EXHIBIT 10-37
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT, dated as of April 23, 1999 (the
"Agreement"), by and between Energy East Corporation, a New York
corporation (the "Company"), and Xxxxxx X. xxx Xxxxxx (the
"Executive").
The Board of Directors of the Company (the "Board") desires
to provide for the employment of the Executive as a member of the
management of the Company, in the best interest of the Company
and its shareholders. The Executive is willing to commit himself
to serve the Company, on the terms and conditions herein
provided.
In order to effect the foregoing, the Company and the
Executive wish to enter into an employment agreement on the terms
and conditions set forth below. Accordingly, in consideration of
the premises and the respective covenants and agreements of the
parties herein contained, and intending to be legally bound
hereby, the parties hereto agree as follows:
1. Defined Terms. The definitions of capitalized terms
used in this Agreement, unless otherwise defined herein, are
provided in the last Section hereof.
2. Employment. The Company hereby agrees to employ the
Executive, and the Executive hereby agrees to serve the Company,
on the terms and conditions set forth herein, during the term of
this Agreement (the "Term").
3. Term of Agreement. The Term will commence on April
23, 1999 and end on April 22, 2002, unless further extended as
hereinafter provided. Commencing on April 23, 2000 and each
April 23 thereafter, the Term of this Agreement shall
automatically be extended for one (1) additional year unless, not
later than the January 22 immediately preceding each such April
23, the Company (upon authorization by the Board) or the
Executive shall have given notice not to extend this Agreement;
provided, however, if a Change-in-Control shall have occurred
during the Term of this Agreement, Sections 5.4, 5.6, 6, 7 and 10
through 20 of this Agreement and the second and third paragraphs
of Section 5.2 of this Agreement shall continue in effect until
at least the end of the Change-in-Control Protective Period
(whether or not the Term of the Agreement shall have expired for
other purposes).
4. Position and Duties. The Executive shall serve as
Chairman, President and Chief Executive Officer of the Company
and shall have such responsibilities, duties and authority that
are consistent with such positions as may from time to time be
assigned to the Executive by the Board. In addition, the
Executive shall serve as Chairman of the NYSEG Board until
removed or not re-elected. The Executive shall devote
substantially all his working time and efforts to the business
and affairs of the Company; provided, however, that the Executive
may also serve on the boards of directors or trustees of other
companies and organizations, as long as such service does not
substantially interfere with the performance of his duties
hereunder.
5. Compensation and Related Matters.
5.1 Base Salary. The Company shall pay the
Executive a base salary ("Base Salary") during the period of the
Executive's employment hereunder, which shall be at an initial
rate of Seven Hundred Thousand Dollars ($700,000.00) per annum.
The Base Salary shall be paid in substantially equal bi-weekly
installments, in arrears. The Base Salary may be discretionarily
increased by the Board from time to time as the Board deems
appropriate in its reasonable business judgment. The Base Salary
in effect from time to time shall not be decreased during the
Term. During the period of the Executive's employment hereunder,
the Board shall make an annual review of the Executive's
compensation.
Compensation of the Executive by Base Salary payments
shall not be deemed exclusive and shall not prevent the Executive
from participating in any other compensation or benefit plan of
the Company. The Base Salary payments (including any increased
Base Salary payments) hereunder shall not in any way limit or
reduce any other obligation of the Company hereunder, and no
other compensation, benefit or payment hereunder shall in any way
limit or reduce the obligation of the Company to pay the
Executive's Base Salary hereunder.
5.2 Benefit Plans. The Executive shall be entitled
to participate in or receive benefits under any "employee benefit
plan" (as defined in section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended from time to time
("ERISA")) or employee benefit arrangement made available by the
Company now or during the period of the Executive's employment
hereunder to their executives and key management employees,
subject to and on a basis consistent with the terms, conditions
and overall administration of such plans and arrangements;
provided, however, that there shall be no duplication of the
benefits created by this Agreement. The Executive's
participation in such employee benefit plans and arrangements
shall be on an appropriate level, as determined by the Board.
Notwithstanding any provision of NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) that may be to
the contrary, if the Executive's service with the Company or
NYSEG from September 9, 1996 exceeds five full years, there shall
be paid to the Executive under NYSEG's Supplemental Executive
Retirement Plan (or any successor plan) an amount that shall be
determined by giving the Executive, for purposes of that plan,
service credit for three years of service for each of the
Executive's actual years of service. Notwithstanding the
foregoing sentence of this Section 5.2, and any provision of
NYSEG's Supplemental Executive Retirement Plan (or any successor
plan) that may be to the contrary, if the Executive Retires from
the Company subsequent to April 15, 2004, there shall instead be
paid to the Executive under NYSEG's Supplemental Executive
Retirement Plan (or any successor plan) an amount that shall be
determined by (i) giving the Executive, for purposes of that
plan, service credit for 40 years of service and (ii) deeming the
Executive's "highest three years of earnings within the last ten
years of employment" for purposes of that plan to be equal to the
Executive's Base Salary at the rate in effect at the time he
Retires.
During the Term of this Agreement (or, if later, until
the end of the Change-in-Control Protective Period), the Company
will, on each January 5, beginning January 5, 2000, pay the
premium on a Whole Life Insurance Policy issued by The Guardian
Life Insurance Company of New York, Policy No. 3810692, on the
life of the Executive (the "Life Insurance Policy"); provided
that in no event shall the Company pay on any such date more than
$96,000 toward payment of such premium and provided that the
Company shall not pay such premium if the Executive's employment
has been terminated for any reason prior to such January 5,
except as otherwise provided in Sections 6.1 and 10.1(E) hereof.
5.3 Expenses. Upon presentation of reasonably
adequate documentation to the Company, the Executive shall
receive prompt reimbursement from the Company for all reasonable
and customary business expenses incurred by the Executive in
accordance with the Company policy in performing services
hereunder. The Company agrees to reimburse the Executive for any
expenses he incurs in moving himself and his family from
Pittsburgh, PA to any state in the Northeast.
5.4 Vacation. The Executive shall be entitled to
five (5) weeks of vacation during each year of this Agreement, or
such greater period as the Board shall approve, without reduction
in salary or other benefits.
5.5 Transition Payments. The Company agrees to
make a payment to NYSEG in an amount not to exceed $327,780.00 in
connection with the transfer of the Life Insurance Policy from
NYSEG to the Company.
5.6 Bonuses. In recognition of the Executive's
performance and for services rendered or to be rendered to the
Company, the Company shall pay to the Executive a bonus of
$2,400,000.00 payable in the following amounts and at the
following times: $1,000,000.00 on April 30, 1999; $700,000.00 on
April 30, 2000, provided that the Executive is employed by the
Company on April 23, 2000; and $700,000.00 on April 30, 2001,
provided that the Executive is employed by the Company on April
23, 2001. If at any time prior to April 23, 2001, the
Executive's employment is terminated due to the Executive's death
or Disability, or by the Company without Cause or by the
Executive for Good Reason, the Company shall pay to the
Executive, within five (5) days of the Date of Termination, any
unpaid amounts due pursuant to this Section 5.6.
6. Compensation Related to Disability or Termination
(Other Than Certain Post-Termination Payments).
6.1 During the Term of this Agreement (or, if later,
at any time prior to the end of the Change-in-Control Protective
Period), during any period that the Executive fails to perform
the Executive's full-time duties with the Company as a result of
incapacity due to physical or mental illness, the Company shall
pay the Executive's Base Salary to the Executive at the rate in
effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the
terms of any compensation or benefit plan, program or arrangement
maintained by the Company during such period, until the
Executive's employment is terminated by the Company for
Disability; provided, however, that such Base Salary payments
shall be reduced by the sum of the amounts, if any, payable to
the Executive at or prior to the time of any such Base Salary
payment under disability benefit plans of the Company or under
the Social Security disability insurance program, which amounts
were not previously applied to reduce any such Base Salary
payment; and provided further, however, that if the Executive's
employment is terminated by the Company for Disability, the
Company will pay through the end of the Term of this Agreement
(or, if later, until the end of the Change-in-Control Protective
Period), the amount the Company agreed to pay in connection with
the Life Insurance Policy referred to in the third paragraph of
Section 5.2 hereof and any unpaid amounts the Company agreed to
pay pursuant to Section 5.6 hereof. Subject to Sections 7, 8, 9
and 10 hereof, after completing the expense reimbursements
required by Section 5.3 hereof and making the payments and
providing the benefits required by this Section 6.1, the Company
shall have no further obligations to the Executive under this
Agreement.
6.2 If the Executive's employment shall be terminated
for any reason during the Term of this Agreement (or, if later,
prior to the end of the Change-in-Control Protective Period), the
Company shall pay the Executive's Base Salary (to the Executive
or in accordance with Section 14.2 if the Executive's employment
is terminated by his death) through the Date of Termination at
the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of any
compensation or benefit plan, program or arrangement maintained
by the Company during such period. If the Executive's employment
is terminated in connection with the Executive's death, the
Company shall pay any unpaid amounts it agreed to pay pursuant to
Section 5.6 hereof. Subject to Sections 6.1, 7, 8, 9 and 10
hereof, after completing the expense reimbursements required by
Section 5.3 hereof and making the payments and providing the
benefits required by this Section 6.2, the Company shall have no
further obligations to the Executive under this Agreement.
7.Normal Post-Termination Payments Upon Termination of
Employment. If the Executive's employment shall be
terminated for any reason during the Term of this Agreement (or,
if later, prior to the end of the Change-in-Control Protective
Period), the Company shall pay the Executive's normal post-
termination compensation and benefits to the Executive as such
payments become due. Subject to Section 10.1 hereof and the
second paragraph of Section 5.2 hereof, such post-termination
compensation and benefits shall be determined under, and paid in
accordance with, the Company's retirement, insurance and other
compensation or benefit plans, programs and arrangements (other
than this Agreement).
8.Termination of Employment (During the Term and Prior to
a Change-in-Control) by the Company Without
Cause. If the Company shall terminate the Executive's
employment during the Term and prior to a Change-in-Control,
without Cause (and not for Disability or in connection with the
Executive's Retirement or the Executive's death), then in lieu of
any further salary payments to the Executive for periods
subsequent to the Date of Termination, the Company shall pay to
the Executive, within the five days immediately following the
Date of Termination, or as otherwise contemplated by Section 10
hereof, severance payments equal to, and on terms analogous to,
those that are due under Section 10 hereof upon a termination of
the Executive's employment that results in payments being due
under Section 10 hereof. If the Company gives notice to the
Executive pursuant to Section 3 hereof not to extend this
Agreement, it shall be deemed to be a termination of the
Executive's employment without Cause.
9.Post-Termination Continuation of Welfare Benefit Plan
Coverage. Except as otherwise provided in Section 10.1
hereof, if the termination of the Executive's employment is
described in Section 8 hereof, the Company shall maintain in full
force and effect, for the continued benefit of the Executive for
the number of years (including partial years) remaining in the
Term, each "employee welfare benefit plan" (as described in
Section 3(1) of ERISA) in which the Executive was entitled to
participate immediately prior to the Date of Termination,
provided that the Executive's continued participation is possible
under the general terms and provisions of such plans. In the
event that the Executive's participation in any such plan is
barred, the Company shall arrange to provide the Executive with
benefits substantially similar to those which the Executive would
otherwise have been entitled to receive under the plan from which
his continued participation is barred. For purposes of this
Section 9, the term "employee welfare benefit plan" shall be
deemed not to include the payment by the Company of any amount
referred to in the third paragraph of Section 5.2 hereof or
Section 10.1(E) hereof with respect to the Life Insurance Policy.
10. Severance Payments.
10.1 The Company shall pay the Executive the payments
described in this Section 10.1 (the "Severance Payments") upon
the termination of the Executive's employment following a Change-
in-Control and prior to the end of the Change-in-Control
Protective Period, in addition to the payments and benefits
described in Sections 6 and 7 hereof and any unpaid amounts the
Company agreed to pay pursuant to Section 5.6 hereof, unless such
termination is (i) by the Company for Cause, (ii) by reason of
death, Disability or Retirement, or (iii) by the Executive
without Good Reason. For purposes of the immediately preceding
sentence, if a termination of the Executive's employment occurs
prior to a Change-in-Control, but following a Potential Change-
in-Control in which a Person has entered into an agreement with
the Company the consummation of which will constitute a Change-
in-Control, such termination shall be deemed to have followed a
Change-in-Control and to have been (i) by the Company without
Cause, if the Executive's employment is terminated without Cause
at the direction of such Person, or (ii) by the Executive with
Good Reason, if the Executive terminates his employment with Good
Reason and the act (or failure to act) which constitutes Good
Reason occurs following such Potential Change-in-Control and at
the direction of such Person.
(A) In lieu of any further salary payments to the
Executive for periods subsequent to the Date of Termination,
and in lieu of any severance benefit otherwise payable to
the Executive, the Company shall pay to the Executive a lump
sum severance payment, in cash, equal to three (3) times the
sum of:
(i) the higher of the Executive's annual Base Salary
in effect immediately prior to the occurrence of
the event or circumstance upon which the Notice of
Termination is based or the Executive's annual
Base Salary in effect immediately prior to the
Change-in-Control, and
(ii) the incentive compensation award the Executive
would have received under NYSEG's Annual Executive
Incentive Plan, or any successor annual executive
incentive compensation plan, for the year in which
the Date of Termination occurs, calculated in
accordance with Article XI (A) (iii) of the Annual
Executive Incentive Plan or any comparable
provision in any successor annual executive
incentive compensation plan, without, however,
giving effect to any pro-rata adjustments
contained in said provisions.
(B) Notwithstanding any provision of NYSEG's Annual
Executive Incentive Plan, or any successor annual executive
incentive compensation plan, the Company shall pay to the
Executive a lump sum amount, in cash, equal to the sum of
(i) any incentive compensation which has been allocated or
awarded to the Executive for a completed fiscal year
preceding the Date of Termination under the Annual Executive
Incentive Plan, or any successor annual executive incentive
compensation plan, but has not yet been either (x) paid
(pursuant to Section 6.2 hereof or otherwise) or (y)
deferred pursuant to the Deferred Compensation Plan for
Salaried Employees, and (ii) a pro-rata portion to the Date
of Termination of the aggregate value of any contingent
incentive compensation award to the Executive for any
uncompleted fiscal year under the Annual Executive Incentive
Plan or any successor annual executive incentive
compensation plan, calculated as to each such award in
accordance with Article XI (A) (iii) of the Annual Executive
Incentive Plan or any comparable provision in any successor
annual executive incentive compensation plan.
(C) The second paragraph of Section 5.2 hereof shall
be inapplicable, and notwithstanding any provision of
NYSEG's Supplemental Executive Retirement Plan (or any
successor plan) that may be to the contrary, the Company
shall pay to the Executive under NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) an amount
that shall be determined by (i) deeming the Executive (a) to
have 40 years of service credit, for purposes of that plan,
(b) to be at least 60 years of age and (c) to be a "Key
Person" as defined in, and for all purposes under, that
plan and (ii) deeming the Executive's "highest three years
of earnings within the last ten years of employment" for
purposes of that plan to be equal to the higher of the
Executive's Base Salary as determined pursuant to Section
10.1(A)(i) hereof; and such benefits shall be determined
without regard to any amendment to NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) made
subsequent to a Change-in-Control and on or prior to the
Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits
thereunder.
Notwithstanding any provision in NYSEG's Supplemental
Executive Retirement Plan (or any successor plan) that may
be to the contrary, the benefits otherwise payable to the
Executive pursuant to this Section 10.1(C) shall be paid to
the Executive in a lump sum payment that is equal in amount
to the present value (calculated under generally accepted
actuarial methods that are consistent with the actuarial
methods used in producing the tables of Appendix A of
NYSEG's Retirement Benefit Plan (or any successor plan)) of
such benefits and such payment shall be in lieu of any
payments to which the Executive otherwise would have been
entitled under NYSEG's Supplemental Executive Retirement
Plan (or any successor plan) and shall satisfy any
obligations that the Company would otherwise have to the
Executive under NYSEG's Supplemental Executive Retirement
Plan (or any successor plan). Such lump sum payment shall
be paid to the Executive no later than the due date of the
first payment otherwise due to the Executive under NYSEG's
Supplemental Executive Retirement Plan (or any successor
plan).
Notwithstanding the immediately preceding paragraph of
this Section 10.1(C), the Executive may elect to have the
benefits otherwise payable to the Executive pursuant to this
Section 10.1(C) be paid to the Executive in the manner
provided for under NYSEG's Supplemental Executive Retirement
Plan (or any successor plan) and such method of payment
shall be in lieu of a lump sum payment. The Executive shall
make such election by sending a letter to the Company in
which he states that he has decided to make such election.
The election shall not be effective unless the letter is
received by the Company (i) at least 60 days prior to the
day (the "Change-in-Control Day") that the Change-in-
Control, or Potential Change-in-Control, that gives rise to
the applicability of Section 10.1(C) occurs and (ii) prior
to the first day of the calendar year in which the Change-
in-Control Day occurs. The Executive shall have the right
to revoke any such election by sending a letter to the
Company in which he states that he has decided to revoke
such election. The revocation of such election shall not be
effective unless the letter is received by the Company (i)
at least 60 days prior to the Change-in-Control Day and (ii)
prior to the first day of the calendar year in which the
Change-in-Control Day occurs. If the Executive revokes an
election, he can make a new election (in the manner, and
subject to the timing requirements, set forth in this
paragraph), and he can revoke any such new election (in the
manner, and subject to the timing requirements, set forth in
this paragraph).
(D) For a thirty-six (36) month period after the Date
of Termination, the Company shall arrange to provide the
Executive with life (other than the Life Insurance Policy),
disability, accident and health insurance benefits
substantially similar to those which the Executive is
receiving immediately prior to the Notice of Termination
(without giving effect to any reduction in such benefits
subsequent to a Change-in-Control if the Executive
terminated his employment for Good Reason or was terminated
without Cause). Benefits otherwise receivable by the
Executive pursuant to this Section 10.1(D) shall be reduced
to the extent comparable benefits are actually received by
or made available to the Executive without cost during the
thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually
received by the Executive shall be reported to the Company
by the Executive). If the benefits provided to the
Executive under this Section 10.1(D) shall result in a
Gross-Up Payment pursuant to Section 10.2, and these Section
10.1(D) benefits are thereafter reduced pursuant to the
immediately preceding sentence because of the receipt of
comparable benefits, the Gross-Up Payment shall be
recalculated so as to reflect that reduction, and the
Executive shall refund to the Company an amount equal to any
calculated reduction in the Gross-Up Payment, but only if,
and to the extent, the Executive receives a refund of any
Excise Tax previously paid by the Executive pursuant to
Section 10.2 hereof.
(E) The Company shall pay to The Guardian Life
Insurance Company of New York such lump-sum amount as is
necessary to result in the Life Insurance Policy being a
policy upon which no future premiums are due.
10.2 (A) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any
payment or distribution by the Company to or for the benefit of
the Executive on account of a Change-in-Control, whether paid or
payable or distributed or distributable pursuant to the terms of
this Agreement or otherwise (a "Payment"), would be subject to
the excise tax imposed by Section 4999 of the Code or any
interest or penalties with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment
("Gross-Up Payment") in an amount such that after payment by the
Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without
limitation, any income taxes and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(B) Subject to the provisions of Section 10.2(C)
hereof, all determinations required to be made under this Section
10.2, including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment and the assumptions to be used in
arriving at such determinations, shall be made by the Company's
principal outside accounting firm (the "Accounting Firm") which
shall provide detailed supporting calculations both to the Board
and the Executive within fifteen (15) business days of the Date
of Termination and/or such earlier date(s) as may be requested by
the Company or the Executive (each such date and the Date of
Termination shall be referred to as a "Determination Date", for
purposes of this Section 10.2(B) and Section 10.3 hereof). All
fees and expenses of the Accounting Firm shall be borne solely by
the Company. The initial Gross-Up Payment, if any, as determined
pursuant to this Section 10.2(B), shall be paid by the Company to
the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm
determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with a written opinion that failure
to report the Excise Tax on the Executive's applicable federal
income tax return would not result in the imposition of a
negligence or similar penalty. Any determination by the
Accounting Firm under this Section 10.2(B) shall be binding upon
the Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by
the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the
event that the Company exhausts its remedies pursuant to Section
10.2(C) and the Executive thereafter is required to make a
payment of any Excise Tax, the Accounting Firm shall determine
the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(C) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of an
Underpayment. Such notification shall be given as soon as
practicable but no later than ten (10) business days after the
Executive is informed in writing of such claim and shall apprise
the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the thirty (30) day period
following the date on which he gives such notice to the Company
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of such
period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request
in writing from time to time, including, without
limitation, accepting legal representation with
respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any
proceeding relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and
penalties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax basis,
for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 10.2(C),
the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo
any and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct the Executive to pay
the tax claimed and xxx for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and xxx
for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such
advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the
statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-
Up Payment would be payable hereunder and the Executive shall be
entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing
authority.
(D) If, after the receipt by the Executive of an
amount advanced by the Company pursuant to Section 10.2(C)
hereof, the Executive becomes entitled to receive any refund with
respect to such claim, the Executive shall (subject to the
Company's complying with the requirements of Section 10.2(C)
hereof) promptly pay to the Company the amount of such refund
(together with any interest paid or credited thereon after taxes
applicable thereto). If, after the receipt by the Executive of
an amount advanced by the Company pursuant to Section 10.2(C)
hereof, a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and
shall not be required to be repaid.
10.3 The payments provided for in Section 10.1 hereof
(other than Section 10.1(C) and (D)) shall be made not later than
the fifth day following each Determination Date, provided,
however, that if the amounts of such payments cannot be finally
determined on or before such day, the Company shall pay to the
Executive or to The Guardian Life Insurance Company as
applicable, on such day an estimate, as determined by the
Executive, of the minimum amount of such payments to which the
Executive or The Guardian Life Insurance Company, as applicable,
is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be
determined but in no event later than the thirtieth (30th) day
after each Determination Date. In the event that the amount of
the estimated payments exceeds the amount subsequently determined
to have been due, such excess shall constitute a loan by the
Company to the Executive, payable on the fifth (5th) business day
after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code).
10.4 The Company also shall pay to the Executive all
legal fees and expenses incurred by the Executive as a result of
a termination which entitles the Executive to the Severance
Payments (including all such fees and expenses, if any, incurred
in disputing any such termination or in seeking in good faith to
obtain or enforce any benefit or right provided by this Agreement
or in connection with any tax audit or proceeding to the extent
attributable to the application of Section 4999 of the Code to
any payment or benefit provided hereunder). Such payments shall
be made within five (5) business days after delivery of the
Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably
may require.
11. Termination Procedures.
11.1 Notice of Termination. During the Term of this
Agreement (and, if longer, until the end of the Change-in-Control
Protective Period), any purported termination of the Executive's
employment (other than by reason of death) shall be communicated
by written Notice of Termination from one party hereto to the
other party hereto in accordance with Section 15 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean
a notice which shall indicate the specific termination provision
in this Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated. Further, a Notice of Termination for Cause is
required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board which
was called and held for the purpose of considering such
termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's
counsel, to be heard before the Board) finding that, in the good
faith opinion of the Board, the Executive was guilty of conduct
set forth in clause (i) or (ii) of the definition of Cause
herein, and specifying the particulars thereof in detail.
11.2 Date of Termination. "Date of Termination",
with respect to any purported termination of the Executive's
employment during the Term of this Agreement (or prior to the end
of the Change-in-Control Protective Period, if a Change-in-
Control shall have occurred), shall mean (i) if the Executive's
employment is terminated by his death, the date of his death,
(ii) if the Executive's employment is terminated for Disability,
thirty (30) days after Notice of Termination is given (provided
that the Executive shall not have returned to the full-time
performance of the Executive's duties during such thirty (30) day
period), and (iii) if the Executive's employment is terminated
for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company,
shall not be less than thirty (30) days (except in the case of a
termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than
sixty (60) days, respectively, from the date such Notice of
Termination is given).
12. No Mitigation. The Company agrees that, if the
Executive's employment hereunder is terminated during the Term
(or, if later, prior to the end of the Change-in-Control
Protective Period), the Executive is not required to seek other
employment or to attempt in any way to reduce any amounts payable
to the Executive by the Company hereunder. Further, the amount
of any payment or benefit provided for hereunder (other than
pursuant to Section 10.1(D) hereof) shall not be reduced by any
compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against
any amount claimed to be owed by the Executive to the Company, or
otherwise.
13. Confidentiality and Noncompetition.
13.1 The Executive will not, during or after the Term,
disclose to any entity or person any information which is treated
as confidential by the Company and to which the Executive gains
access by reason of his position as an employee or director of
the Company.
13.2 If, at any time prior to the end of the Term (or,
if later, the end of the Change-in-Control Protective Period),
the Executive terminates his own employment without Good Reason
(and not in connection with his Disability, Retirement or death)
or the Company terminates his employment with Cause, then for a
twelve-month period immediately following his Date of
Termination, the Executive shall not, except as permitted by the
Company upon its prior written consent, enter, directly or
indirectly, into the employ of or render or engage in, directly
or indirectly, any services to any person, firm or corporation
within the "Restricted Territory," which is a major competitor of
the Company or NYSEG with respect to products which the Company
or NYSEG are then producing or services the Company or NYSEG are
then providing (a "Competitor"). However, it shall not be a
violation of the immediately preceding sentence for the Executive
to be employed by, or render services to, a Competitor, if the
Executive renders those services only in lines of business of the
Competitor which are not directly competitive with the primary
lines of business of the Company or NYSEG or are outside of the
Restricted Territory. For purposes of this Section 13.2, the
"Restricted Territory" shall be the states of Maryland, New
Jersey, New York and Pennsylvania.
If, at any time following a Change-in-Control, or a
Potential Change-in-Control under the circumstances described in
the second sentence of Section 10.1 hereof, and prior to the end
of the Term (or, if later, the end of the Change-in-Control
Protective Period), the Executive terminates his own employment
with Good Reason (and not in connection with his Disability or
Retirement) or the Company terminates his employment without
Cause, then for a twelve month period immediately following his
Date of Termination, the Executive shall not enter into the
employ of any person, firm or corporation or any affiliate
thereof (as such term is defined in Rule 12b-2 of the Exchange
Act) that caused the Change-in-Control, or the Potential Change-
in-Control under the circumstances described in the second
sentence of Section 10.1 hereof.
14. Successors; Binding Agreement.
14.1 In addition to any obligations imposed by law
upon any successor to the Company, 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 such assumption and agreement prior to the effectiveness
of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be
entitled to hereunder if the Executive were to terminate the
Executive's employment for Good Reason after a Change-in-Control,
except that, for purposes of implementing the foregoing, the date
on which any such succession becomes effective shall be deemed
the Date of Termination.
14.2 This Agreement shall inure to the benefit of and
be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive shall die
while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate
upon the death of the Executive) if the Executive had continued
to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the
Executive's estate.
15. Notices. For the purpose of this Agreement, notices
and all 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 mail, return
receipt requested, postage prepaid, addressed to the respective
addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be
effective only upon actual receipt:
To the Company:
Energy East Corporation
Xxxx Xxxxxx Xxx 0000
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Attention: Corporate Secretary
To the Executive:
Xxxxxx X. xxx Xxxxxx
000 Xxxxxx Xxxx
Xxxxxxxx, XX 00000
16. Miscellaneous.
16.1 No provision of this Agreement may be
modified, waived or discharged unless such waiver, modification
or discharge is agreed to in writing and signed by the Executive
and such officers as may be specifically designated by the Board.
No waiver by any party hereto at any time of any breach by any
other party hereto 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. No
agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made
by any party which are not expressly set forth in this Agreement.
This Agreement sets forth the entire agreement of the parties
hereto in respect of the subject matter contained herein and
supersedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties,
whether oral or written, by any officer, employee or
representative of any party hereto; and any prior agreement of
the parties hereto in respect of the subject matter contained
herein is hereby terminated and cancelled. The validity,
interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of New York. All
references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such
sections. There shall be withheld from any payments provided for
hereunder any amounts required to be withheld under federal,
state or local law and any additional withholding amounts to
which the Executive has agreed. The obligations under this
Agreement of the Company or the Executive which by their nature
and terms require satisfaction after the end of the Term (or
after the end of the Change-in-Control Protective Period) shall
survive such event and shall remain binding upon such party.
16.2 References in this Agreement to employee benefit
plans, compensation plans, incentive plans, pension plans,
disability policies or similar plans, programs or arrangements of
the Company include such plans, programs or arrangements of NYSEG
if maintained for the benefit of employees of the Company.
17. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
18. 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.
19. Settlement of Disputes; Arbitration. All claims by
the Executive for benefits under this Agreement shall be directed
to and determined by the Board and shall be in writing. Any
denial by the Board of a claim for benefits under this Agreement
shall be delivered to the Executive in writing and shall set
forth the specific reasons for the denial and the specific
provisions of this Agreement relied upon. The Board shall afford
a reasonable opportunity to the Executive for a review of the
decision denying a claim and shall further allow the Executive to
appeal to the Board a decision of the Board within sixty (60)
days after notification by the Board that the Executive's claim
has been denied. To the extent permitted by applicable law, any
further dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration
in New York, New York 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.
20. Definitions. For purposes of this Agreement, the
following terms shall have the meaning indicated below:
(A) "Base Salary" shall have the meaning stated in
Section 5.1 hereof.
(B) "Beneficial Owner" shall have the meaning
defined in Rule 13-d-3 under the Exchange Act.
(C) "Board" shall mean the Board of Directors of
the Company.
(D) "Cause" for termination by the Company of the
Executive's employment, for purposes of this Agreement, shall
mean (i) the willful and continued failure by the Executive to
substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's
incapacity due to physical or mental illness or any such actual
or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section
11.1) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand
specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive
in conduct which is demonstrably and materially injurious to the
Company or its subsidiaries, monetarily or otherwise. For
purposes of clauses (i) and (ii) of this definition, no act, or
failure to act, on the Executive's part shall be deemed "willful"
unless done, or omitted to be done, by the Executive not in good
faith and without reasonable belief that the Executive's act, or
failure to act, was in the best interest of the Company.
(E) A "Change-in-Control" shall be deemed to have
occurred if the conditions set forth in any one of the following
paragraphs shall have been satisfied during the Term:
(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) representing 25% or
more of the combined voting power of the Company's then
outstanding securities; or
(II) during any period of two consecutive years
(not including any period prior to the date of this
Agreement), 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 paragraph (I), (III) or (IV)
of this Change-in-Control definition or a director
whose initial assumption of office occurs as a result
of an actual or threatened election contest with
respect to the election or removal of directors or
other actual or threatened solicitations of proxies or
consents by or on behalf of a Person other than the
Board) 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 a majority thereof; or
(III) the shareholders of the Company approve a
merger or consolidation of the Company with any other
corporation, other than (i) 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), in combination
with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of
the Company or any of its subsidiaries, at least 75% of
the combined voting power of the voting securities of
the Company or such surviving entity 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 acquires more than 50%
of the combined voting power of the Company's then
outstanding securities; or
(IV) the shareholders of the Company approve a
plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of
all or substantially all the Company's assets.
(F) "Change-in-Control Protective Period" shall mean
the period from the occurrence of a Change-in-Control until the
later of (i) the second anniversary of such Change-in-Control, or
(ii) the sixtieth day after the Executive becomes sixty years of
age.
(G) "Code" shall mean the Internal Revenue Code of
1986, as amended from time to time.
(H) "Company" shall mean Energy East Corporation and
any successor to its business and/or assets which assumes and
agrees to perform this Agreement by operation of law, or
otherwise (except in determining, under Section 20(E) hereof,
whether or not any Change-in-Control of the Company has occurred
in connection with such succession).
(I) "Date of Termination" shall have the meaning
stated in Section 11.2 hereof.
(J) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as
a result of the Executive's incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time
performance of the Executive's duties with the Company for the
maximum number of months applicable to the Executive under the
Company's Disability Policy for Salaried Employees (or any
successor policy) (but in no event for less than six (6)
consecutive months), the Company shall have given the Executive a
Notice of Termination for Disability, and, within thirty (30)
days after such Notice of Termination is given, the Executive
shall not have returned to the full-time performance of the
Executive's duties.
(K) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(L) "Excise Tax" shall have the meaning stated in
Section 10.2(A) hereof.
(M) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence (without the
Executive's express written consent) after any Change-in-Control,
or after any Potential Change-in-Control under the circumstances
described in the second sentence of Section 10.1 hereof (treating
all references in paragraphs (I) through (VIII) below to a
"Change-in-Control" as references to a "Potential Change-in-
Control), of any one of the following acts by the Company, or
failure by the Company to act:
(I) the assignment to the Executive of any
duties inconsistent with the Executive's status as an
executive officer of the Company or a substantial
alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior
to the Change-in-Control (including, without
limitation, any such alteration attributable to the
fact that the Company may no longer be a public
company);
(II) a reduction by the Company in the
Executive's annual base salary as in effect on the date
hereof or as the same may be increased from time to
time;
(III) the relocation of the Company's Stamford,
Connecticut executive offices to a location more than
fifty (50) miles from the location of such offices
immediately prior to the Change-in-Control or the
Company's requiring the Executive to be based anywhere
other than the Company's Stamford, Connecticut
executive offices except for required travel on the
Company's business to an extent substantially
consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company, without the
Executive's consent, to pay to the Executive any
portion of the Executive's current compensation
(including compensation pursuant to Section 5.6
hereof), or to pay to the Executive any portion of an
installment of deferred compensation under any deferred
compensation program of the Company, within seven (7)
days of the date such compensation is due;
(V) the failure by the Company to continue in
effect any compensation plan in which the Executive
participates immediately prior to the Change-in-Control
which is material to the Executive's total
compensation, including but not limited to NYSEG's
Annual Executive Incentive Plan, Long Term Executive
Incentive Share Plan, and Supplemental Executive
Retirement Plan, or any substitute plans adopted prior
to the Change-in-Control, unless an equitable
arrangement (embodied in an ongoing substitute or
alternative plan) has been made with respect to such
plan, or the failure by the Company to continue the
Executive's participation therein (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 the Executive's
participation relative to other participants, as
existed at the time of the Change-in-Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially
similar to those enjoyed by the Executive under any of
the Company's pension, life insurance, medical, health
and accident, or disability plans in which the
Executive was participating at the time of the Change-
in-Control, the taking of any action by the Company
which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the
time of the Change-in-Control, or the failure by the
Company to provide the Executive with the number of
paid vacation days to which the Executive is entitled
to under Section 5.4 hereof, or the failure by the
Company to provide the Executive with the benefit it
agreed to provide pursuant to the second paragraph of
Section 5.2 hereof, or the failure by the Company to
pay the amount it agreed to pay in connection with the
Life Insurance Policy referred to in the third
paragraph of Section 5.2 hereof;
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice
of Termination satisfying the requirements of Section
11.1; for purposes of this Agreement, no such purported
termination shall be effective; or
(VIII) the failure of the Board to validly
terminate a merger or consolidation described in
Section 20(E)(III) hereof within sixty (60) days after
shareholder approval of such merger or consolidation
that provides for the election or appointment of a
successor to the Executive as Chairman or Chief
Executive Officer of the Company.
The Executive's right to terminate the Executive's
employment for Good Reason shall not be affected by the
Executive's incapacity due to physical or mental illness. The
Executive's continued employment shall not constitute consent to,
or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(O) "Gross-Up Payment" shall have the meaning stated
in Section 10.2(A) hereof.
(P) "Life Insurance Policy" shall have the meaning
stated in the third paragraph of Section 5.2 hereof.
(Q) "Notice of Termination" shall have the meaning
stated in Section 11.1 hereof.
(R) "NYSEG" shall mean New York State Electric & Gas
Corporation.
(S) "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; however, a Person shall not include
(i) the Company or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan
of the Company or any of its subsidiaries, (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.
(T) "Potential Change-in-Control" shall be deemed to
have occurred if the conditions set forth in any one of the
following paragraphs shall have been satisfied during the Term:
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of
a Change-in-Control;
(II) the Company or any Person publicly announces
an intention to take or to consider taking actions
which, if consummated, would constitute a Change-in-
Control;
(III) any Person (x) is or becomes the Beneficial
Owner, directly or indirectly, (y) discloses directly
or indirectly to the Company (or publicly) a plan or
intention to become the Beneficial Owner, directly or
indirectly, or (z) makes a filing under the Xxxx-Xxxxx-
Xxxxxx Anti-Trust Improvements Act of 1976, as amended,
with respect to securities to become the Beneficial
Owner, directly or indirectly, of securities of the
Company representing 9.9% or more of the combined
voting power of the Company's then outstanding
securities; or
(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential
Change-in-Control has occurred.
(U) "Retirement" shall be deemed the reason for the
termination by the Company or the Executive of the Executive's
employment if such employment is terminated in accordance with
the Company's retirement policy, not including early retirement,
generally applicable to its salaried employees, as in effect
immediately prior to the Change-in-Control, or in accordance with
any retirement arrangement established with the Executive's
consent with respect to the Executive.
(V) "Retires" shall, for purposes of the second
paragraph of Section 5.2 hereof, refer to the termination of the
Executive's employment in accordance with the Company's
retirement policy, not including early retirement (except that,
on April 15, 2004, and thereafter, the Executive shall be deemed
to have satisfied any normal retirement age requirement of that
retirement policy), generally applicable from time to time to its
salaried employees, or in accordance with any retirement
arrangement established with the Executive's consent with respect
to the Executive.
(W) "Severance Payments" shall mean those payments
described in Section 10.1 hereof.
(X) "Term" shall have the meaning stated in Section 3
hereof.
(Y) "NYSEG Board" shall mean the Board of Directors of
NYSEG.
IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date first above written.
ENERGY EAST CORPORATION
By: /S/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Executive Vice President and
General Counsel
/S/ Xxxxxx X. Xxx Xxxxxx
XXXXXX X. XXX XXXXXX
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