CHANGE IN CONTROL TERMINATION AGREEMENT
Exhibit
10.13(h)
This
Change in Control Termination Agreement (the “Agreement”) is entered into as of
April 1, 2007, between Middlesex Water Company, a New Jersey corporation, with
its principal place of business located at 1500 Ronson Road, P.O. Box 1500,
Iselin, New Jersey 08830-0452, (the “Company”), and Xxxxxxxxxx X. Xxxxxx,
residing at 00 Xxxxxxxxxx Xxxxx, Xxxxxxx, Xxx Xxxxxx 00000, (referred to as
“You” in this Agreement).
Recitals
A. The
Company considers it essential to the best interests of its stockholders to
xxxxxx the continuous employment of key management personnel. In this
connection, the Board of Directors of the Company (the “Board”) recognizes that,
as is the case with many publicly held Companies, the possibility of a Change
In
Control may exist. This possibility, and the uncertainty and
questions that it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its
stockholders.
B. The
Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s
management, including yourself, to the assigned duties without distraction
in
the face of potentially disturbing circumstances arising from the possibility
of
a Change In Control of the Company.
C. To
induce you to remain in the employ of the Company, and in consideration of
your
agreement set forth below, the Company agrees that you shall receive the
severance benefits set forth in this Agreement in the event your employment
with
the Company is terminated or “constructively terminated” as defined herein in
connection with a “Change In Control of the Company” (as defined in Section 2
below) under the circumstances described below. This Agreement is
meant to supersede any other specific written agreements that may have been
entered into between yourself and the Company concerning termination of
employment.
Therefore,
in consideration of your continued employment and the parties’ agreement to be
bound by the terms contained in this Agreement, the parties agree as
follows:
1. Term
of Agreement. This Agreement shall commence as
of April 1, 2007 and shall continue in effect through December 31,
2007. However, commencing on December 31, 2007, and each December 31
afterwards, the term of this Agreement shall automatically be extended for
one
additional year unless, no later than the preceding November 1, the Company
shall have given notice that
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it
does
not wish to extend this Agreement. Notwithstanding the foregoing, if a Change
In
Control of the Company shall be proposed to occur or have occurred during the
original or any extended term of this Agreement, this Agreement shall continue
in effect until your termination of employment with the Company or its successor
or when all amounts due under this Agreement following a termination have been
paid, whichever is later.
2. Change
In Control. No benefits shall be payable under this
Agreement unless there shall have been a Change In Control of the Company,
as
set forth below. For purposes of this Agreement, a “Change In
Control” of the Company shall be deemed to occur if any party or group acquires
beneficial ownership of 20 percent or more of the voting shares of the Company;
or if shareholder approval is required for a transaction involving the
acquisition of the Company through the purchase or exchange of the stock or
assets of the Company by merger or otherwise; or if one-third or more of the
Board elected in a 12-month period or less are so elected without the approval
of a majority of the Board as constituted at the beginning of such period;
or a
liquidation or dissolution of Company.
3. Termination
Following Change In Control. If any of the events
described in Section 2 above constituting a Change In Control of the Company
shall have occurred, unless the termination is (A) because of your death,
Disability or Retirement, (B) by the Company for Cause, or (C) by you other
than
for Good Reason, on the subsequent termination or “Constructive Termination” of
your employment during the term of this Agreement: (i) you shall be
entitled to the benefits provided in subsection 4.3 below if such termination
occurs on or before the third anniversary of the Change in Control or (ii)
you
shall be entitled to the benefits provided in subsection 4.4 below if such
termination occurs after the third anniversary of the Change in
Control.
3.1 Disability;
Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for 6 consecutive months, and within
30 days after written notice of termination is given you shall not have returned
to the full-time performance of your duties, your employment may be terminated
for "Disability." Termination by the Company or you of your
employment based on "Retirement" shall mean termination in accordance with
the
Company's retirement policy, including early retirement, generally applicable
to
its salaried employees or in accordance with any retirement arrangement
established with your consent with respect to you.
3.2 Cause. Termination
by the Company of your employment for "Cause" shall mean termination
on:
3.2.1 The
willful and continued failure by you to substantially perform your duties with
the Company as such employment was
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performed
by you prior to the Change of Control (other than any such failure resulting
from your incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance by you of a Notice of Termination for
Good Reason as defined in Subsections 3.4 and 3.3, respectively) after a written
demand for substantial performance is delivered to you by the Board, which
demand specifically identifies the manner in which the Board believes that
you
have not substantially performed your duties; or
3.2.2 The
willful act by you in conduct that is demonstrably and materially injurious
to
the Company, and which the Board deems to cause or will cause substantial
economic damage to the Company or injury to the business reputation of the
Company, monetarily or otherwise. For purposes of this Subsection, no
act, or failure to act, on your part shall be deemed “willful" unless done, or
omitted to be done, by you not in good faith and without a reasonable belief
that your action or omission was in the best interest of the
Company. Notwithstanding the foregoing, you shall not be deemed to
have been terminated for Cause unless and until there shall have been delivered
to you a copy of a resolution duly adopted by the affirmative vote of not less
than three-quarters of the entire membership of the Board at a meeting of the
Board called and held for such purpose (after reasonable notice to you and
an
opportunity for you, together with your counsel, to be heard before the Board),
finding that in the good faith opinion of the Board you were guilty of conduct
set forth above in clauses 3.2.1 or 3.2.2 of the first sentence of this
Subsection and specifying the particulars in detail.
3.3 Good
Reason. You shall be entitled to terminate your
employment for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, without your express written consent, the occurrence in
connection with a Change In Control of the Company of any of the following
circumstances unless, in the case of paragraphs 3.3.1, 3.3.5, 3.3.6, 3.3.7,
or
3.3.8, the circumstances are fully corrected prior to the Date of Termination
specified in the Notice of Termination, as defined in Subsections 3.5 and 3.4,
respectively, given in respect of them. If you have Good Reason for
your termination you shall be considered to have been “Constructively
Terminated” by the Company under the following circumstances:
3.3.1 The
assignment to you of any duties inconsistent with your status and position
(i)
prior to the Change In Control where such change is a direct result of any
pending Change in Control; or (ii) as such status exists immediately prior
to
the Change In Control of the Company, or (iii) a substantial adverse alteration
in the nature or
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status
of your responsibilities from those in effect immediately
prior to the Change In Control of the Company whichever is applicable;
3.3.2 A
reduction by the Company in your annual
base salary as in effect on this date or as the same may be increased from
time
to time irrespective of future Company policies including any across-the-board
salary reductions similarly affecting all key employees of the Company;
3.3.3 Your
relocation, without your consent, to
a location not within twenty-five (25) miles of your present office or job
location, except for required travel on the Company's business to an extent
substantially consistent with your present business travel obligations;
3.3.4 The
failure by the Company, without your
consent, to pay to you any part of your current compensation, or to pay to
you
any part of an installment of deferred compensation under any deferred
compensation program of the Company, within fourteen (14) days of the date
the
compensation is due;
3.3.5 The
failure by the Company to continue in
effect any bonus to which you were entitled, or any compensation plan in which
you participate (i) prior to the Change in Control where such change is a direct
result of any pending Change In Control, or (ii) immediately prior to the Change
In Control of the Company that is material to your total compensation, including
but not limited to the Company's Restricted Stock Plan, 401(k) Plan, and Benefit
Plans, or any substitute plans adopted prior to the Change In Control of the
Company, unless an equitable arrangement (embodied in an ongoing substitute
or
alternative plan) has been made with respect to the plan, or the failure by
the
Company to continue your participation in it (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of
the
amount of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change In Control;
3.3.6 The
failure by the Company to continue to
provide you with (i) benefits substantially similar to those enjoyed by you
under any of the Company's life insurance, medical, health and accident, or
disability plans in which you were participating at the time of the Change
In
Control of the Company was in effect for the employees of the Company generally
at the time of the Change In Control, (ii) the failure to continue to provide
you with a Company automobile or allowance in lieu of it at the time of the
Change In Control of the Company, (iii) the taking of any action by the Company
that would
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directly
or indirectly materially reduce any of such benefits or deprive you of any
material fringe benefit enjoyed by you at the time of the Change In Control
of
the Company, or (iv) the failure by the Company to provide you with the number
of paid vacation days to which you are entitled on the basis of years of service
with the Company in accordance with the Company's normal vacation policy in
effect at the time of the Change In Control of the Company;
3.3.7 The
failure of the Company to obtain a satisfactory agreement from any successor
to
assume and agree to perform this Agreement, as contemplated in Section 5 of
this
Agreement; or
3.3.8 Any
purported termination of your employment that is not effected pursuant to a
Notice of Termination satisfying the requirements of Subsection 3.4 below (and,
if applicable, the requirements of Subsection 3.2 above); for purposes of this
Agreement, no such purported termination shall be effective.
3.4 Notice
of Termination. Any purported termination of your
employment by the Company or by you shall be communicated by written Notice
of
Termination to the other party to this Agreement in accordance with Section
6 of
this Agreement. For purposes of this Agreement, a "Notice of
Termination" shall mean a notice that shall indicate the specific termination
provision in this Agreement relied on, and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of your
employment under the provision so indicated. Your rights to
terminate your employment pursuant to this Subsection shall not be affected
by
your incapacity due to physical or mental illness. Your continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any circumstance constituting Good Reason under this
Agreement. In the event you deliver Notice of Termination based on
circumstances set forth in Paragraphs 3.3.1, 3.3.5, 3.3.6, 3.3.7, or 3.3.8
above, which are fully corrected prior to the Date of Termination set forth
in
your Notice of Termination, the Notice of Termination shall be deemed withdrawn
and of no further force or effect.
3.5 Date
of Termination, etc. "Date of Termination" shall mean
(A) if your employment is terminated for Disability, 30 days after Notice of
Termination is given (provided that you shall not have returned to the full-time
performance of your duties during such 30-day period), and (B) if your
employment is terminated pursuant to Subsection 3.2 or 3.3 above or for any
other reason (other than Disability), the date specified in the Notice of
Termination (which, in the case of a termination pursuant to Subsection 3.2
above shall not be less than 30 days, and in the case of a termination pursuant
to Subsection 3.3 above shall not be less than 15 nor more than 60 days,
respectively, from the date the Notice of Termination is
given). However, if within 15 days after any Notice
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of
Termination is given, or, if later, prior to the Date of Termination (as
determined without regard to this provision), the party receiving the Notice
of
Termination notifies the other party that a dispute exists concerning the
termination, then the Date of Termination shall be the date on which the dispute
is finally determined, either by mutual written agreement of the parties, by
a
binding arbitration award, or by a final judgment, order, or decree of a court
of competent jurisdiction (which is not appealable or with respect to which
the
time for appeal has expired and no appeal has been perfected). The
Date of Termination shall be extended by a notice of dispute only if the notice
is given in good faith and the party giving the notice pursues the resolution
of
the dispute with reasonable diligence. Notwithstanding the pendency
of any such dispute, the Company will continue to pay you your full compensation
in effect when the notice giving rise to the dispute was given (including,
but
not limited to, base salary) and continue you as a participant in all
compensation, benefit, and insurance plans in which you were participating
when
the notice giving rise to the dispute was given, until the dispute is finally
resolved in accordance with this Subsection. Amounts paid under this
Subsection are in addition to all other amounts due under this Agreement and
shall not be offset against or reduce any other amounts due under this
Agreement.
4. Compensation
on Termination or During Disability. Following a Change
In Control of the Company, as defined by Section 2, on termination of your
employment or during a period of disability you shall be entitled to the
following benefits:
4.1 During
any period that you fail to perform your full-time duties with the Company
as a
result of incapacity due to physical or mental illness, you shall continue
to
receive your base salary at the rate in effect at the commencement of any such
period, together with all amounts payable to you under any compensation plan
of
the Company during the period, until this Agreement is terminated pursuant
to
section 3.1 above. Thereafter, or in the event your employment shall
be terminated by the Company or by you for Retirement, or by reason of your
death, your benefits shall be determined under the Company's retirement,
insurance, and other compensation programs then in effect in accordance with
the
terms of those programs.
4.2 If
your employment shall be terminated by the Company for Cause or by you other
than for Good Reason, Disability, death, or Retirement, the Company shall pay
you your full base salary through the Date of Termination at the rate in effect
at the time Notice of Termination is given, plus all other amounts and benefits
to which you are entitled under any compensation plan of the Company at the time
the payments are due. The Company shall have no obligations to you
under this Agreement.
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4.3 On
or before the third anniversary of the Change In Control, if your employment
by
the Company shall be terminated (a) by the Company other than for Cause,
Retirement or Disability, or (b) by you for Good Reason (as defined in Section
3.3 herein), then you shall be entitled to the benefits provided
below:
4.3.1 The
Company shall pay you your full salary through the Date of Termination at the
rate in effect at the time notice of Termination is given, plus all other
amounts and benefits to which you are entitled under any compensation plan
of
the Company, at the time the payments are due, except as otherwise provided
below.
4.3.2 In
lieu of any further salary payments to you for periods subsequent to the Date
of
Termination, the Company shall pay to you, as severance pay the
following: (i) a lump sum severance payment equal to three (3) times
the average of your Compensation for the five (5) years prior to the occurrence
of the circumstance giving rise to the notice of Termination (or if employed
less than 5 years, the average annualized compensation of the period worked
to
date), plus (ii) the amounts in the forms set forth in paragraphs 4.3.3, 4.3.4
and 4.3.5 (the “Severance Payments”). In addition to the Severance
Payments, the Company shall pay to you an additional amount equal to the amount
of the Excise Tax, if any, that is due or determined to be due under
Section 4999 of the Internal Revenue Code of 1986, as amended, resulting from
the Severance Payments or any other payments under this Agreement or any other
agreement between you and the Company and an amount sufficient to pay the taxes
on any such Excise Taxes (the “Gross-up”).
4.3.3 The
Company shall continue coverage for you and your dependents under any health
or
welfare benefit plan under which you and your dependents were participating
prior to the Change in Control for a period ending on the earlier to
occur of (i) the date you become covered by a new employer’s health and welfare
benefit plan, (ii) the date you become covered by Medicare, or (iii) the date
which is thirty-six (36) months from the date of Termination. The
coverage for your dependents shall end earlier than (i), (ii) or (iii) if
required by the health or welfare benefit plan due to age
eligibility.
4.3.4 The
Company shall pay to you any deferred compensation, including, but not limited
to deferred bonuses, allocated or credited to you or your account as of the
Date
of Termination.
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4.3.5 Outstanding
stock options or Restricted Stock grants, if any, granted to you under the
Company's Stock Plans which are not vested on Termination shall immediately
vest.
4.3.6 Where
you shall prevail in any such action, the Company shall also pay to you all
legal and accounting fees and expenses incurred by you as a result of the
termination (including all such fees and expenses incurred by you as a result
of
the termination (including all such fees and expenses, if any, incurred in
contesting or disputing any termination or in seeking to obtain or enforce
any
right or benefit provided by this Agreement or in connection with any tax audit
or proceeding to the extent attributable to the application of Code Section
4999
to any payment or benefit provided under this Agreement) or any other agreement
with the Company.
4.3.7 The
amount of Severance Payments and any Gross-up due to you under this or any
other
relevant agreement with the Company shall be determined by a third party agreed
to by you and the Company. If you cannot agree on a third party, then
both third parties shall determine the amounts due under this
Agreement. If the third parties do not agree on the amount to be paid
to you, then either party may submit the calculation of the amounts which are
in
dispute to Arbitration in accordance with this Agreement. The
payments provided for in Paragraphs 4.3.2, 4.3.4 and 4.3.5 above, shall be
made
no later than the thirtieth (30th) day following the Date of
Termination. However, if the amounts of the payments cannot be
finally determined on or before that day, the Company shall pay to you on that
day an estimate, as determined in good faith by the Company, of the minimum
amount of such payments and shall pay the remainder of those payments (together
with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as
soon
as the amount can be determined but in no event later than the 30th day after
the Date of Termination. In the event that the amount of the estimate
payments exceeds the amount subsequently determined to have been due, the excess
shall constitute a loan by the Company to you payable on the 30th day after
demand by the Company (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code).
4.4 After
the third anniversary of the Change In Control, if your employment by the
Company shall be terminated (a) by the Company other than for Cause, Retirement
or Disability, or (b) by you for Good Reason (as defined in Section 3.3 herein),
then you shall be entitled to the benefits provided in Section 4.3 above and
as
otherwise provided under this Agreement except that sub paragraph 4.3.2(i)
shall
read: (i) a lump sum severance payment equal to one and
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one
half
(1.5) times the average of your Compensation for the five (5) years prior to
the
occurrence of the circumstance giving rise to the notice of Termination (the
“Termination Payment”).
4.5 For
purposes of this Agreement, “Compensation” shall mean the aggregate remuneration
paid by the Company to you during a calendar year, including bonuses, awards
under the Company’s Restricted Stock Plan, benefits under employee benefit
plans, automobile allowances or any fees paid to you as remuneration for serving
as a Director of the Company.
4.6 You
shall not be required to mitigate the amount of any payment provided for in
this
Section 4 by seeking other employment or otherwise, nor shall the amount of
any
payment or benefit provided for in this Section 4 be reduced by any compensation
earned by you as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by you to the Company,
or otherwise except as specifically provided in this Section 4.
4.7 In
addition to all other amounts payable to you under this Section 4, you shall
be
entitled to receive all qualified benefits payable to you under the Company's
401(k) Plan, Defined Benefit Plan and any other plan or agreement relating
to
retirement benefits in accordance with the terms of those plans.
5. Successors;
Binding Agreement.
5.1 The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation, or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume 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. Failure
of the Company to obtain the assumption and agreement prior to the effectiveness
of any succession shall be a breach of this agreement and shall entitle you
to
compensation from the Company in the same amount and on the same terms as you
would have been entitled to under this Agreement if you had terminated your
employment for Good Reason following a Change In Control of the Company, except
that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of
Termination.
5.2 This
Agreement shall inure to the benefit of and be enforceable by your personal
or
legal representatives, executors, administrators, heirs, distributees, and
legatees. If you should die while any amount would still be payable
to you if you had continued to live, all such amounts, unless otherwise provided
in this Agreement, shall be paid in accordance with the terms of
this
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Agreement
to your legatee or other designee or, if there is no such designee, to your
estate.
6. Notice. For
the purpose of this Agreement, all notices and other communications provided
for
in the Agreement shall be in writing and shall be deemed to have been duly
given
when delivered or mailed by United States registered or certified mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth on the first page of this Agreement, provided that all notices to the
Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance this Agreement, except that
notice of a change of address shall be effective only on receipt.
7. Miscellaneous
7.1 No
provision of this Agreement may be modified, waived, or discharged unless the
waiver, modification, or discharge is agreed to in writing and signed by you
and
such officer as may be specifically designated by the Board.
7.2 No
waiver by either party to this Agreement at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement
to be
performed by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent
time.
7.3 No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter of this Agreement have been made by either party
that are not expressly set forth in this Agreement.
7.4 Nothing
in this Agreement is intended to reduce any benefits payable to you under any
other agreement you may have with the Company or in any Company plan in which
you may participate.
7.5 The
validity, interpretation, construction, and performance of this Agreement shall
be governed by the law of New Jersey without reference to its conflict of laws
principles.
7.6 All
references to sections of the Exchange Act or the Code shall be deemed also
to
refer to any successor provisions to such sections. Any payments
provided for shall be paid net of any applicable withholding or deduction
required under federal, state or local law.
7.7 The
obligations of the Company under Section 4 shall survive the expiration of
the
term of this Agreement.
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8. Validity. The
validity or enforceability of any provision of this Agreement shall not affect
the validity or unenforceability of any other provision of this Agreement,
which
shall remain in full force and effect.
9. Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original but all of which together will constitute one and the same
instrument.
10. Arbitration. Any
dispute or controversy arising under or in connection with this Agreement shall
be settled exclusively by arbitration in New Jersey in accordance with the
rules
of the American Arbitration Association then in effect. Judgment may
be entered on the arbitrator's award in any court having
jurisdiction. However, you shall be entitled to seek specific
performance of your right to be paid until the Date of Termination during the
pendency of any dispute or controversy arising under or in connection this
Agreement.
11. Entire
Agreement. This Agreement sets forth the entire
understanding of the parties with respect to its subject matter and supersedes
all prior written or oral agreements or understandings with respect to the
subject matter.
In
witness whereof, the parties have executed this Agreement as of the day and
year
first above written.
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MIDDLESEX
WATER COMPANY
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By:
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/s/
Xxxxxx X. Xxxx
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Xxxxxx
X. Xxxx
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President
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ATTEST:
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/s/
Xxxxxxx X. Xxxxx
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Xxxxxxx
X. Xxxxx
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Vice
President and
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Secretary
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/s/
Xxxxxxxxxx X. Xxxxxx
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Xxxxxxxxxx
X. Xxxxxx
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(Corporate
Secretary/Change in Control/Xxxxxx)
Page
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