ORANGE AND ROCKLAND UTILITIES, INC.
SEVERANCE AGREEMENT
THIS AGREEMENT, effective this 10th day of April, 1998 by and between
Orange and Rockland Utilities, Inc. (the "Company") and Xxxxxx X. Xxxxxx, Xx.
(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; and
WHEREAS, on January 3, 1991 the Board of Directors of the Company
determined that it would be in the best interests of the Company and its
shareholders 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 officers of the Company; and
WHEREAS, the Board of Directors of the Company approved the
appointment of the Employee to the position of Vice President - Energy Delivery
Services of the Company on April 8, 1998; and
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; and
NOW THEREFORE, it is hereby agreed by and between the parties hereto
as follows:
1. Definitions.
"Beneficial Owner" shall have the meaning set forth in Rule 13d-3
under the Exchange Act.
"Board" shall mean the Board of Directors of the Company.
"Cause" shall mean (a) the Employee's conviction of a felony or (b)
the Employee's fraud or dishonesty which has resulted or is likely to result in
material 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 be deemed to have occurred if the event set
forth in any one of the following paragraphs shall have occurred:
(i) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates other than in connection with the acquisition by the
Company or its affiliates of a business) representing 20% or more of either the
then outstanding shares of common stock of the Company or the combined voting
power of the Company's then outstanding securities; or
(ii) the following individuals cease for any reason to constitute
a majority of the number of directors then serving: individuals who, on the
date hereof, constitute the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or
threatened election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company (as such
terms are used in Rule 14a-11 of Regulation 14A under the Exchange Act)) whose
appointment or election by the Board or nomination for election by the
Company's shareholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors on the date hereof
or whose appointment, election or nomination for election was previously so
approved; or
(iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation or approve the issuance
of voting securities of the Company in connection with a merger or consolidation
of the Company (or any direct or indirect subsidiary of the Company) pursuant to
applicable stock exchange requirements, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior to such merger or consolidation continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity or any parent thereof), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least 65% of the combined voting power of the
voting securities of the Company or such surviving entity or any parent thereof
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially Owned by such Person any securities acquired directly
from the Company or its affiliates other than in connection with the acquisition
by the Company or its affiliates of a business) representing 20% or more of
either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding securities; or
(iv) the stockholders of the Company approve a plan of complete
liquidation or dissolution of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets,
other than a sale or disposition by the Company of all or substantially all of
the Company's assets to an entity, at least 65% of the combined voting power of
the voting securities of which are owned by Persons in substantially the same
proportions as their ownership of the Company immediately prior to such sale.
Notwithstanding the foregoing, no "Change in Control" shall be
deemed to have occurred if there is consummated any transaction or series of
integrated transactions immediately following which the record holders of the
common stock of the Company immediately prior to such transaction or series of
transactions continue to have substantially the same proportionate ownership in
an entity which owns all or substantially all of the assets of the Company
immediately following such transaction or series of transactions.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
"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 functions, 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 consent, 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 that 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.
"Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except
that such term shall not include (i) the Company or any of its affiliates (as
defined in Rule 12b-2 promulgated under the Exchange Act), (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its affiliates, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as their ownership of stock of the Company.
2. Term.
This Agreement shall commence on the date hereof and shall continue in
effect for a period of twenty-four (24) months following the date of an
occurrence of a Change in Control (or, if later, twenty-four (24) months
following the date of the consummation of the transaction the approval of which
by the Company's shareholders constitutes a Change in Control under subsection
(iii) or (iv) of the definition of "Change in Control," above) (hereinafter the
"Term of this Agreement").
3. Severance Benefit.
a. In the event of any termination of the Employee's employment
hereunder at any time during the Term of this Agreement (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 determined
under section 28OG 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 described 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 individual basis. The benefits provided in accordance with this paragraph 3b
shall be secondary to any comparable benefits provided by another employer.
c. 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 payments to be made pursuant
to paragraph 3a hereof shall be correspondingly reduced before implementation of
paragraph e below, and, if necessary, the Employee shall make an appropriate
refund to the Employer without interest.
d. If Independent Tax Counsel shall determine that the
aggregate payments made to the Employee pursuant to paragraphs 3a and b above
and any other payments to the Employee from the Company which constitute
"parachute payments" as defined in section 28OG 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
April 8, 2003, the Employee shall be entitled to all payments under paragraphs
3a and b 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 paragraph 3d, "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.
e. If it is established pursuant to a final determination of a
court or a final Internal Revenue 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 payments paid to the Employee under this
Agreement constitutes an "excess parachute payment" for purposes of sections
28OG 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
incorrectly 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 Employee 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 difference between the
Company and the Employee with respect to the subject matter of this Agreement
and the enforcement 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
agreement of the parties or, if they cannot agree on an arbitrator 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 evidence 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 governmental regulation or ruling.
7. Entire Understanding.
This Agreement contains the entire understanding 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, including the Prior Agreement, 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.
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
unenforceable 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 invalid, 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 communications 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 records 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 anticipation, commutation, alienation, sale
assignment, encumbrance, charge, pledge, or hypothecation or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, 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 estoppel 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 condition for the
future or as to any act other than that specifically waived.
14. Headings of No Effect.
The paragraph headings contained in this Agreement 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, interpretation, 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/ Xxxxxxx X. Del Xxxxxxx
XXXXXX X. XXXXXX, XX.
/s/ Xxxxxx X. Xxxxxx, Xx.
