E M P L O Y M E N T A G R E E M E N T
between
CITIZENS UTILITIES COMPANY
and
XXXXXXX XXX
July 11, 1996
THIS AGREEMENT entered into on July 11, 1996 by and between
CITIZENS UTILITIES COMPANY, a Delaware corporation with offices at Xxxx Xxxxx
Xxxx, Xxxxxxxx, XX 00000 (the "Company") and XXXXXXX XXX, an individual residing
at 000 Xxxxxxx Xxxxx Xxxx, Xxx Xxxxxx, XX 00000 (the "Executive").
W I T N E S S E T H
WHEREAS:
A. The Executive has been a member of the Board of
Directors of the Company and Chairman of the Executive Committee of the Board
of Directors of the Company since April of 1989;
B. On June 22, 1990, the Executive was elected Chairman of the
Board of the Company and designated Chief Executive Officer of the Company
effective on July 1, 1990 and is currently acting as such Chairman and Chief
Executive Officer and is so acting to the full satisfaction of the Company;
C. Under date of March 29, 1991, the Company and Executive
entered into an employment agreement (the "Prior Agreement") whereby Executive
was employed as the Company's chief executive for a term of six and one-half
years ending December 31, 1996; the Executive also has been acting as the
Company's Chief Financial Officer;
D. The Company and Executive are desirous of continuing the
employment of Executive as chief executive officer of the Company after the
expiration of the Prior Agreement and the Company is desirous of having the
benefit of the Executive's advice after his retirement from employment with the
Company as an advisor-consultant on matters of importance to the Company.
E. The Company believes that in order to continue to motivate
and retain the services of the Executive, it is necessary that benefits
available upon retirement be made available to the Executive and that the
Executive be given the opportunity to acquire shares of the Common Stock of the
Company;
F. The Executive has served as Chairman of the Board of the
Company since June 22, 1990 and as its Chief Executive Officer since July 1,
1990. During the same period of time Executive has served as Chairman of the
Board and chief executive and chief financial officer of Century Communications
Corp., a New Jersey corporation ("Century") and as an officer and director of
various subsidiaries of Century. The Company acknowledges that during this
period when acting as both Chairman and Chief Executive Officer of the Company
and of Century and as Chief Financial Officer of Century, the Executive has
performed his services to the Company to the full satisfaction of the Board of
Directors of the Company, and the Company is aware that the Executive may
continue to serve as Chairman of the Board and Chief Executive Officer and Chief
Financial Officer of Century during the full term of Executive's employment by
the Company, and is agreeable to Executive continuing to act in such capacities
with Century and various of Century's subsidiaries and affiliated Companies
during his employment by the Company; and
G. The Company has requested the Executive to relinquish in
this Agreement certain benefits that were made available to the Executive under
the Prior Agreement and the Executive has expressed a willingness so to do and
to continue his employment with the Company as its chief executive officer under
the terms, provisions and conditions set forth herein including the providing of
and making certain benefits available to the Executive prior to the commencement
of the term of this Agreement, as defined, and the Company is desirous of
continuing the employment of the Executive as its Chief Executive Officer under
the terms, provisions and conditions set forth herein and is agreeable to
providing certain benefits as provided for herein prior to the commencement of
the term of this Agreement as defined.
NOW, THEREFORE, in consideration of the mutual covenants
herein contained and other good and valuable consideration, each to the other in
hand paid and the receipt and adequacy of which is mutually acknowledged, the
parties agree as follows:
1. Employment; Duties.
(a) The Company hereby employs and continues the employment of
the Executive and the Executive hereby accepts such employment, for the
duration of the Term (as herein defined) and upon the terms and conditions
hereafter provided, as chief executive officer of the Company. As such chief
executive, the Executive shall be in charge of and have final authority and
responsibility for all phases of the activities, operations and business of the
Company and its subsidiaries, subject only to such authority and responsibility
which under applicable law cannot be delegated and which may only be exercised
by the Board of Directors of the Company. The Executive shall be the most senior
officer of the Company and report directly to the Board of Directors, and no
officer of the Company shall have authority and responsibility greater than or
senior to the Executive. All officers, employees and other personnel shall
report directly or indirectly to the Executive. The Executive shall work with
the Board of Directors in the formulation of a management succession program for
future years.
(b) The Executive presently acts as Chairman of the
Board of the Company. During the Term (as herein defined) the Executive shall
continue to be designated as the Chairman of the Board of the Company and the
By-Laws of the Company shall continue to provide that the Chairman of the Board
shall be the chief executive officer of the Company. Additionally, during the
Term, the Executive agrees to serve, if it is mutually determined to be
appropriate or if the Executive desires to be so elected or appointed, and for
the period for which he is and from time-to-time shall be appointed or elected,
as an officer of any subsidiary or affiliate of the Company. The Company shall
not take any action to reduce the scope of the Executive's authority, position,
functions, duties and responsibilities from that which is in effect at the date
hereof and/or which is contemplated hereby, unless he shall otherwise consent in
writing.
(c) The Executive is currently a member of the Board of
Directors of the Company. The Company shall use its best efforts to cause the
Executive to continue to be a member of its Board of Directors throughout the
Term, and shall include the Executive in management's slate for election as a
director at every stockholders' meeting at which his term for director would
otherwise expire and/or at the annual meeting of stockholders. The Company shall
use its best efforts to cause the Executive to be a member of the Board of
Directors of all subsidiaries of the Company throughout the Term (as herein
defined). If elected to such, the Executive agrees to serve and continue to
serve as a director and as a member of any committee of the Board of Directors
of the Company and also agrees to serve, if elected, as a member of the Board of
Directors of all subsidiaries of the Company, with the understanding and
agreement that the Executive may resign from any such position at any time.
During the Term of the Agreement, the Executive shall not receive a fee as a
director or as a member of any committee of directors of the Company or any
subsidiary of the Company.
2. Term. The term of the Executive's employment under this
Agreement shall commence on January 1, 1997 (subsequent to the termination of
the Executive's employment under the Prior Agreement as defined herein) and
expire on December 31, 2000 (the "Term"). Executive's employment under this
Agreement may be terminated prior to the expiration of the Term, as hereinafter
provided.
Unless the context shall indicate to the contrary, the phrase
"terminate this Agreement" when used herein shall refer to the termination of
the period of employment or the rendering of advisory services under this
Agreement.
3. Compensation, Expenses and Benefits. For services rendered
by the Executive during the period of his employment under this Agreement, the
Executive shall be paid the compensation, benefits and expenses provided in
Sections 3(a), (b), (c), (d), and (e). Additionally, Executive shall also be
entitled to the other payments and benefits set forth in other sections of this
Agreement.
(a) Base Salary. The Company shall pay to the
Executive a base salary ("Base Salary") of $900,000 for each year of the Term.
The Base Salary shall be payable currently in accordance with the customary
payroll practices of the Company but in no event less frequently than monthly
and shall be subject to such withholdings as may be required by applicable law.
(b) Stock Compensation.
(i) In addition to his Base Salary,
and in consideration of his entering into this Agreement, the Executive shall be
awarded and Company agrees to and shall give and deliver to the Executive, upon
the execution and delivery of this Agreement, 500,000 shares of the Series A
Common Stock of the Company (as increased and augmented as provided in this
subparagraph (i) and subparagraph (ii)). These shares (the "Restricted
Shares")shall be registered in the Executive's name but shall be subject to a
restriction period (the "Restriction Period") (after which all restrictions
shall lapse) which shall mean the period commencing with the delivery of said
shares to the Executive and ending with the first to occur of (i) the first
January 1 next succeeding the expiration of the Term under this Agreement in
accordance with its provisions on December 31, 2000, (ii) termination of
employment by death of the Executive or by either the Executive or the Company
under this Agreement in accordance with its provisions prior to December 31,
2000, provided that if the Executive is the chief executive officer on December
31 of the year in which such termination occurs or if the Executive is otherwise
a "covered employee" for the purposes of Section 162(m) of the Internal Revenue
Code of 1986, as amended ("Code"), for the taxable year in which such
termination occurs, the Restriction Period shall end on the next succeeding
January 1 after such termination; provided further that if termination of
employment occurs because of Executive's exercise of his voluntary option
pursuant to Section 10(a)(ii), the Restriction Period shall end on the January 1
next succeeding the giving of notice of such termination, (iii) sale of all or
substantially all of the assets of the Company, (iv) merger, consolidation or
other amalgamation or combination of the Company, in which merger or other
transaction the Company is not the surviving entity, or (v) a Change in Control
or threatened Change in Control as defined in Section 15. During the Restriction
Period, none of the Restricted Shares shall be sold, exchanged, transferred,
pledged, hypothecated or otherwise disposed of except that the Executive shall
not be precluded from exchanging any Restricted Shares for any other shares of
the Company that thereby become similarly restricted by this Section or are
similarly restricted. Except for the restrictions on the Restricted Shares
during the Restriction Period set forth in the immediately preceding sentence,
Executive shall have all of the rights of a shareholder with respect to the
Restricted Shares, including without limitation the right to vote the shares and
receive dividends and other distributions. During the Restriction Period,
dividends and other distributions payable in capital stock of the Company
received by the Executive shall be subject to the foregoing restrictions.
(ii) For the purposes of this Agreement,
EBIDTA means, for any period, consolidated net income or loss for such period,
excluding gains or losses from extraordinary or non-recurring items, of the
Company and its consolidated or combined subsidiaries plus the sum of
consolidated interest expense, depreciation and amortization expense, provision
for income taxes, and all other non-cash expenses and income included in the
determination of net income or loss. Notwithstanding the above, EBIDTA shall
include the EBIDTA of any investment or subsidiary accounted for on the equity
method of accounting to the extent of the Company's interest in same. Provided,
however, if the Company or any of its subsidiaries has sold, discontinued or
otherwise disposed of any of its subsidiaries, divisions or businesses (a
"Disposed Property" or "Disposed Properties") during any period for which EBIDTA
is to be computed, or during the Term, EBIDTA shall be computed as if each of
such Disposed Properties had not been owned by the Company or a subsidiary
during any part of the Term or during the fiscal year ended December 31, 1996.
Minority interests included in cash flow in accordance with the first two
sentences of this paragraph shall be treated in a manner consistent with the
immediately preceding sentence with respect to any Disposed Property. For all
purposes for which EBIDTA is to be determined under this Agreement, EBIDTA shall
be determined by the Company's independent public accountants utilizing for each
of the applicable years those generally accepted accounting principles ("GAAP")
which are in effect for the fiscal year ended December 31, 1996.
The foregoing award of shares shall be subject to the
following provison: in the event that EBIDTA of the Company as above defined -
(A) for the fiscal year 2000, if the Term of this Agreement expires on December
31, 2000, or (B) for the year in which employment as chief executive officer
terminates, in the event of voluntary termination during 1999 or 2000 pursuant
to Section 10(a)(ii), or (C) for the fiscal year in which employment of
Executive as chief executive officer is terminated by the Company for "good
cause" as defined as Section 9(a)(ii) - is not in excess of the EBIDTA of the
Company for the year ended December 31, 1996 by at least the following
applicable percentages (the "Applicable Percentage"):
Applicable
Fiscal Year
Under (A), (B) Applicable
or (C) above Percentage
Calendar Year 1997 5%
Calendar Year 1998 10%
Calendar Year 1999 15%
Calendar Year 2000 20%
the 500,000 Restricted Shares, as same may have been otherwise adjusted, shall
be reduced by a fraction, the numerator of which is the difference between the
Applicable Percentage and the actual percentage increase in EBIDTA for the
particular applicable fiscal year and the denominator of which is the Applicable
Percentage for the particular year. (If termination occurs during a fiscal year,
the EBIDTA for such year shall be annualized based on the EBIDTA for the portion
of the year prior to termination.) As an example of the application of the
foregoing, assuming that termination of employment occurs at the end of fiscal
1999 and the actual EBIDTA for fiscal year 1999 is in excess of the EBIDTA of
the Company for calendar year 1996 by 12%, then the reduction in Restricted
Shares (assuming the 500,000 Restricted Shares have not been otherwise adjusted)
shall be determined as follows:
15% (the Applicable Percentage) minus 12% (the actual percentage
for the particular applicable fiscal year)
__________________________________________________________ =20%
15% (the Applicable Percentage
multiplied by 500,000 = reduction in number of Restricted Shares
The reduction of 20% results in the number of Restricted Shares being 500,000
minus 100,000 shares, or 400,000 shares.
Provided further, however, (I) the aforesaid formula shall apply and the number
of Restricted Shares shall be reducible in accordance with such formula only if
the Restriction Period terminates by reason of an event set forth in
subdivisions (A), (B) or (C) above, (II) in the event that employment under this
Agreement terminates by reason of the events set forth in subdivision (B) or (C)
above, and only in such events, the aforesaid formula shall apply and the number
of Restricted Shares shall be subject to reduction pursuant thereto, and the
number of Restricted Shares shall be further subject to reduction by the
fraction, the numerator of which shall be the number of full calendar months
remaining in the unexpired portion of the Term at the date of the termination of
employment under this Agreement pursuant to the events set forth in subdivision
(B) or (C) above, and the denominator of which is 48, and (III) if the
Restriction Period terminates by reason of any event other than one referred to
in subdivision (A), (B) or (C) above, there shall be no reduction in the number
of Restricted Shares pursuant to the aforesaid formula and the aforesaid formula
shall not be applicable.
(iii) The Company agrees that on and after
expiration or the prior termination for any reason, of employment under this
Agreement, at the request, from time to time, of the Executive or his
representative(s), the Company shall cause such of the Restricted Shares, as
adjusted, which the Executive and/or his representative(s) then desire to sell
or otherwise dispose of, to be registered under an effective Registration
Statement prepared pursuant to the Securities Act of 1933, as amended, and to be
registered (or the equivalent thereof) under all state securities laws, and to
keep such registrations and registration statement current for a period of 12
months after its effective date, and to furnish the Executive and/or his
representative(s), a reasonable number of prospectuses, to be used in connection
with any such sale or disposition, all at the sole cost and expense of the
Company, including without limitation, the cost of all legal fees and
disbursements. Additionally, the Company agrees that promptly following the
commencement of the Term (but in no event more than 60 days after the
commencement thereof) it shall cause the Restricted Shares to be listed for
trading on the New York Stock Exchange and that promptly after the number of the
Restricted Shares is adjusted from time to time, (but in no event more than 60
days after each such increase or augmentation) the shares which have not
previously been listed, shall be listed for trading on the New York Stock
Exchange. Provided, however, that if the Common Stock of the Company at any
relevant time is not listed for trading on the New York Stock Exchange, the
Company's obligations with respect to listing of shares are set forth in this
sub-paragraph, shall be satisfied by listing for trading of Restricted Shares,
as augmented and increased, on the largest (measured by number of securities
traded and listed) national securities exchange in which shares of the Company's
Common Stock are traded with the national market system of NASDAQ being deemed a
national securities exchange.
The Company shall and does hereby agree to indemnify and hold
free and harmless, the Executive (and his representative(s)) from any and all
claims, liabilities, obligations, actions, causes of actions, cost and expenses,
including but not limited to legal fees and disbursements, arising out of or
related in any way, to or by reason of, any and all data, information,
representations and/or material relating to the Company contained in any of said
registration statements and registrations, including, but not limited to
financial statements which form part of such statements or are exhibits thereto
or are incorporated by reference therein.
(c) Benefits and Other Plans.
(i) Participation in Plans - Generally.
In addition to his Base Salary and Stock Compensation the Executive shall be
eligible to participate in the Company's (A) 401(k) Plan, (B) Incentive Deferred
Compensation Plan ("IDCP"), (C) Equity Incentive Plan ("EIP"), (D) Stock
Purchase Plan, (E) Employees' Stock Ownership Plan, when adopted ("ESOP"), and,
in each case, any successor Plans, and (F) any and all additional plans for
executives and/or employees generally, and all medical, hospitalization, major
medical, health, dental and eye care plans, sick leave, life or other insurance
or death benefit, travel and accident insurance, termination pay, vacation, auto
allowance, and any other fringe or employee benefit plans, programs and
practices of the Company or its subsidiaries (collectively, "the Plans" and
individually a "Plan") for which the Executive is or other key executives are or
shall become eligible. Except as otherwise provided in this Agreement, in all
instances where salary is relevant, the awards to be made to the Executive, all
contributions of the Company and all other benefits will be determined on the
basis of Executive's then Base Salary and stock compensation as provided in
Sections 3(a) and 3(b), together with any bonus awarded pursuant to Section 4
during the immediately preceding year of the Term (or for the first full year of
the Term if same is the applicable year).
(ii) Vesting of Grants Under The Plans.
All awards or grants to the Executive under any of the Plans, or otherwise,
which are granted or awarded on and after the commencement of the Term, whether
the award or grant is of shares of the Common Stock of the Company or options to
acquire shares of the Company, or otherwise, shall vest and be free of all
restrictions, if not previously vested and free of restrictions, on and no later
than the expiration date of the Term of this Agreement on December 31, 2000, or
the prior termination of employment, and the full credit balance in the
Executive's account in all of said Plans, if not previously vested and free of
restrictions, shall be deemed vested and free of restrictions on such date, as
well as any amount credited to the account of the Executive for the year of
termination. Provided however that the provisions of Section 3(b)(ii) shall
remain applicable in the event of a termination of employment on December 31,
2000, or earlier termination pursuant to Section 9(a)(ii) or Section 10(a)(ii).
(iii) Vesting of Prior Grants. Heretofore,
awards of cash, credit balances, shares of the Common Stock of the Company and
options to acquire shares of Common Stock of the Company were awarded and
granted to the Executive. All such grants and awards shall be deemed to vest in
full and all restrictions thereon shall lapse (to the extent not already vested
or lapsed) at the expiration of the Prior Agreement at the end of its term on
December 31, 1996 or upon other earlier termination of Executive's employment
under the Prior Agreement. Provided that, restrictions will not lapse for
361,281 restricted shares of Series B Common Stock of the Company awarded to the
Executive on October 15, 1991 and April 14, 1992 and options to acquire shares
of the Series B Common Stock of the Company granted to the Executive on April
1993 will not vest by reason of termination of employment if such termination is
by the Executive pursuant to Section 10(a)(ii) of the Prior Agreement or by the
Company pursuant to Section 9(a)(ii) of the Prior Agreement.
(iv) Life and Accident Insurance.
A. Pursuant to the Prior
Agreement the Company put into effect and presently maintains at the Company's
sole cost a $3,000,000 life insurance policy on the life of the Executive. The
policy was effected on a split-dollar insurance basis and the owner and
beneficiary of the policy is a trust created by the Executive. To minimize the
cost of maintaining this policy the Company desires to exchange said policy into
a split-dollar life insurance policy utilizing both first-to-die and
second-to-die life insurance on the lives of Executive and his wife Xxxxxx Xxx.
As further consideration for Executive entering into this Agreement it is agreed
that the principal amount of said insurance shall be increased from $3,000,000
to $6,000,000 and shall be effected on a split-dollar life insurance basis with
both first-to-die and second-to-die life insurance policies on the lives of
Executive and his wife Xxxxxx Xxx and with the applicant, owner and beneficiary
thereof, to the extent of $6,000,000 of net proceeds, to be the aforesaid trust
or another trust created by Executive. The Company at its sole cost and expense,
and promptly after the execution of this Agreement but in no event later than 60
days immediately succeeding the date of this Agreement, shall effect said
insurance through and with insurance companies authorized to do business in the
State of Connecticut, and at its sole cost and expense shall pay all premiums on
said $6,000,000 of insurance and at its sole cost and expense otherwise keep and
maintain said $6,000,000 of insurance in full force and effect during the
remaining term of the Prior Agreement, the Term and the Advisory Period and will
do so free of all liens and loans. The amount of premiums to be paid by the
Company on the applicable policy or policies shall be such that no later than
the expiration of the Term of this Agreement or prior termination of employment
under this Agreement, the said policy or policies shall be a fully paid-up
policy or policies with no additional premiums being due.
In addition, in the event this Agreement is terminated prior to the expiration
date of the Term for any reason other than the death of the Executive, and on
such termination the said policy or policies is (or are) not a fully-paid-up
policy (or policies), the Company shall forthwith make such payments of premiums
so that said policy or policies is (are) fully paid-up and no additional
premiums are due. The split dollar agreement and split dollar collateral
assignment to be entered into by the applicable trust and the Company shall be
in a form similar to the split-dollar agreement and collateral assignment
presently in effect and referenced in subdivision B of this subsection 3(c)(iv).
If the Executive, his wife and/or the applicable trustee or trust become subject
to income and/or gift tax under the Code and/or applicable state law by reason
of any premiums paid by the Company on said policies (whether paid directly to
the insurance carrier or indirectly to the Executive or to the applicable
trustee or trust) or with respect to the amounts of the PS 58 and/or PS 38 (or
successor promulgations) values applicable to each policy and on any other
amounts taxable to the Executive, his wife or the applicable trustee or trust,
emanating from such arrangement, the Company shall pay such tax and fully
reimburse on an after-tax basis the Executive, his wife or the applicable trust,
as the case may be, therefor. Provided that the gift tax referenced in this
subdivision A shall be the gift taxes to which the Executive, his wife and/or
the applicable trustee or trust become subject which emanate from the
arrangements contemplated in this subdivision A of this subsection 3(c)(iv).
B. Heretofore the Executive and the
Company have entered into a so-called split dollar insurance arrangement
pursuant to which both second to die and first to die insurance on the lives of
the Executive and his wife Xxxxxx Xxx were effected with insurance carriers. The
insurance was applied for and the policies are owned by and the beneficiary of
the policies is the trustee of a trust created by the Executive, as grantor. The
principal amount of insurance is such that on the death of the second to die of
the Executive and his said wife there will be paid over to the said Trustee not
less than the sum of $18,600,000. The aforesaid split-dollar insurance
arrangement and policies of insurance were effected to replace a pension payment
to Executive provided for in the Prior Agreement. In contemplation of the
execution of this Agreement and in further consideration therefor and to induce
Executive to accept this Agreement without any express provision providing for a
pension created expressly for Executive (other than the form of pension made
available to certain other employees of the Company), the Executive (and/or a
trust created by Executive) and the Company shall put into place and effectuate
promptly after the execution of this Agreement but in no event later than 60
days immediately following the date of this Agreement, an additional split
dollar insurance arrangement utilizing both first to die and second to die
policies of insurance on the lives of the Executive and his wife Xxxxxx Xxx with
companies licensed to underwrite such insurance in the State of Connecticut
which will provide that on the death of the second to die of said individuals a
payment of not less than $7,500,000 shall be made to the aforesaid Trustee or to
a trustee of a trust concurrently being created by the Executive as grantor
thereof. The arrangements for this additional split dollar life insurance shall
be similar to that entered into for the aforementioned split dollar arrangement
referenced in this subdivision B, including but not limited to payment of all
premiums by the Company (but with the understanding and agreement that the
policy or policies of insurance shall be fully paid up and all premiums paid on
or before the termination of this Agreement). To the extent, if any, that the
Executive, his wife and/or the applicable trustee or trust become subject to
income and/or gift tax by reason of any premiums paid by the Company on the
applicable policy or policies of insurance (whether paid directly to the
insurance carrier or indirectly to the Executive or the applicable trustee or
trust) or with respect to the PS 58 and/or PS 38 (or successor promulgations)
values applicable to each policy and on any other amounts taxable to the
Executive, his wife or the applicable trustee or trust emanating from said
arrangement, the Company shall pay such tax and fully reimburse on an after-tax
basis the Executive, his wife or the applicable trustee or trust, as the case
may be, therefor. Provided that the gift tax referenced in this subdivision B
shall be the gift taxes to which the Executive, his wife and/or the applicable
trustee or trust become subject which emanate from the arrangements contemplated
in this subdivision B of this subsection 3(c)(iv).
C. Additionally, the Executive and his
wife shall each be entitled to coverage in the amount of $1,000,000 under the
Company's paid Business Travel Accident Insurance Plan during the period of
Executive's employment hereunder and thereafter when traveling on Company
matters, with the beneficiary or beneficiaries to be designated by Executive and
his wife respectively.
The provisions of this subdivision (iv) are subject to the
provisions of Section 9(c) B.
(v) Payments and Distributions under
Compensation and Benefit Plans. Any provision in the 401(k) Plan and the IDCP
Plan to the contrary notwithstanding (subject, however, to the provisions of
Section 7 and provided, with respect to the 401(k) Plan, that same does not
result in the disqualification of such plan as a Qualified Plan under the Code),
payments will be made to the Executive of the entire balances in his accounts
under the IDCP and the 401(k) Plan on the date of termination of employment of
the Executive for whatever reason or as soon as practicable thereafter in the
instance of the 401(k) Plan, or if the Executive shall designate a later date or
later dates for any of said payments, on such later date or dates.
(vi) Nonforfeitability. Subject to the
provisions of Section 7, the Executive's benefits under any Plan which does not
expressly provide for non-forfeitability of benefits, for any reason, and/or
Executive's benefits under the provisions of this Agreement, shall not be
subject to forfeiture except as expressly provided for in Section 5(b),
notwithstanding any provision to the contrary in such plan for forfeiture or
divestiture of benefits or compensation.
(d) Expenses, Tax and Other Services.
(i) The Company will promptly pay or,
if not paid, reimburse Executive upon reasonable substantiation for, all
expenses, including without limitation, travel and business entertainment
expenses, incurred by Executive on behalf of or in connection with the conduct
of the business of the Company. In connection with the rendition and performance
of Executive's services, the Company shall provide Executive with the use of,
and shall pay all costs of maintenance and repair of, an automobile of
Executive's choosing, and a driver.
(ii) To enable the Executive to render
the most effective services practicable and to facilitate appropriate financial
planning, and consistent with the Company's prior practice with respect to the
Company's two immediately preceding Chief Executive Officers, the Company shall
reimburse the Executive for costs incurred by him for tax, financial,
investment, estate planning and other professional advice and services,
including legal and accounting services, which may be rendered or incurred at
any time during the Term, up to a maximum of $50,000 per year. Such payments
shall be made on the Executive's requests therefor as such costs are incurred by
him, and any of the $50,000 available for any year which is not utilized by
Executive, may be carried over and shall be available for utilization by
Executive in other years of the Term.
(e) Accoutrements of Office. Executive shall
also be entitled to all accoutrements of office that are currently being made
available by the Company to the Executive and such additional accoutrements of
office that are generally made available to chief executive officers of publicly
held companies of the size of the Company, including without limitation an
office, office furnishings, secretaries, and support and other personnel and
assistance, transportation and any and all other services and facilities made
available to Executive's immediate predecessor in office.
(f) Vacation. Executive shall be entitled to a
vacation of six weeks during each year of the Term, at times mutually agreeable
to Executive and the Company. All payments and benefits to Executive shall be
paid and continue during all vacation periods.
(g) Place and Time for Services. Executive's
base of operations shall be Fairfield County, CT (the "Base Area"), although
Executive, at his election, may render his services from other locations.
However, Executive shall not be required to render his services on a permanent
or other than a temporary basis outside of the Base Area. Executive agrees,
nevertheless, from time-to-time, to take such trips and travel outside said area
as may reasonably be necessary in connection with his duties. In the event any
trip or the contemplated duration of any trip by the Executive outside of the
Base Area is more than two days, Executive's wife may accompany Executive and
the costs and expenses incident to the Executive's wife shall be paid for or
reimbursed by the Company. First class travel and deluxe lodging arrangements
shall be made available to the Executive.
4. Additional Payments. Nothing in Section 3 or any other
provision of this Agreement shall preclude increases in Executive's
compensation, including without limitation, additional benefits, bonuses,
incentive awards and other payments or benefits as the Board of Directors or
appropriate committee of the Board of Directors of the Company may approve, in
its sole discretion, all of which payments and benefits are expressly
authorized.
5. Exclusivity.
(a) Other Relationships. The Company acknowledges
that Executive presently acts, performs and renders services as Chairman of the
Board, chief executive officer and chief financial officer and as a member of
the Board of Directors of Century Communications Corp., a New Jersey corporation
("Century") and as chief executive or other officer and/or as a member of the
Board of Directors of Century's various subsidiaries and certain affiliated
companies of Century. (Such subsidiaries and affiliated companies are deemed
included within the meaning of "Century").
The Company agrees
(i) that Executive may continue to render
and perform such services for Century and retain such offices, directorships or
other offices in Century and any future subsidiaries or affiliated companies of
Century and (ii) the Company shall make no claim of any nature against Executive
or his legal representatives by reason of any such employment by or association
with Century. Additionally, subject to the provisions of Section 5(b) (with
respect to Executive engaging in competition materially detrimental to the
Company), and without the necessity of seeking approval of the Board of
Directors of the Company, Executive may serve as a member of the board of
directors, officer, partner or stockholder, or in any other similar position or
capacity or provide services for any company, firm, person other than the
Company (which shall be deemed to include all subsidiaries and all affiliates of
the Company) and other than Century, concurrently with and after his employment
under this Agreement, and further may engage in the management of his own
affairs concurrently with his employment hereunder and thereafter. Executive
shall retain for his account any and all compensation and other benefits payable
to him with respect to services rendered to or for Century or to or for such
other entities.
(b) Additional Obligations. All payments and
benefits to the Executive under this Agreement, other than those referenced in
Sections 3(b) through 3(c) and Section 6 (the "Excluded Payments") during this
period of his employment with the Company, shall be subject to the following
provisions of this Section 5(b). Subject to the provisions of Sections 5(a) and,
without limitation, excluding any employment or association with Century, if
during the Term, the Executive, without the written consent of the Company,
shall knowingly engage in competition with the Company which is materially
detrimental to the Company and its subsidiaries taken as a whole, the
Executive's rights to such payments or benefits (other than the "Excluded
Payments") in the future shall terminate, and the Company's obligations to make
such payments and provide such benefits shall cease; provided, however, that the
Executive shall not be deemed to have knowingly engaged in such competition
unless and until the Executive shall have received written notice, on behalf of
the Board of Directors of the Company, from an independent consultant selected
by those Directors who are not employees of the Company, specifying the conduct
alleged to constitute such competition, and the Executive has thereafter
continued to engage in such conduct after a reasonable opportunity and a
reasonable period, (but in no event less than 60 or more than 120 days) after
receipt of such notice to refrain from such conduct. In the event of
discontinuance by the Executive, he shall not be or be deemed to be in violation
of the provisions of this Section 5(b). Additionally, and without limitation,
Executive shall have the right to contest in appropriate forums the
determination of the independent consultant. In no event shall the Executive be
under any obligation to repay to the Company any amounts theretofore paid to
him. Notwithstanding and without limitation of the foregoing, it is agreed that
ownership by Executive and/or his wife of an interest in a publicly traded
entity that is competitive to the Company and its subsidiaries, taken as a
whole, without the rendition by the Executive of senior management services,
shall not be deemed to be engagement in competition. The provisions of this
Section shall constitute the sole contractual provisions between the Executive
and the Company restricting the activities or conduct of the Executive or
governing any forfeiture or divesting of entitlements or benefits. Any similar
provisions in any Plan, or any other Company benefit plan, or elsewhere, shall
terminate and be deemed terminated and be unenforceable to the extent
inconsistent with or more burdensome to Executive than this Section, subject to
the limitations of Section 7 of this Agreement.
6. Advisory Term.
(a) Advisory Services.
(i) General. The Executive shall render
the advisory services described in this Section 6(a) as an advisor-consultant of
the Company for the period commencing immediately upon (A) the scheduled
expiration of the Term, or (B) the prior termination of employment under this
Agreement by the giving of notice by the Executive pursuant to Sections
10(a)(ii) which notice does not include notice of cancellation by Executive of
the Advisory Period, or (C) the prior termination of employment under this
Agreement by Executive by the giving of notice pursuant to Section 10(a)(iii)
which does not include notice of cancellation by Executive of the Advisory
Period. The Advisory Period shall continue through the fifth anniversary of the
commencement date thereof (the "Advisory Period"); with the understanding that
in the event termination is effected pursuant to Section 10(a)(iii), as a
pre-requisite to the commencement of the Advisory Period the Executive shall
certify or represent that he is physically and mentally capable of rendering the
advisory services delineated in the next succeeding sentence, notwithstanding
but subject to the illness or disability referenced in Section 10(a)(iii).
During the Advisory Period, the Executive will provide such advisory services
concerning the business, affairs and management of the Company as may reasonably
be requested by the Board of Directors of the Company, but shall not be required
to devote more than 30 hours each month to such services, which shall be
performed at a time or times and at places which are mutually convenient to both
parties and which are consistent with the Executive's other employment and
private activities. Services may be performed via telephone. The Executive may
engage in other full time employment during the Advisory Period, provided that
during the Advisory Period the Executive shall not engage in full time
employment that is in materially detrimental competition with the Company or any
of its subsidiaries or affiliates (as provided for in Section 5(b)), it being
agreed without limitation that employment by Century or the rendition of
services for or to Century is not and shall not be deemed in competition with
the Company or any of its subsidiaries or affiliates. During the first year of
the Advisory Period, the Executive shall be entitled to receive a payment in an
amount equal to 50% of Executive's Base Salary for the 12-month period of the
Term immediately preceding expiration or termination of employment under this
Agreement, and during each subsequent year of the Advisory Period, the Executive
shall be entitled to receive 110% of the amount due and/or paid to the Executive
pursuant to this sentence during the immediately preceding year of the Advisory
Period. Such payments are referred to as the Advisory Payments. Provided,
however, that in the event this Agreement is terminated by death or Permanent
Incapacity of Executive, as hereafter defined, or without "good cause", as
hereafter defined, the Company shall pay to Executive or his legal
representatives (as provided in Sections 9 and 10) and without limitation of any
of Executive's other rights and remedies, a lump sum payment equal to the
commuted value of the Advisory Payments for the entire or balance of the
Advisory Period, as the case may be, determined in accordance with Section 13
hereof.
(ii) Termination. Notwithstanding the
foregoing, coincident with, or at any time after, the commencement of the
Advisory Period, the Executive, on notice to the Company may terminate the
Advisory Period and not be required to render any additional advisory services,
and have no further obligations to the Company in the event such notice is based
on the advice or recommendation of Executive's physician(s) or other medical
and/or mental health practitioner(s) that continued rendering of his services
and acting as an advisor-consultant might have an adverse effect on the
Executive's physical or mental health (a "Disability Notice"). In the instance
of such termination, in addition to any other rights and payments, Executive and
his wife may have or be entitled to under this Agreement, Executive shall
receive and the Company shall pay Executive an amount equal to the present
commuted value determined pursuant to Section 13 of Advisory Payments for the
remaining balance of the Advisory Period. Additionally the Executive may
terminate services during the Advisory Period by giving notice to the Company
similar to the type of notice provided for in Section 10(a)(ii), in which case
Executive shall be entitled to receive in addition to any other rights and
payments Executive and his wife may be entitled to under this Agreement, the
payments and benefits set forth in Section 9(d).
(b) Other Matters. During the Advisory Period
and for such further period as may be mutually agreed (in the event that
subsequent to the end of the Advisory Period there should then be a business
relationship between the Company and the Executive), the Company at its expense
shall provide Executive with and maintain in good repair and condition, an
appropriate private office outside the Company's offices (taking into account
the position held by the Executive and his length of service and contribution to
the growth and development of the Company) at a location acceptable to the
Executive, appropriate office furnishings, all utilities, equipment, parking
privileges, office and secretarial assistants and other amenities and
accoutrements of office (all of which are referred to as "Advisory Support"), it
being understood and agreed that such Advisory Support is to be and is being
provided for the Company's benefit, and provided, however, that until the
Executive's new office is ready (it being agreed that same will be ready no
later than 90 days immediately succeeding commencement of the Advisory Period),
the Company shall provide Executive with and maintain in good repair and
condition an appropriate temporary private office together with office and
secretarial assistants and other services which were available to Executive when
acting as chief executive officer. The Advisory Support shall be equivalent to
that provided to the Executive currently at the Company's headquarters, as same
may be augmented during the Term. The Company shall be responsible for the
hiring, employment by the Company and compensation, including benefits, of the
personnel forming part of the Advisory Support and for all required moving and
relocation expenses. In lieu of the Company providing the Exective with
Advisory Support, as aforesaid at the Company's expense, the Exective at his
option may elect to make other arrangements for himself at any time during
which the Company is obligated to provide the same and to receive from the
Company for each twelve month period during the Advisory Period, or the
remaining term thereof, as the case may be, a payment of $90,000, increased
by the increase in the Consumer Price Index as defined in Section 12 from the
date hereof to the first day of the applicable twelve month period for each
twelve-month period following such election, payable in full on the date
specified in said election, and annualized in the event that the final period
within the Advisory Period is less than twelve months. If Executive is
provided, and avails himself, at no cost to himself, of an office and
secretarial and and office administrative support equivalent to Advisory
Support, by any other business entity from which office he renders services as
advisor or consultant, the Company shall not be required to provide compensation
(or payments in lieu thereof) for such office and support for the period of his
use of the office under these circumstances.
7. Waivers; Limitations of Law. The Company shall make such
waivers, amendments to Plans or consents under Plans, or amendments and consents
in connection with other benefits provided for herein, as may be necessary to
carry out the intent of Sections 3(b) and 3(c). However, in no event shall the
Company or any Plan take any action which would (A) contravene applicable law,
(B) bring about the disqualification of any Plan under the Code of any Plan
presently so qualified under the Code, or (C) eliminate any exception from
liability under Section 16(b) of the Securities Exchange Act of 1934 for any
director or officer subject thereto. If, by reason of any matter referred to in
this Section, any action cannot be undertaken at the time at which it is
expected, requested or proposed by the Executive, it (or as much thereof as
shall be permissible) shall be undertaken at the earliest time possible
thereafter, or in the case of a request for deferred payment, at the time
closest to that requested which is permissible without contravening this
Section. To the extent that benefits under a Plan or other benefits or payments
provided for herein would be lost to the Executive permanently or for any period
of time by reason of this Section, the Company shall provide such benefits
supplementarily outside such Plan or in an alternative form within the Plan
which will not disqualify the Plan.
8. Continued Availability of Benefits after Retirement. The
payments provided under this Agreement for the Executive are not intended to
limit or eliminate any benefits to which the Executive (or, after his death, his
beneficiaries or estate) or his wife is or may be or become entitled under any
of the Plans. Subsequent to the period of his employment under this Agreement
(whatever the cause or basis for any termination may have been) and during the
lifetime of the Executive and the lifetime of his wife, the Executive and/or his
wife shall be eligible to receive all benefits (or their equivalents or
counterparts) which he and his wife now enjoy or for which he or his wife are or
may become eligible (whether or not retired key employees or their spouses would
otherwise be eligible therefor) under the Plans of the Company and its
subsidiaries. The coverage of the Executive and his wife under the health,
hospital, medical and similar Plans, shall continue to be maintained, until the
last covered person has died, at no less than the benefit levels applicable on
the retirement date of the Executive or the termination or expiration of the
Term. No amendment to any Plan shall be carried out which shall deprive the
Executive or his wife from continuing to participate in and receive the
aforesaid benefits and all other benefits provided for in this Agreement, unless
the Executive or his wife is compensated by supplemental payments outside said
Plan so that he or she is in no way prejudiced by any such Plan amendment.
Additionally, after expiration of the Term and/or the Advisory Period, or prior
termination of employment or services rendered by the Executive either by the
Company or by the Executive, for any reason, the life insurance coverage and
entitlement of the Executive and his wife shall be continued at the level of
coverage set forth in Section 3(c)(iv) as provided for in said Section (whether
by payment of premium or as otherwise provided for in Section 3(c)(iv)) until
his death and if applicable, until the last to die of the Executive and his
wife, in all cases without diminution of any of the Company's obligations under
Section 3(c)(iv). The Executive may convert such insurance arrangements into new
or different insurance coverages or substitute different insurance arrangements,
as he shall determine from time to time, and also may extend coverage to his
wife and extend the period to include her lifetime; provided, however, that if
the Executive should elect to make any such different arrangements, the total
cost on an actuarial basis of the insurance coverage which shall be borne or be
expected to be borne by the Company shall not exceed the cost to the Company on
an actuarial basis of maintaining (for the remainder of the Executive's life and
if applicable, that of Executive's wife) the level of life insurance coverage to
which the Executive is entitled as described above. Such costs on an actuarial
basis shall be determined as provided in Section 13 hereof. The implementation
of this paragraph shall be subject to the provisions set forth in paragraph 7
hereof.
9. Termination by Company; Death.
(a) Death or Termination for Good Cause. The
death of the Executive shall constitute a termination of employment during the
Term and advisory services during the Advisory Period. Additionally, the Company
shall have the right to terminate employment during the Term or services during
the Advisory Period only under the following circumstances:
(i) Upon notice from Company to Executive
in the event of an illness or other disability which has incapacitated
Executive from performing his duties for twelve consecutive months
("Permanent Incapacity").
(ii) For "good cause" upon notice from
Company. Termination by Company of Executive's employment for "good
cause" as used in this Agreement shall be limited to (A) chronic
alcoholism or chronic drug addiction materially and injuriously
affecting the Executive's performance, (B)willful malfeasance by
Executive, consisting of his refusal without proper cause to perform
his duties of chief executive officer under this Agreement which
refusal has a materially injurious effect on the Company's business,
(C) Executive's conviction of a felony involving moral turpitude and
related directly to the conduct of Executive's office (which
through lapse of time or otherwise, is not subject to appeal) or
(D) knowingly engaging in and not thereafter refraining from
competition as provided for in Section 5(b); provided, however, that
such termination shall be effected only by written notice thereof
delivered by the Company to the Executive specifying in detail the
basis for termination, and shall be effective as of the date which is
30 business days after receipt of such notice by the Executive;
provided further, however, that if (i) such termination is by reason of
Executive's willful malfeasance without proper cause to perform his
duties as chief executive officer under this Agreement, and (ii) within
30 days following the date of receipt of such notice Executive shall
cease his refusal and shall use his reasonable efforts to perform such
obligations, the termination shall not be effective. Without
limitation, Executive shall have the right to contest or challenge in
appropriate forums any termination for "good cause".
(b) Consequences of Termination under Section 9(a).
If this Agreement is terminated pursuant to Section 9(a) above, Executive's
rights and Company's obligations hereunder shall forthwith terminate except as
expressly provided in this Agreement. In the event the Company does not exercise
its right of termination under Section 9(a)(i) or 9(a)(ii), all of the payments
and benefits due or to become due to Executive, and/or his wife and/or his
designated beneficiaries or legal representatives shall continue to be made and
accrue as if and to the same extent that Executive was fully performing his
obligations hereunder.
(c) Consequences of Termination under Section 9(a)
(i). If this Agreement is terminated by reason of death of the Executive or
pursuant to Section 9(a)(i) hereof, Executive or his designated beneficiary or
beneficiaries or legal representatives, as the case may be, shall be entitled to
receive the following:
A.The then present commuted value,
determined pursuant to Section 13, of the aggregate of (i) 100% of
Executive's Base Salary accrued to date of termination, and 150% of the
Executive's Base Salary for the balance of the Term, without obligation
of the Executive to provide any of the services provided for in
Section 1 for said balance of the Term, (ii) 100% of Executive's
Advisory Payments for the full term of the Advisory Period (or if such
death occurs during the Advisory Period for the balance of the
Advisory Period) without obligation of the Executive to provide any
of the services set forth in Section 6(a); (iii) 100% of the amount in
Executive's account in the IDCP and in the 401(k) Plan together with
such additional amount that would be in such Plan for the benefit of
Executive had this Agreement not been terminated by the Company and
Executive rendered his services during the balance of the Term;
(iv) 100% of all monies, shares and options in or allocated to
Executive's account in the ESOP and in all other Plans, all fully
vested and without restrictions of any kind; (v)100% of all options
and shares which are in the Executive's account in the EIP (other than
the 500,000 shares referred to in Section 3(b)which are governed
by Section 3(b)); and (vi) a bonus for each year or the fraction
thereof for the remainder of the Term based on the average amount of
the bonuses paid immediately preceding death;
X.Xx the instance of termination by reason
of death subsequent to the death of his wife, the proceeds of the
policy or policies of life insurance referenced in Section 3(c)(iv),
subject to the terms of the split dollar arrangements referenced in
said section, relating to the $6,000,000 and $7,500,000 of insurance,
and, in the instance of termination by reason of death prior to the
death of his wife, or under Section 9(a)(i), a fully paid up policy
or policies of life insurance in the principal amounts set forth in
Section 3(c)(iv); and
C.Continued participation for Executive and
his wife during their respective lifetimes in all health, medical and
hospital plans of the Company made available for senior employees,
with the Company paying all premiums and charges in connection
therewith with the understanding and agreement that in the event
such continued participation is not permitted or available under one
or more of said plans, the services and benefits provided in such
plan or plans shall be made available by the Company to and for
Executive and his wife, at the Company's cost, outside of such plans.
(d) Consequences of Termination under 9(a)(ii).
If Executive's employment or services are terminated pursuant to Section
9(a)(ii), or terminated as provided in the last sentence of Section 6(a)(ii),
Executive shall be entitled to receive the following:
A. The present commuted value determined
pursuant to Section 13, as of the date of termination of (i)100% of the
amount in Executive's account in the IDCP and 401(k) Plan, (ii) 100%
of all monies in Executive's account in the ESOP and in all other
Plans, (iii)100% of all options and shares which are in the Executive's
account in the EIP(other than the 500,000 shares referred to in Section
3(b) which are governed by Section 3(b)) and which are fully vested as
of the date of termination, (iv) Base Salary for services rendered
through the date of termination, and (v), in the event of termination
of services during the Advisory Period, Advisory Payments for
services rendered through the date of termination;
B. Fully paid-up policy or policies of life
insurance in the principal amounts set forth in Section 3(c)(iv); and
C. If the Executive is employed as chief
executive officer on December 31 of a fiscal year or is otherwise
a covered employee for purposes of Section 162(m) of the Code for
such fiscal year, payment of the Executive's account in the ESOP and
all other deferred benefit Plans shall be made in the next succeeding
fiscal year.
(e) Challenge or Contest. Without limitation on
his rights and remedies,Executive shall have the right to challenge or contest
any termination by the Company pursuant to Section 9(a)(i) or 9(a)(ii) by
appropriate legal action, before any court and to obtain damages from the
Company (including without limitation, legal fees and expenses) and in addition
thereto the payments, proceeds and participations set forth in Section 9(c) if
and to the extent that such termination is determined by final non-appealable
court order of a court having jurisdiction to have been wrongful. Failure of
such court order to find that the Company terminated employment under this
Agreement for "good cause" as defined, shall be deemed to be a determination
that the termination by the Company was wrongful.
(f) No Reduction. Nothing in this Section 9
shall adversely affect the rights of the Executive or his wife under Sections 6
and 8, which shall survive termination of employment and services hereunder, or
reduce or diminish the number of Restricted Shares to which Executive is
entitled pursuant to Section 3(b) and such number of shares shall only be
reduced or diminished as expressly provided in said Section 3(b).
10. Termination by Executive and Wrongful Termination
by the Company.
(a) Termination by Executive. The Executive
shall have the right, exercisable by notice to the Company, to terminate
services during the Term, the Advisory Period and this Agreement (i) effective
30 days after the giving of such notice, if, at any time during the Term or the
Advisory Period, the Company shall be in material breach of any of its
obligations hereunder, provided that services during the Term or the Advisory
Period, or this Agreement, shall not so terminate if within such thirty-day
period the Company shall have cured all such material breaches of its
obligations hereunder; or (ii) after this Agreement has been in effect for 25 or
more months after December 31, 1996, at any time, in Executive's option and
discretion, effective no less than 30 days after the giving of notice of
termination, which notice may be given at any time on or after January 1, 1999;
or (iii) effective 30 days after the giving of notice in the instance of an
illness or disability to Executive which is not a Permanent Incapacity under
Section 9(a)(i), and the Executive's physician(s) or other medical and/or mental
health practitioner(s) advise or recommend that the continuance of Executive in
his employment with the Company would or might have an adverse effect on
Executive's physical or mental health. If, within 30 days after receiving notice
from the Executive pursuant to Section 10(a)(iii), the Company shall give notice
to the Executive that the Company wishes the Executive to continue to remain as
chief executive of the Company notwithstanding such illness or disability with
the Executive only being required to render services subject to the limitations
and restrictions of such illness or disability and without diminution of
compensation and benefits, the effectiveness of the notice of termination of
employment given by the Executive shall be postponed for a period, designated by
the Company in its notice but not in excess of four months, at the end of which
the Executive shall reconsider his notice of termination in light of the
condition of his illness or disability at that time, provided that, if the
Executive shall give further notice of termination at the end of such period,
termination of employment shall occur 10 days after the giving of such notice.
The parties acknowledge and agree that a material breach for purposes of this
Section 10 shall include, but not be limited to (i) failure of Executive to be
elected or retained as Chairman of the Board and Chief Executive Officer of the
Company or the failure of the Company to cause Executive to so serve in such
positions, (ii) a reduction by the Board of Directors (other than an incidental
or immaterial reduction) in the Executive's authority, functions, duties or
responsibilities provided in Section 1 (whether or not accompanied by a change
in title) which has not been fully corrected within the 30-day period
immediately succeeding the giving of notice thereof to the Company, (iii) the
Company's requirement that all persons and personnel (or causing all persons or
personnel to) report directly or indirectly to other than Executive or (iv) the
Company's failure to cause Executive to be the senior officer of the Company.
(b) Certain Consequences. In the event of
termination by the Executive in accordance with the foregoing procedures or in
the event of the termination of this Agreement or employment or advisory
services by the Company in breach of any of its obligations under this
Agreement, or by the Executive by reason of such breach by the Company, the
following provisions shall apply:
(i) The Executive shall have no further
obligations or liabilities to the Company whatsoever which shall
survive such termination, except as set forth in Section 6.
(ii) In the event of termination
occasioned by breach by the Company, then on the date of such
termination, the Company shall pay as damages in a lump sum, the sum
of $1,000,000 plus the monies, shares and options set forth and
enumerated in Section 9(c)A, and there shall be paid over to Executive
and additionally he shall be entitled to receive, the
benefits set forth in Sections 9(c) B and C. In this connection, the
payment and benefit pursuant to Section 9(c)B shall be the same as the
payment and benefit provided in the instance of termination under
9(a)(i).
(iii) In the event of termination of
employment or termination of advisory services under this Agreement
by Executive at his option pursuant to Section 10(a)(ii) (but not
under Section 10(a)(iii)) after this Agreement has been in effect
for twenty-five months, then on the date of termination the Company
shall pay to Executive and Executive shall be entitled to receive
the payments and benefits provided for in Section 9(d). Provided
that in the event the Executive commences rendering advisory
services and thereafter terminates the Advisory Period by a
Disability Notice in accordance with the provisions of
Section 6(a), Executive shall receive and the Company shall pay the
Executive the amount equal to the Advisory Payments for the balance of
the Advisory Period.
(iv) In the event of termination by the
Executive pursuant to Section 10(a)(iii), then on the date of
termination, the Company shall pay to Executive and Executive shall
be entitled to receive the payments and benefits provided for in
Section 9(c) in the instance of termination under Section 9(a)(i),
with the understanding that the Advisory Payments shall only be
included in such payments in the event the Executive does not make
the certification or representation referenced in Section 6(a) and
does not commence rendering, or continue the
rendering of, advisory services, provided that in the event the
Executive commences rendering, advisory services and thereafter
terminates the Advisory Period by a Disability Notice in accordance
with the provisions of Section 6(a), Executive shall receive and the
Company shall pay the Executive the amount equal to the then present
commuted value of the Advisory Payments computed in accordance with
Section 13 for the balance of the Advisory Period, in addition, but
without duplication, to the payments provided for in the first four
lines of this subdivision (iv) ending with the words "Section 9(a)(i)".
(c) Vested Rights not Affected. Any termination
under Section 10(a) shall not affect any vested rights which the Executive may
have at the effective date of such termination pursuant to any insurance or
other death benefit plans or arrangements of the Company or under any stock
option, stock appreciation right, bonus unit, management incentive or other plan
of the Company maintained for its senior executives not referenced in
Sections 9(c) A, B and C, 9(d) and Section 10(b), all of which rights shall
remain in full force and effect (and any period shall not be deemed shortened as
a result of the Executive's termination of employment, notwithstanding the
provisions of any related plan, agreement or certificate issued thereunder), nor
shall such termination affect the obligations of the Company to continue to
provide the Executive with the other benefits, support services, Advisory
Support, and other entitlement required to be provided to the Executive under
this Agreement.
(d) Mitigation. In the event of the termination
of this Agreement by the Executive pursuant to Section 10 or by reason of breach
by the Company of any of its obligations hereunder, or in the event of the
termination of this Agreement by the Company pursuant to Section 9(a)(i) or
other than pursuant to Section 9(a)(ii), the Executive shall not be required to
mitigate his damages hereunder and payments and benefits to be made in event of
termination under Section 10 or Section 9(a)(i) or by reason of breach by the
Company of any of its obligations hereunder or other than by reason of
Section 9 (a)(ii), shall not be limited or reduced by any amount Executive might
earn or be able to earn from other employment or ventures.
(e) Excess Parachute Payments. The parties
believe that the above payments or benefits pursuant to Section 10(b)(ii) do and
will not constitute "Excess Parachute Payments" under Section 280G of the Code.
Notwithstanding such belief, if any such payment or benefit under
Section 10(b)(ii) is determined by the United States Internal Revenue Service to
be an "Excess Parachute Payment" the Company shall pay Executive additional
amounts (the "Tax Payment") on a fully reimbursed after-tax basis equal to the
sum of excise tax under Section 4999 of the Code, income taxes under Subtitle A
of the Code and all other taxes under applicable state law on such Excess
Parachute Payments.
(f) Remedies. The Company recognizes and agrees
that because of Executive's special talents, stature and opportunities that the
provisions of this Agreement regarding further payments of Base Salary, Advisory
Payments and the other payments, the benefits as provided for in
Section 10(b)(ii), constitute fair and reasonable provisions for the
consequences of such termination and do not constitute a penalty.
(g) No Reduction. Nothing in this Section 10
shall adversely affect the rights of the Executive or his wife under Sections 6
and 8 or reduce or diminish the number of Restricted Shares to which Executive
is entitled pursuant to Section 3(b) and such number of shares shall only be
reduced or diminished as expressly provided for in said Section 3(b).
11. Indemnity, Directors' and Officers' Insurance.
(a) The Company agrees to and confirms its
obligations, among others, to indemnify the Executive as an officer, director,
employee and agent, and its related obligation to advance funds for expenses to
the Executive as contained in the Company's certificate of incorporation,
by-laws and any other instruments or provided for by law or otherwise. Such
obligations shall be in scope the greatest of (i) the obligations existing as of
the date hereof, (ii) the obligations as they may be amended or otherwise
revised in the future, or (iii) the maximum protection available for officers
and/or directors under applicable law. The Company agrees that it will use its
best efforts to the end that the By-laws and Certificate of Incorporation of the
Company shall not be amended to reduce any indemnity protection presently
available to officers and/or directors.
(b) The Company presently maintains Directors
and Officers Insurance in limits of $25,000,000. The Company agrees to maintain
Directors' and Officers' Insurance (at a minimum in such limit) covering the
Company's obligation, among other things, to indemnify the Executive for loss,
liability and expense resulting from litigation relating to his activities as an
officer, directors, employee or agent of the Company and insuring the Executive
against such loss, liability and expense, with coverage at least as high as the
insurance now maintained by the Company, and, following termination of
employment under this Agreement, to maintain equivalent coverage for the
executive, on an "occurrence" basis (or as a named former officer and director
on a "claims made" basis) or otherwise, for his activities during the Term and
Advisory Period and additionally while he is in the service of the Company.
12. Consumer Price Index.
(a) Whenever used herein the words "Consumer
Price Index" shall mean the New York-Northeastern New Jersey Area Consumer Price
Index for Urban Wage Earners and Clerical Workers (or if publication of that
index is terminated, any substantially equivalent successor thereto), as
published by the Bureau of Labor Statistics of the United States Department of
Labor or similar agency if such bureau is disbanded.
(b) If at any time that a computation based on
an increase in the Consumer Price Index for any specified period is required
under the terms of this Agreement and the appropriate percentage increase in the
Consumer Price Index is not yet available, the percentage increase will be
assumed to have been the same as the increase for the most recent period of the
specified duration for which information is available. If at any time a
computation is required to be made under this Agreement based on the Consumer
Price Index as of any date or month, the most recent Consumer Price Index which
is available on that date or at the end of such month shall be used.
(c) In comparing Consumer Price Indexes the same
lag time or procedure to reflect a delay in the availability of information will
be used for each. In the case of any adjustment or corrections in the Consumer
Price Index appropriate payments or credits between the Company and the
Executive shall be reflected in the first monthly payment after current or
corrected information becomes available.
13. Determination of Benefits. Whenever under this Agreement
it is necessary to determine actuarially equivalent continuing benefits, or
whether one benefit, cost or payment is less than, equal to or larger than
another (whether or not such benefit, cost or payment is provided under this
Agreement), or to make any determination or calculation specifically designated
in this Agreement to be made in accordance with this paragraph 13, or the
present or commuted value of payment or payments to be made in the future or
over a period of time, or whenever either party hereto requests that any
calculation relevant to this Agreement be made or a procedure for a calculation
be established or the accuracy of a calculation be checked, such determination,
calculation or procedure shall be made by an independent actuary acceptable to
the Executive and the Company, using when such information is needed the
mortality tables then currently in use for purposes of the Company's Pension
Plan (assuming 100% joint and survivor benefits), and the discount rate of 8%
per year.
14. Merger, Consolidation, or Sale of Assets or Stock. Nothing
in this Agreement shall preclude the Company from consolidating or merging into
or with, or transferring all or substantially all of its assets or capital stock
to, another corporation or business organization which expressly assumes in
writing this Agreement and all obligations and undertakings of the Company to
the Executive under this Agreement or any corporate instrument, by-law,
certificate of incorporation, benefit plan, program or practice, other corporate
undertaking, agreement or law. Upon such a consolidation, merger or transfer of
assets or stock and assumption, the term "Company" shall refer to such other
corporation or business organization, and this Agreement shall continue in full
force and effect, and such other corporation or business organization shall,
ipso facto, assume, in writing, this Agreement and all other obligations of the
Company contemplated by this Agreement. No such consolidation, merger or
transfer shall relieve the Company from any of the Company's obligations under
this Agreement without the written consent of the Executive or if Executive is
deceased or permanently incapacitated, of his surviving wife, or if surviving
wife is deceased or permanently incapacitated, the Executive's legal
representative.
15. Additional Option To Acquire Shares.
(a) In the event of a threatened or actual
Change in Control, as defined in Section 15(c) the Executive shall have the
right and option, exercisable by Executive in Executive's discretion, from time
to time during the period set forth below, by notice to the Company (the "Option
Notice") to acquire from the Company up to 6,000,000 shares, in the aggregate
(the precise number of shares to be determined by the Executive in his
discretion), of the Series A Common Stock or Series B Common Stock, or a
combination of Series A and Series B Common Stock, as the Executive may
determine, ("Common Stock") of the Company (adjusted as set forth in
Subsection (b)) at a price per share, to be paid by Executive, equal to the
Closing Price (as hereafter defined) of said stock on the date of the giving of
the Option Notice, or if such day is a Saturday, Sunday or Holiday, on the
immediately preceding business day on which securities are generally traded (the
"Applicable Date"). The Option Notice shall be given on or before the latest of
(i) the expiration date of the Term as set forth in Section 2, (ii) the
expiration date of any renewal or extension of this Agreement or any other
employment agreement between Executive and the Company (the "New Agreement") and
(iii) six months following the termination of Executive's Employment with the
Company subsequent to the Term or the term of any New Agreement. The Closing
Price shall be the last such reported sales price, regular way, on the
Applicable Date, or, in case no such reported sale takes place on such
particular day, the average of the closing bid and asked prices, regular way,
for such particular day, in each case on the principal national securities
exchange or in the NASDAQ-National Market System (the "Securities Exchange") on
which the shares of Series A Common Stock and/or Series B Common Stock, as the
case may be, are listed or admitted to trading or, if not listed or admitted to
trading, the average of the closing bid and asked prices of the Common Stock in
the over-the-counter market as reported by NASDAQ or any comparable system, as
adjusted pursuant to Subsection (b). Payment shall be made by the Executive
within ten business days following the giving of the Option Notice.
(b) The number of shares subject to the option
set forth in subsection (a) above, shall be adjusted to reflect, after the date
of this Agreement, any (i) declaration or payment of dividends in the form of
Series A Common Stock, Series B Common Stock or other common stock of the
Company, (ii) stock splits, (iii) subdivisions or combinations or
reclassifications of outstanding Series A or Series B Common Stock or (d) the
issuance to holders of Series A or Series B Common Stock of options, warrants or
rights to acquire additional shares of such respective series and any other
distribution made by its Company to holders of Series A Common Stock or Series B
Common Stock, as the case may be, and the Option Price shall be adjusted to
reflect all of the foregoing.
(c) A "Change in Control" of the Company shall
be deemed to occur when (A) any person or group of affiliated or related persons
(other than a group of which Executive or an entity controlled by Executive is a
participant and other than an employee benefit plan of the Company) acquires,
directly or indirectly, voting securities or assets of the Company if,
immediately after giving effect to such acquisition, such person or group of
affiliated or related persons either (i) beneficially owns 9% or more of the
total voting power of all of the Company's voting securities outstanding at the
time of such acquisition, or 9% or more than the fair market value of the
Company's issued and outstanding stock, or (ii) within the preceding 12-month
period acquired the voting power referenced in (i) above, or (iii) within the
preceding 12-month period acquired 20% or more of the assets of the Company, or
(iv) otherwise effectively controls the operations of the Company, whether by
control of its Board of Directors, by contract, or otherwise, or (B) a majority
of the members of the Board of Directors of the Company is replaced during the
preceding 12-month period by directors whose appointment or election was not
endorsed by the prior Board. Without limitation, a threatened Change in Control
shall be deemed to have occurred when any person or group of persons acquires
such ownership of securities of the Company that such person or group files or
is required to file Forms 13D and 13G or otherwise files or is required to make
a filing pursuant to Regulation 13d under the Securities and Exchange Act of
1934, as amended.
16. Miscellaneous.
(a) Decisions by Company. Except as otherwise
expressly provided in this Agreement, any decision, designation, consent or
other action by the Company relating to this Agreement, its operation or its
termination, shall be made by the Board of Directors, or at the direction of the
Board of Directors, when so requested by the Executive.
(b) Entire Agreement. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter hereof, and supersedes all prior agreements, arrangements and
understandings, written or oral, between the parties and may not be modified
except by an agreement signed by the Executive (and/or where applicable his
legal representatives and his wife) and the Company.
(c) Assignability. This Agreement, and the
Executive's rights and obligations hereunder, may not be assigned or delegated
by the Executive; provided, however, that nothing in this subsection (c) shall
preclude (i) the Executive from designating a beneficiary to receive any benefit
payable on his death, and (ii) the legal representatives of the estate of the
Executive or his wife from assigning any rights hereunder to the person or
persons entitled thereto under his or her will or, in case of intestacy, to the
person or persons entitled thereto under the laws of the intestacy. Except as
expressly provided for in Section 14, this Agreement and the Company's rights
and obligations hereunder, may not be assigned or delegated by the Company.
(d) No Attachment. Except as otherwise required
by law, no right to receive payments under this Agreement shall be subject to
encumbrance, charge, execution, attachment, levy or similar process or
assignment by operation of law, and any attempt voluntary/or involuntary, to
effect any such action shall be null, void and of no effect.
(e) Binding Agreement. This Agreement shall be
binding upon and inure of the benefit of the Executive and the Company and their
respective permitted successors and permitted assigns.
(f) No 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 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.
(g) Expenses and Legal Fees. The Company shall
pay all legal fees (which shall include without limitation, fees of tax advisors
and tax counsel and associated expenses and disbursements) incurred by Executive
in the negotiation and execution of this Agreement. Additionally, the Company
shall pay all legal fees of litigation, and other expenses incurred by the
Executive, his wife, or the estate, legal representative or other beneficiary of
either ("Claimant") (i) as a result of (A) the Company's refusal to make
payments or failure to make payments when due to which the Claimant or any
benefit plan, fund or agent is or shall become entitled under this Agreement, or
otherwise, (B) the refusal or failure of the Company to make provision for or
acknowledge any employee benefit to which the Claimant is or shall become
entitled as provided for by this Agreement or otherwise, or (C) the refusal or
failure or by any benefit plan, fund or agent established for the benefit of the
Company's employees to make any such payments when due or (ii) as a result of
the Company's contesting the validity, enforceability or interpretation of this
Agreement or any portion thereof.
(h) Right to Accelerate. Without limitation of
any rights of Executive to otherwise cause acceleration of any benefits or
monies due or to become due to Executive, his wife or their respective legal
representatives, if the Company or any of the benefit plans or funds referenced
herein shall fail to make, when due, any payment referred to in this Agreement
or shall refuse to make any such payment, or shall fail or refuse to make
provision for, any employee or other benefit to which the Claimant is entitled,
the Claimant may, at his, her or its option, accelerate and declare due, payable
and performable all such payments, provisions or entitlement, provided, however,
that such acceleration shall be effected only by written notice thereof
delivered by the Claimant to the Company specifying in detail the basis for
acceleration, and shall be effective as of the date which is 30 business days
after the receipt of such notice by the Company; provided further, however, that
if within 30 business days following the date of receipt of such notice the
Company shall make, when due, the payment in question or shall agree to make any
such payment when due, or shall make provision therefor, the acceleration shall
not be effective. If at any time the Claimant has the right to accelerate
payments under this Section, same shall be determined in accordance with the
provisions of Section 13 but incorporating, however, in said lump sum
calculation the average annual increase in the Consumer Price Index for the most
recent 36 months preceding the date on which said accelerated payment is to be
made. The Claimant may, but shall not be required to, bring one or more legal
actions to enforce payment, or other appropriate remedy, of any and all amounts
to which the Claimant has then become, or shall at any time in the future become
entitled, whether or not then due, payable or performable.
(i) Severability. If for any reason any
provision of this Agreement shall be held invalid, such invalidity shall not
affect any other provision of this Agreement not held invalid, and all other
such provisions shall to the full extent consistent with law continue in full
force and effect so as to carry out the intent of this Agreement. If any such
provision shall be held invalid in part, such invalidity shall in no way affect
the rest of such provision not held invalid, and the rest of such provision,
together with all other provisions of this Agreement, shall likewise to the full
extent consistent with law continue in full force and effect so as to carry out
the intent of this Agreement. In the event of any such invalidity, the parties
shall both endeavor and negotiate in, good faith, to agree upon substitute
provisions to effectuate the interest of the provisions held to be invalid.
(j) Headings. The headings of Sections are
included solely for convenience of reference and shall not control the meaning
or interpretation of any of the provisions of this Agreement.
(k) Governing Law. The Company being a Delaware
corporation, the validity, interpretation, performance and enforcement of this
Agreement shall be governed by the internal laws of the State of Delaware
applicable to agreements made and fully to be performed therein, without any
reference to any rules of conflicts of laws.
(l) Counterparts. This Agreement may be
executed in two or more counterparts, and such counterparts when taken together
shall constitute one executed instrument.
(m) Notices. All notices and other
communications hereunder shall be in writing and shall be deemed given (i) when
delivered personally, (ii) when transmitted by facsimile transmission to the
telecopy number set forth below (during normal business hours of the recipient
or the immediate succeeding business day), (iii) when mailed, on the second
business day immediately succeeding the mailing by registered or certified mail
(return receipt requested), postage prepaid, or (iv) when delivered by overnight
courier such as Federal Express, on the day delivered, addressed to the parties
at the following respective address (or at such other address for a party as
shall be specified by like notice, provided that notices of changes of address
shall be effective only upon receipt thereof):
(i) If to the Company at:
Xxxx Xxxxx Xxxx
Xxxxxxxx, XX 00000
Attn: Board of Directors
Telecopy Number: 000-000-0000
with a copy to the same address or telecopy number but Attention: Legal
Department, and to
Xxxxxxxx X. Xxxxxxxxx, Esq.
Winthrop, Stimson, Xxxxxx & Xxxxxxx
Xxx Xxxxxxx Xxxx Xxxxx
Xxx Xxxx, XX 00000-0000
Telecopy Number: 000-000-0000
(ii) If to Executive at:
000 Xxxxxxx Xxxxx Xxxx
Xxx Xxxxxx, XX 00000
with copy to:
Xxxxx X. Xxxxxxxxxx, Esq.
Xxxxx Xxxxxxxxxx & Xxxxx
00 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Telecopy Number: 000-000-0000
IN WITNESS WHEREOF, the parties hereto have signed their
names, all as of the date and year first above written.
CITIZENS UTILITIES COMPANY
By:
Its
Attest:
Xxxxxxx X. Xxxxx
Secretary of
Citizens Utilities Company
APPROVED: Xxxxxxx Xxx
Xxxxxxx Xxxxxxxxx
Xxxxxx X. Xxxxxxxx
Xxxxx Xxxxxxxx
Xxxxxxx X. Xxxxxxxxx
Xxxxxx X. Xxxxxxx (Chairman)
Members of the Compensation Committee
of the Board of Directors of Citizens
Utilities Company.
TABLE OF CONTENTS
Page
1. Employment; Duties. 3
2. Term. 4
3. Compensation, Expenses and Benefits. 5
(a) Base Salary. 5
(b) Stock Compensation. 5
(c) Benefits and Other Plans. 11
(i) Participation in Plans - Generally. 11
(ii) Vesting of Grants Under The Plans. 12
(iii) Vesting of Prior Grants. 12
(iv) Life and Accident Insurance. 13
(v) Payments and Distributions under Compensation and Benefit Plans. 16
(vi) Nonforfeitability. 17
(d) Expenses, Tax and Other Services. 17
(e) Accoutrements of Office. 18
(f) Vacation. 18
(g) Place and Time for Services. 18
4. Additional Payments. 19
5. Exclusivity. 19
(a) Other Relationships 19
(b) Additional Obligations. 20
6. Advisory Term 21
(a) Advisory Services 21
(i) General 22
(ii) Termination 23
(b) Other Matters. 24
7. Waivers; Limitations of Law. 25
8. Continued Availability of Benefits after Retirement. 26
9. Termination by Company; Death. 28
(a) Death or Termination for Good Cause 28
(b) Consequences of Termination under Section 9(a) 29
(c) Consequences of Termination under Section 9(a)(i) 29
(d) Consequences of Termination under 9(a)(ii) 31
(e) Challenge or Contest 32
(f) No Reduction 32
10. Termination by Executive and Wrongful Termination
by the Company 33
(a) Termination by Executive 33
(b) Certain Consequences 34
(c) Vested Rights not Affected 36
(d) Mitigation. 36
(e) Excess Parachute Payments. 37
(f) Remedies. 37
(g) No Reduction 37
11. Indemnity, Directors' and Officers' Insurance. 38
12. Consumer Price Index. 39
13. Determination of Benefits. 39
14. Merger, Consolidation, or Sale of Assets or Stock. 40
15. Additional Option To Acquire Shares. 41
16. Miscellaneous. 43
(a) Decisions by Company. 43
(b) Entire Agreement. 43
(c) Assignability. 44
(d) No Attachment. 44
(e) Binding Agreement. 44
(f) No Waiver. 44
(g) Expenses and Legal Fees. 45
(h) Right to Accelerate. 45
(i) Severability. 46
(j) Headings. 47
(k) Governing Law. 47
(l) Counterparts. 47
(m) Notices. 47
Agreement of Clarification
--------------------------
Under the date hereof we, the undersigned, Xxxxxxx Xxx (sometimes the
"Executive"), and Citizens Utilities Company ("Citizens") are entering into an
agreement of employment (the "Agreement") pursuant to which Citizens employs the
Executive as its chief executive for a period of four years commencing January
1, 1997, subject to prior termination as provided in the Agreement.
Section 3(b) of the Agreement provides for the grant to Executive of
500,000 shares of Citizens' Series A Common Stock, to be reduced under certain
circumstances if the applicable percentage increase in EBIDTA (as defined in the
Agreement) from fiscal year 1996 to the year of termination is not met, all as
provided for in the Agreement.
We are now mutually desirous of clarifying the determination of EBIDTA
as applied to earnings generated by the net proceeds available to Citizens from
the discontinuance, sale or other disposition of a Disposed Property, as defined
in the Agreement (the "Additional Proceeds"). As currently defined in the
Agreement such earnings are to be taken into account and included in determining
EBIDTA for an applicable year.
In the event either of the undersigned believes that such inclusion
will work an inequitable measurement of the increase in EBIDTA from the fiscal
year 1996 to the year of termination, such party (the "Notifying Party") within
20 days following the end of the first fiscal year of Citizens in which EBIDTA
includes earnings generated by the Additional Proceeds, shall notify the other
party (the "Receiving Party") of this position in writing (the "Notification")
and thereafter and within 20 days immediately following receipt of the
Notification by the Receiving Party, the parties shall meet and negotiate in
good faith the methodology pursuant to which the amount of earnings generated by
the Additional Proceeds are to be included in the determination of EBIDTA.If the
parties are unable to reach an agreement within 20 days following commencement
of the negotiation (the "Negotiation Period) the methodology to be utilized
shall be determined by arbitration in New York City by a panel of three
arbitrators, one chosen by the Notifying Party, one chosen by the Receiving
Party (the "Selected Arbitrators") and one chosen by the Selected Arbitrators.
The Selected Arbitrators shall be chosen within 10 days immediately succeeding
the end of the Negotiation Period and the third arbitrator shall be chosen by
the Selected Arbitrators within 10 days immediately succeeding the date when the
second of the Selected Arbitrators is chosen. In the event the American
Arbitration Association ("AAA") permits or authorizes its then obtaining rules,
other than the rules of the AAA relating to selection of arbitrators to be
utilized by the arbitrators, such rules of the AAA shall be utilized. In the
event the AAA does not authorize or permit such rules to be utilized by the
arbitrators, the arbitrators shall hold such hearings and adopt such procedures
as they may deem appropriate and which are in accordance with applicable law,
and have such authority that is available to arbitrators under applicable law.
The arbitrators shall complete their hearings proceedings within 30 days
immediately succeeding the designation of the third arbitrator and shall render
their decision (which may be by majority vote) within 30 days immediately
succeeding the completion of proceedings. The decision of the arbitrators shall
be final and binding as provided by applicable law.
In connection with the foregoing each of Executive and Citizens
acknowledges and agrees that it is his or its respective intention that the
manner of computing EBIDTA resulting from any discontinuance, sale or other
disposition of any Disposed Property, as defined in the Agreement, shall not
have any negative or detrimental effect or impact on attaining the specified
percentage increases in EBIDTA set forth in Section 3(b)(ii). In reaching a
decision the arbitrators are to take into account this intention of the parties.
In the event no Notification is given within said 20-day period, no
adjustment shall be made in determining EBIDTA and same shall be determined as
provided for in Section 3(3b)(ii) of the Agreement.
Additionally and consistent with the intent set forth in Section
3(c)(iv) of the Agreement, in the event the split-dollar arrangements referenced
therein result in income and/or gift tax on or being imposed, levied or assessed
against Executive, his wife and/or any of the trusts or the trustees referenced
in said section by reason of the Technical Advice Memorandum 9604001 issued by
the US Internal Revenue Service under date of September 8, 1995 (copy of which
is annexed) and rulings referenced therein, Citizens shall pay such taxes and
fully reimburse, on an after tax basis, the Executive, his wife or the
applicable trust and trustee, as the case may be.
By signing their respective names, hereto, the undersigned hereby agree
to the foregoing.
CITIZENS UTILITIES COMPANY
By: _________________________ ____________________________
Its Xxxxxxx Xxx
