with a Change in Control or his termination of employment (the
"Payments"), if any of the Payments will be subject to the tax imposed by
Section 4999 of the Code (or any similar tax that may hereafter be
imposed) (the "Excise Tax"), the Company shall pay to Executive an
additional amount (the "Gross-Up Payment") such that the net amount
retained by him, after deduction of any Excise Tax on the Payments and any
federal, state and local income tax and Excise Tax upon the payment
provided for by
this paragraph, shall be equal to the Payments. For purposes of
determining whether any of the Payments will be subject to the Excise Tax
and the amount of such Excise Tax, (a) any other payments or benefits
received or to be received by Executive in connection with a Change of
Control or his termination of employment (whether pursuant to the terms of
this Agreement or any plan, arrangement or agreement with the Company or
any person whose actions result in a Change of Control or any person
affiliated with the Company or such person) shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all
"excess parachute payments" within the meaning of Section 280G(b)(1) shall
be treated as subject to the Excise Tax, unless in the opinion of tax
counsel selected by the Company's independent auditors, and consented to
in writing by the Executive, which consent shall not be unreasonably
withheld, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually
rendered before the date of the change within the meaning of Section
280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise
Tax, (b) the amount of the Payments which shall be treated as subject to
the Excise Tax shall be equal to the lesser of (1) the total amount of the
Payments or (2) the amount of excess parachute payments within the meaning
of Section 280G(b)(1) (after applying clause (a), above), and (c) the
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal, state and local income taxes at
the highest marginal rate of federal, state and local income taxation in
the calendar year in which the Gross-Up Payment is to be made. In the
event that the Excise Tax is subsequently determined to be less than the
amount taken into account hereunder at the time of termination of
Executive's employment, he shall repay to the Company at the time that the
amount of such reduction in Excise Tax is finally determined the portion
of the Gross-Up Payment attributable to such reduction (plus the portion
of the Gross-Up Payment attributable to the Excise Tax and federal, state
and local income tax imposed on the Gross-Up Payment being repaid by
Executive if such repayment results in a reduction in Excise Tax and/or a
federal, state and local tax deduction) plus interest on the
amount of such repayment at the rate provided in Section 1274(b)(2)(B) of
the Code, applied by treating the period between initial payment of the
Gross-Up Payment and the repayment in respect thereof as the term of the
debt instrument referred to in section 1274(d)(1)(A) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of the termination of Executive's employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess (plus
any interest payable with respect to such excess) at the time that the
amount of such excess is finally determined.
A Gross-Up Payment shall be made not later than the fifth day, or as
soon thereafter as the Company in good xxxxx xxxxx practicable, following
the date Executive becomes subject to payment of excise tax; provided,
however, that if the amounts of such payment cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of such payment
(together with interest at the rate provided under Section 1274(b)(2)(B)
of the Code) as soon as the amount can be determined but no later than the
thirtieth day after the date Executive becomes subject to the payment of
excise tax. In the event the amount of the estimated payment exceeds the
amount subsequently determined to have been due, such excess shall
constitute a loan by the Company to Executive, payable on the fifth day
after demand by the Company (together with interest at the rate provided
in Section 1274(b)(2)(B) of the Code).
4. Further Obligations of the Executive.
(A) Confidentiality. The Executive agrees that, the Executive shall
hold in confidence and not directly or indirectly disclose or use or copy or
make lists of any confidential information or proprietary data of the Company,
except to the extent authorized in writing pursuant to authorization by the
Board of Directors of the Company or required by any court or administrative
agency, other than to an employee of the Company or a person to whom disclosure
is reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company. Confidential information
shall not include any information known generally to the public or any
information of a type not otherwise considered confidential by persons engaged
in the same business or a
business similar to that of the Company. All records, files, documents and
materials, or copies thereof, relating to the business of the Company which the
Executive shall prepare, or use, or come into contact with, shall be and remain
the sole property of the Company and shall be promptly returned to the Company
upon termination of employment with the Company.
5. Expenses and Interest. If, after a Change in Control of the
Company, (A) a dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or (B) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, the Executive shall recover from the Company any
reasonable attorneys' fees and necessary costs and disbursements, including
without limitation expert witness fees, incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Xxxxxx Guaranty Trust Company of New York from
time to time as its prime or base lending rate from the date that payments to
him should have been made under this Agreement. Within ten days after the
Executive's written request therefor (which, without limitation, may be made
periodically or from time to time based on the date or dates at which the
Executive is billed for services and related expenses which are reimbursable as
"Expenses" hereunder), the Company shall pay to the Executive, or such other
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
6. Payment Obligations Absolute. The Company's obligation during and
after the Employment Period to pay the Executive the amounts and to make the
benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. All amounts payable by the
Company hereunder shall be paid without notice or demand. Each and every payment
made hereunder by the Company shall be final, and the Company will not seek to
recover all or any part of such payment from the Executive, or from whomsoever
may be entitled thereto, for any reason whatsoever.
7. Successors.
(A) If the Company sells, assigns or transfers all or substantially
all of its business and assets to any Person or if the Company merges into or
consolidates or otherwise combines (where the Company does not survive such
combination) with any Person (any such event, a "Sale of Business"), then the
Company shall assign all of its right, title and interest in this Agreement as
of the date of such event to such Person, and the Company shall cause such
Person, by written agreement in form and substance reasonably satisfactory to
the Executive, to expressly assume and agree to perform from and after the date
of such assignment all of the terms, conditions and provisions imposed by this
Agreement upon the Company. In case of such assignment by the Company and of
assumption and agreement by such Person, as used in this Agreement, "Company"
shall thereafter mean such Person which otherwise becomes bound by all the terms
and provisions of this Agreement by operation of law, and this Agreement shall
inure to the benefit of, and be enforceable by, such Person. The Executive
shall, in his discretion, be entitled to proceed against any or all of such
Persons, any Person which theretofore was such a successor to the Company (as
defined in the first paragraph of this Agreement) and the Company (as so
defined) in any action to enforce any rights of the Executive hereunder. Except
as provided in this Subsection, this Agreement shall not be assignable by the
Company. This Agreement shall not be terminated by the voluntary or involuntary
dissolution of the Company.
(B) This Agreement and all rights of the Executive shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under this Agreement, if the Executive had lived shall
be paid, in the event of the Executive's death, to the Executive's estate, heirs
and representatives; provided, however, that the foregoing shall not be
construed to modify any terms of any benefit plan of the Company or of any
agreement or arrangement of the Company with respect to benefits, as such terms
are in effect on the date of the Change of Control of the Company, that
expressly govern benefits under such plan, agreement or arrangement in the event
of the Executive's death.
8. Severability. The provisions of this Agreement shall be regarded
as divisible, and if any of said provisions or any part hereto are declared
invalid or unenforceable by a court of competent jurisdiction, the validity and
enforceability of the remainder of such provisions or parts hereof and the
applicability thereof shall not be affected thereby.
9. Amendment. This Agreement may not be amended or
modified at any time except by written instrument executed by the
Company and the Executive.
10. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of nationally recognized tax counsel if any question as to the amount
or requirement of any such withholding shall arise.
11. Governing Law; Resolution of Disputes. This Agreement and the
rights and obligations hereunder shall be governed and construed in accordance
with the laws of the State of New York. Any dispute arising out of this
Agreement shall, at the Executive's election, be determined by arbitration under
the rules of the American Arbitration Association then in effect (in which case
both parties shall be bound by the arbitration award) or by litigation. Whether
the dispute is to be settled by arbitration or litigation, the venue for the
arbitration or litigation shall be New York or, at the Executive's election, if
the Executive is no longer residing or working in the New York metropolitan
area, in the judicial district encompassing the city in which the Executive
resides; provided, that, if the Executive is not then residing in the United
States, the election of the Executive with respect to such venue shall be either
in New York, New York or in the judicial district encompassing that city in the
United States among the thirty cities having the largest population (as
determined by the most recent United States Census data available at the
Termination Date) which is closest to the Executive's residence. The parties
consent to personal jurisdiction in each trial court in the selected venue
having subject matter jurisdiction notwithstanding their residence or situs, and
each party irrevocably consents to service of process in the manner provided
hereunder for the giving of notices.
12. Payment from Trust Funds. The Company has established various
Trust Funds in order to assure payment by the Company of obligations under its
various benefit programs and pursuant to this Agreement. In the event that the
Company or its successors or assigns shall not make a payment required by this
Agreement or pursuant to any employment arrangement or agreement with respect to
which a Trust has been established, the Trustee of such Trust, consistent with
the terms and conditions of the Trust, shall make the payment required of the
Company without any need to inquire into the obligations of the Executive to the
Company under this Agreement.
13. Notices. All notices hereunder shall be in writing and deemed
properly given if delivered by hand and receipted or if mailed by registered
mail, return receipt requested. Notices to the Company shall be directed to the
Corporate Secretary at the Company's headquarters offices. Notices to the
Executive shall be directed to his last known home address.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
dated this 1st day of March, 1997.
LONG ISLAND LIGHTING COMPANY
By: /s/ Xxxxxxx X Xxxxxxxxxxx
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Xxxxxxx X. Xxxxxxxxxxx
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
