EMPLOYMENT AGREEMENT
This AGREEMENT, made this 1st day of January, 1997, by and
between CONSOLIDATED HYDRO, INC. (the "Company"), a Delaware corporation with
its principal office at Stamford Towers, 000 Xxxxxxxxxx Xxxxxxxxx, Xxxxxxxx, XX
00000, and Xxxxxxx X. Xxxxxx ("Executive"), an individual residing at 000 Xxxx
Xxxxx Xxxx, Xxxxxxxx, XX 00000.
WHEREAS, the Company and Executive wish to enter into an
employment agreement whereby Executive will be employed by the Company in
accordance with the terms and conditions stated below;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
1. Employment. The Company agrees to employ Executive, and
----------
Executive agrees to enter the employ of the Company, for the period stated in
Section 3 hereof and upon the other terms and conditions herein provided.
2. Position and Responsibilities. The Company agrees to employ
-----------------------------
Executive in the position of Executive Vice President, Strategy and Corporate
Development and Executive agrees to serve for the term and on the conditions
hereinafter set forth. Executive agrees to perform such services not
inconsistent with his position as shall from time to time be assigned to him by
the Chief Executive Officer of the Company, the Company's Board of Directors, or
by their respective designees.
3. Term and Duties.
---------------
(a) Term of Employment. This Agreement shall become effective
and the terms of employment pursuant to this Agreement shall commence on January
1, 1997, and will continue through June 30, 1999 unless earlier terminated in
accordance with the provisions hereof; provided, however, that, unless the
Company shall have delivered to Executive written notice of its intent not to
renew this Agreement prior to July 1, in any year, commencing with July 1, 1998,
the term of this Agreement shall be extended by twelve months from the then
effective expiration date.
(b) Duties. During the period of his employment hereunder
Executive shall serve the Company as its Executive Vice President, Strategy and
Corporate Development and shall also serve as the President and Chief Executive
Officer of the Company's wholly-owned subsidiary. CHI Power Marketing, Inc.
("CHIPMI"), and except for illnesses, vacation periods, and reasonable leaves of
absence, Executive shall devote all his business time, attention, skill, and
efforts to the faithful performance of his duties hereunder;
provided, however, that with the approval of the Chief Executive Officer of the
Company, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in the Chief Executive Officer of the Company's judgment,
will not present any conflict of interest with the Company or any of its
subsidiaries or affiliates or divisions, or materially affect the performance of
Executive's duties pursuant to this Agreement.
So long as Executive is Executive Vice President, Strategy and
Corporate Development of the Company, he will discharge all duties incidental to
such office and such further duties as may be reasonably assigned to him from
time to time by the Chief Executive Officer of the Company, the Company's Board
of Directors, or by their respective designees. Subject to the authority of the
Company's Board of Directors, Executive shall participate in various corporate
activities including, but not limited to, selected corporate financing, capital
sourcing, transaction structuring, business development and strategic planning
activities, including the origination, negotiation, implementation and
transaction of such activities, as directed by the Company's Chief Executive
Officer or his designee and, with respect to CHIPMI, shall be responsible for,
inter alia, the day-to-day general management of all present and future
businesses of CHIPMI, its operating units and subsidiaries, if any; coordinating
CHIPMI's interface with the Company; sourcing CHIPMI's capital and overseeing
the development and implementation of CHIPMI's power marketing and power trading
activities, including those activities necessary to support the value
enhancement of the Company, it being understood that particularly because power
marketing and power trading are new business areas for the Company, and in light
of the considerations and risks inherent in any business development effort, it
is expected that Executive's responsibilities with respect to both the
2
Company and CHIPMI will change over time, but will continue to be significant
responsibilities, reflective of Executive's senior position with the Company.
4. Compensation and Reimbursement of Expenses.
------------------------------------------
(a) Salary. For all services rendered by Executive as
Executive Vice President, Strategy and Corporate Development during his
employment under this Agreement, the Company shall pay Executive as compensation
a salary at the rate of $249,900 per year. Executive's salary shall be reviewed
on June 30, 1997, and at least annually thereafter during the term of this
agreement. Such review shall be conducted by the Board of Directors of the
Company, or a committee designated by the Board of Directors, and such Board or
committee may increase said salary. (The salary payable to Executive in any
fiscal year is referred to herein as the "Base Salary" for such fiscal year.)
(b) Incentive Compensation. For each fiscal year, commencing
with the fiscal year ending June 30, 1997, the Company shall pay Executive an
incentive bonus determined, at the discretion of the Board of Directors, upon
the achievement of certain goals and objectives to be agreed upon from time to
time by Executive and the Chief Executive Officer of the Company or his
designee. Such bonuses shall be payable upon completion of the annual audit of
the Company for the applicable year.
(c) Equity Plan. It is the current intention of the Board of
Directors of the Company to adopt an equity plan for the Company's management as
part of the Company's plan of restructuring. It is the Board's current
intention, should such a plan be adopted, that options relating to the Company's
common stock would be granted to the management of the Company upon completion
of such restructuring, and that options would be awarded to the Executive,
should he still be employed hereunder at such time.
(d) Reimbursement of Expenses. The Company shall pay or
reimburse Executive for all reasonable travel and other expenses incurred by
Executive in performing his obligations under this Agreement. The Company
further agrees to furnish Executive with a private office, private secretary,
and such other assistance and accommodations as shall be suitable to the
character of Executive's position with the Company and adequate for the
performance of his duties.
3
5. Participation in Benefit Plans. The payments provided in
------------------------------
Sections 4 and 6 hereof are in addition to any benefits Executive is entitled to
under group hospitalization, health, dental care, disability insurance, surety
bond, death benefit plan, travel and/or accident insurance, other allowance
and/or executive compensation plan, including, without limitation, capital
accumulation and termination pay programs, restricted or non-restricted stock
purchase plan, stock option plan, retirement income or pension plan, or other
present or future group employee benefit plan or program of the Company for
which key executives are or shall become eligible, and Executive shall be
eligible to receive during the period of his employment under this Agreement,
and during any subsequent period for which he shall be entitled to receive
payment from the Company under Section 6(a) or Section 7(b) below, all benefits
and employments for which key executives are eligible under every such plan or
program to the extent permissible under the general terms and provisions of such
plans or programs and in accordance with the provisions thereof.
6. Benefits Payable Upon Disability or Death.
-----------------------------------------
(a) Disability Benefits. In the event of the disability of
Executive, the Company shall, subject to Section 9 hereof, continue to pay
Executive the monetary compensation and provide the other benefits provided in
Section 4 hereof during the period of his disability for the remainder of the
term of this Agreement, except that after the date of Executive's disability (i)
Executive shall not be entitled to payment of any further bonuses under Section
4(b), and (ii) no further options or other awards shall be granted Executive
under Section 4(c) or shall vest, unless the plan or agreement under which such
options or awards are granted provides otherwise. To the extent that disability
insurance is available on Executive, the Company shall be permitted to purchase
and pay for such insurance. Receipt by Executive of such disability benefits
shall reduce by such amount the obligation of the Company set forth in the
preceding sentence.
As used in this Agreement, the term "disability" shall mean
the complete inability of Executive to perform his duties under this Agreement
as determined by an independent physician selected by the Company with the
approval of Executive.
4
(b) Death Benefits. In the event of the death of Executive
during a period of disability or otherwise during the term of this Agreement,
the Company shall pay, or cause to be paid, to Executive's designated
beneficiary or beneficiaries or legal representatives the payments set forth in
Section 7(b) below.
7. Payments to Executive Upon Termination of Employment.
----------------------------------------------------
(a) Termination. Upon the death of Executive or the occurrence
of an event of termination (as hereinafter defined) during the period of
Executive's employment under this Agreement, the provisions of this Section 7(a)
and Section 7(b) shall apply. As used in this Agreement, an "event of
termination" shall mean and include any one or more of the following:
(i) The termination by the Company of Executive's full-time
employment hereunder for any reason other than pursuant to Section 7(c)
or as a result of a material breach by Executive of this Agreement; or
(ii) Executive's resignation from the Company's employ,
pursuant to:
A. a material change by the Company in Executive's
function, duties or responsibilities, which change would cause
Executive's position with the Company to become one of less
dignity, responsibility, importance or scope from the position
and attributes as described in Section 2 above, and any such
material change shall be deemed a continuing breach of this
Agreement;
B. any liquidation, dissolution, consolidation or
merger of the Company which results in a change of control
of the Company or transfer of all or substantially all of its
assets;
C. failure to elect, re-elect or to appoint Executive
to the office of Executive Vice President, Strategy and
Corporate Development;
D. other material breach of this Agreement
by the Company.
5
Upon the occurrence of any event described in clauses (A),
(B), (C) or (D) above, Executive shall have the right to elect to
terminate his employment under this Agreement by resignation, upon not
less than thirty (30) days' prior written notice given within a
reasonable period of time not to exceed, except in case of a continuing
breach, three (3) calendar months after the event giving rise to said
right to elect.
(b) Continuation of Salary. Upon the death of Executive or the
occurrence of an event of termination under Section 7(a), the Company shall,
subject to the provisions of Section 9 below, monthly for the duration of the
Severance Period, as defined below, pay Executive, or in the event of subsequent
death, his beneficiary or beneficiaries or his estate, as the case may be, as
severance pay or liquidated damages, or both, the monthly Base Salary paid to
Executive at the time of termination of his employment (the "Severance
Payments"); shall continue to provide the other benefits provided for in
Sections 5 and 6 hereof for a period of twelve months from the date of the event
of termination; and shall continue to provide the benefits provided for in
Section 4(d) for a period of six months from the date of such event of
termination. For purposes of this Agreement, the "Severance Period" shall
commence on the date of termination of Executive's employment with the Company
and expire on the earlier of (i) the date Executive obtains subsequent
employment, and (ii) the later of (A) the second anniversary of the date of
termination of Executive's employment with the Company and (B) the expiration of
the term of this Agreement. Absent an election as described in the next
sentence, the Severance Payments shall commence on the last day of the month in
which the event of termination occurs; provided, that the first such payment
shall be reduced by the amount of any Base Salary received by Executive for the
portion of such month prior to the event of termination. If within 30 days of
the event of termination Executive (or, in the case of his death or incapacity,
his beneficiary or legal representative) so elects by written notice to the
Company, the Severance Payments shall be paid by the Company, in lieu of the
monthly payments described above, in a single lump sum as soon as practicable
after the date of such election. Such lump sum payment shall be in an amount
equal to the sum of the monthly Severance Payments that would have been paid
under this Section but for such election (assuming Executive never obtains
subsequent employment), discounted to present value using an interest rate of
5%, and reduced by the
6
amount of any Severance Payments received by Executive prior to the date of such
lump sum payment.
(c) Other Termination of Employment. Notwithstanding Sections
7(a) and (b) or any other provision of this Agreement to the contrary, if on or
after the date of this Agreement and prior to the end of the term hereof:
(i) Executive has been convicted of any crime or offense
constituting a felony under applicable law, including, without
limitation, any act of dishonesty such as embezzlement, theft or
larceny;
(ii) Executive shall act or refrain from acting in respect of
any of the duties and responsibilities which have been assigned to him
in accordance with this Agreement and the Board of Directors of the
Company determines that such action or inaction constituted gross
negligence or a willful act of malfeasance or misfeasance of Executive
in respect of such duties;
(iii) Executive shall breach any material term of this
Agreement and shall fail to correct such breach within ten days (or
such longer period of time, not exceeding 90 days, as Executive shall
in good faith and the exercise of reasonable efforts require to cure
such breach) after Executive's receipt of notice from the Company of
such breach; or
(iv) any willful or continuous neglect of or refusal to
perform Executive's duties or responsibilities or the willful taking of
actions which directly and materially impair Executive's ability to
perform his duties and responsibilities hereunder which continues after
detailed written notice thereof has been given to Executive;
then, and in each such case, the Company shall have the right to give notice of
termination of Executive's services hereunder as of a date (not earlier than 10
days from such notice) to be specified in such notice and this Agreement (other
than the provisions of Sections 8 and 9 hereof) shall terminate on such date. In
the case of any such termination, Executive shall be entitled to Base Salary
accrued through the date of termination, and to no further compensation or
benefits hereunder.
7
8. Duties Upon Termination. Executive agrees that he will,
-----------------------
upon termination of his employment with the Company for any reason whatsoever,
deliver to the Company any and all records, forms, contracts, memoranda, work
papers, lists of names or other customer data and any other articles or papers
which have come into his possession by reason of his employment with the Company
or which he holds for the Company, irrespective of whether or not any of said
items were prepared by him, and he shall not retain memoranda or copies of any
of said items.
9. Post-Termination Obligations. All payments and benefits to
----------------------------
Executive under this Agreement shall be subject to Executive's compliance with
the following provisions during the Compliance Period, as defined in Section
9(b) below.
(a) Confidential Information and Competitive Conduct.
Executive shall not, to the detriment of the Company, disclose or
reveal to any unauthorized person any trade secret or other
confidential information relating to the Company, its subsidiaries or
affiliates, or to any businesses operated by them, including, without
limitation, any customer lists; and Executive confirms that such
information constitutes the exclusive property of the Company.
Executive shall not otherwise act or conduct himself to the material
detriment of the Company, its subsidiaries or affiliates, or in a
manner which is inimical or contrary to the interests thereof, and
shall not, directly or indirectly, engage in, enter the employ of or
render any service to any person, firm or business within the United
States or Canada in competition with any part of the business being
conducted by the Company; provided, however, that Executive's ownership
of less than 5 percent of the outstanding stock of a corporation (other
than a corporation engaged primarily in a business that directly
competes with the Company) shall not by itself be deemed to constitute
such competition. Executive recognizes that the possible restrictions
on his activities which may occur as a result of his performance of his
obligations under this Section 9(a) are required for the reasonable
protection of the Company and its investments.
(b) Compliance Period. For purposes of this Agreement, the
"Compliance Period" shall commence on the effective date of this
Agreement under Section
8
3(a). If an event of termination under Section 7(a) hereof occurs prior
to the expiration of the term of this Agreement, the Compliance Period
shall end: (i) if Executive elects to receive Severance Payments in
lump sum form under Section 7(b), on the second anniversary of the
termination of Executive's employment; and (ii) otherwise, on the later
of (A) the expiration of six months from the date of termination of
Executive's employment, and (B) the end of the period for which
Executive is entitled to receive Severance Payments. If Executive's
employment by the Company is terminated in accordance with Section 7(c)
hereof prior to the expiration of the term of this Agreement, the
Compliance Period shall end on the later of the expiration of the term
of this Agreement and the first anniversary of the termination of
Executive's employment. In all cases other than those described in the
two preceding sentences, the Compliance Period shall end on the
expiration of the term of this Agreement.
(c) Failure of Executive to Comply. If for any reason other
than death or disability, Executive shall, without written consent of
the Company, fail to comply with the provisions of Section 9(a) above,
his rights to any future payments or other benefits hereunder shall
terminate, and the Company's obligations to make such payments and
provide such benefits shall cease; provided, however, that no failure
to comply with any provision of Section 9(a) above shall be deemed to
have occurred unless and until Executive receives written notice from
the Company, specifying the conduct alleged to constitute such failure,
and Executive has thereafter continued to engage in such conduct after
a reasonable opportunity and a reasonable period to refrain from such
conduct. In no event shall Executive be under any obligation to repay
the Company any amounts theretofore paid him hereunder.
(d) Remedies. Executive agrees that monetary damages would not
be adequate compensation for any loss incurred by the Company by reason
of a breach of the provisions of Sections 8 and 9 of this Agreement and
hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
9
10. Effect of Prior Agreements. This Agreement contains the
--------------------------
entire understanding between the parties hereto and, upon effectiveness of this
Agreement pursuant to Section 3(a) hereof, supersedes all prior employment
agreements between the Company and Executive, except that this Agreement shall
not affect or operate to reduce any benefit or compensation inuring to Executive
of a kind elsewhere provided and not expressly provided in this Agreement.
11. General Provisions.
------------------
(a) Binding Agreement. This Agreement shall be binding upon,
and inure to the benefit of Executive and the Company and their respective
permitted successors and assigns.
(b) Legal Expenses. In the event that Executive incurs legal
expenses in contesting any provision of this Agreement and such contest results
in a determination that the Company has breached any of its obligations
hereunder, Executive shall be reimbursed by the Company for such legal expenses.
12. Successors and Assigns.
----------------------
(a) Assignment by the Company. This Agreement shall be binding
upon and inure to the benefit of the successor and assigns of the Company and,
unless clearly inapplicable, reference herein to the Company shall be deemed to
include its successors and assigns.
(b) Assignment by Executive. Executive may not assign this
Agreement in whole or in part.
13. Modification and Waiver.
-----------------------
(a) Amendment of Agreement. Except for increases in
compensation made as provided in Section 4(a), this Agreement may not be changed
or modified except by an instrument in writing signed by both of the parties
hereto.
(b) Waiver. 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 of
the party charged with such waiver or estoppel. No such written waiver shall be
deemed a continuing waiver unless
10
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. Beneficiaries. This Agreement shall be for the express
-------------
benefit of the Company, Executive and, for so long as The Xxxxxx Xxxxxxx
Leveraged Equity Fund II, L.P. or its successor ("MSLEFII") or Madison Group,
L.P. ("MGLP") shall be a holder of equity of the Company, MSLEFII or MGLP, as
the case may be.
15. Severability. In the event any provision of this Agreement
------------
or any part hereof is held invalid, such invalidity shall not affect any
remaining part of such provision or any other provision, and to this end, the
provisions of this Agreement are intended to be and shall be deemed severable.
If any court construes any provision of this Agreement to be illegal, void or
unenforceable because of the duration or the area or matter covered thereby,
such court shall reduce the duration, area or matter of such provision, and, in
its reduced form, such provision shall then be enforceable and shall be
enforced.
16. Withholding. Employer may withhold from any amounts
-----------
payable under this Agreement such taxes and governmentally required withholdings
as may be required to be withheld pursuant to any applicable law or regulation.
17. Governing Law. The parties hereto intend
-------------
that this Agreement shall be governed by the laws of the
State of Connecticut.
11
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by its duly authorized officer, and Executive has signed this
Agreement, all as of the day and year first above written.
CONSOLIDATED HYDRO, INC.
By: /s/ Xxxxx X. Xxxxxxx
---------------------------
Xxxxx X. Xxxxxxx
Its: Chief Executive Officer
/s/ Xxxxxxx X Xxxxxx
-------------------------------
Xxxxxxx X. Xxxxxx
12
NYFS10...:\84\38684\0003\1924\AGR9257P.290
