EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between MarketSpan Corporation, a New York
Corporation (the "Company"), and Xxxxxx X. Xxxxxx (the "Executive"), dated as of
the 10th day of September, 1998.
WITNESSETH THAT
WHEREAS, the Company wishes to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in the
capacities and on the term and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. EMPLOYMENT PERIOD. The Company shall employ the Executive, and
the Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, for the period (the "Employment Period") beginning on July 31,
1998 and ending on July 31, 2003.
2. POSITION AND DUTIES.
(a) During the Employment Period, the Executive shall serve as
Chairman and Chief Executive Officer of the Company, and as a member of the
Board of Directors of the Company (the "Board").
(b) During the Employment Period, and excluding any period of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best effort to carry out such responsibilities faithfully
and efficiently. It shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic or charitable boards or
committees.
(c) The Executive's services shall be performed primarily at the
Company's headquarters in the five boroughs of New York City, or in Nassau,
Suffolk or Westchester Counties of New York, or such other location in which the
Company's headquarters is located.
3. COMPENSATION.
(a) BASE SALARY. During the Employment Period, the Executive shall
receive an annual base salary (the "Annual Base Salary") of not less than
$700,000, payable in accordance with the Company's regular payroll practice for
its senior executives, as in effect from time to time. During the Employment
Period, the Annual Base Salary shall be reviewed for
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possible increase at least annually. Any increase in the Annual Base Salary
shall not limit or reduce any other obligation of the Company under this
Agreement. The Annual Base Salary shall not be reduced after any such increase,
and the term "Annual Base Salary" shall thereafter refer to the Annual Base
Salary as so increased.
(b) INCENTIVE COMPENSATION. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans ("Annual
Incentive Compensation") and/or long-term incentive compensations plans
("Long-Term Incentive Compensation") providing him with the opportunity to earn,
on a year-by-year basis, short-term and long-term incentive compensation at
least equal to the amounts that he had the opportunity to earn under the
comparable plans of KeySpan Energy Corporation as in effect as of December 29,
1996.
(c) OTHER BENEFITS.
(i) The Executive shall be entitled to the benefits described in
Appendix A hereto (the "SERP").
(ii) During the Employment Period, the Company shall provide the
Executive with life insurance coverage (the "Life Insurance Coverage") providing
a death benefit to such beneficiary or beneficiaries as the Executive may
designate the amount provided to him as the Chief Executive Officer under the
Group Term Replacement Insurance Program (GRIP) of KeySpan Corporation or such
greater amount as may be provided under the GRIP Plan from time to time.
(iii) In addition, and without limiting the generality of the
foregoing, during the Employment Period and thereafter: (A) the Executive shall
be entitled to participate in all applicable incentive, savings and retirement
plans, practices, policies and programs of the Company to the same extent as
other senior executives (or, where applicable, retired senior executives) of the
Company; and (B) the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in, and shall receive all benefits
under, all applicable welfare benefit plans, practices, policies and programs
provided by the Company, other than severance plans, practices, policies and
programs but including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs, to the same
extent as other senior executives of the Company. After the Employment Period,
Executive shall be entitled to participate in all plans applicable to retired
senior executives of the Company.
(d) PERQUISITES. During the Employment Period, the Executive shall
be entitled to receive perquisites on the same terms and conditions as those he
received from KeySpan Energy Corporation immediately before the Effective Time.
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4. TERMINATION OF EMPLOYMENT.
(a) DEATH OR DISABILITY. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period. The
Company shall be entitled to terminate the Executive's employment because of the
Executive's Disability during the Employment Period. "Disability" means that (i)
the Executive has been unable, for a period of one hundred eighty (180)
consecutive business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties before the Disability
Effective Date.
(b) BY THE COMPANY.
(i) The Company may terminate the Executive's employment during the
Employment Period for Cause or without Cause. "Cause" means conviction of the
Executive of a felony under the laws of New York or gross misconduct, which is
willful and results in material and demonstrable damage to the business or
reputation of the Company. No act or failure to act on the part of the Executive
shall be considered "willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the Executive's action
or omission was in the best interests of the Company. Any act or failure to act
that is based upon authority given pursuant to a resolution duly adopted by the
Board, or the advice of counsel for the Company, shall be conclusively presumed
to be done, or omitted to be done, by the Executive in good faith and in the
best interests of the Company.
(ii) A termination of the Executive's employment for Cause shall be
effected in accordance with the following procedures. The Company shall give the
Executive written notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in reasonable
detail the specific conduct of the Executive that it considers to constitute
Cause and the specific provision(s) of this Agreement on which it relies, and
stating the date, time and place of the Special Board Meeting for Cause. The
"Special Board Meeting for Cause" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination for
Cause, that takes place not less than ten (10) and not more than twenty (20)
business days after the Executive receives the Notice of Termination for Cause.
The Executive shall be given an opportunity, together with counsel, to be heard
at the Special Board Meeting for Cause. The Executive's termination for Cause
shall be effective when and if a resolution is fully adopted at the Special
Board Meeting for Cause by affirmative vote of a majority of the entire
membership of the Board, excluding employee directors, stating that in good
faith opinion of the Board, the Executive is guilty of the conduct described in
the Notice of Termination for Cause, and that conduct constitutes Cause under
this Agreement.
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(iii) A termination of the Executive's employment without Cause
shall be effected in accordance with the following procedures. The Company shall
give the Executive written notice ("Notice of Termination without Cause") of its
intention to terminate the Executive's employment without Cause, stating the
date, time and place of the Special Board Meeting without Cause. The "Special
Board Meeting Without Cause" means a meeting of the Board called and held
specifically for the purpose of considering the Executive's termination without
Cause, that takes place not less than ten (10) and not more than twenty (20)
business days after the Executive receives the Notice of Termination without
Cause. The Executive shall be given an opportunity, together with counsel, to be
heard at the Special Board Meeting without Cause. The Executive's termination
without Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting without Cause by affirmative vote of a majority of the
entire membership of the Board, excluding employee directors, stating that the
Executive is terminated without Cause.
(c) GOOD REASON.
(i) The Executive may terminate employment for Good Reason or without
Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties inconsistent
in any respect with paragraph (a) of Section 2 of this Agreement, the
failure to provide the Executive with the titles required by paragraph (a)
of Section 2 of this Agreement or with duties commensurate with such
titles, as and when required by said paragraph (a), or any other action,
or failure to take action, by the Company, the Board or the shareholders
of the Company by the Company that results in a diminution in the
Executive's position, authority, titles, duties or responsibilities, other
than an isolated, insubstantial and inadvertent action that is not taken
in bad faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
B. any failure to comply with any other provision of Section 3
of this Agreement, other and an isolated, insubstantial and inadvertent
failure to comply with a provision of Section 3 of this Agreement that is
not taken in bad faith and is remedied by the Company promptly after
receipt of notice thereof from the Executive;
C. any requirements by the Company that the Executive's services by
rendered primarily at a location or locations other than that provided for
in paragraph (c) of Section 2 of this Agreement;
D. any purported termination of the Executive's employment by
the Company for a reason or in a manner not expressly permitted by this
Agreement;
E. any failure by the Company to comply with paragraph (c) of Section
12 of this Agreement; or
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F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof from the Executive.
(ii) A termination of employment by the Executive for Good Reason
shall be effectuated by giving the Company written notice ("Notice of
Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which date
shall in no event be later than 30 days after the notice is given).
(iii) A termination of the Executive's employment by the Executive
without Good Reason shall be effected by giving the Company written notice of
the Termination.
(d) NO WAIVER. The failure to set forth any fact or circumstance in
a Notice of Termination for Cause, A Notice of Termination without Cause or a
Notice of Termination for Good Reason shall not constitute a waiver of the right
to assert, and shall not preclude the party giving notice from asserting, such
fact or circumstance in an attempt to enforce any right under or provision of
this Agreement.
(e) DATE OF TERMINATION. The "Date of Termination" means the date of
the Executive's death, the Disability Effective date, the date on which the
termination of the Executive's employment by the Company for Cause or without
Cause or by the Executive for Good Reason is effective, or the date on which the
Executive gives the company notice of a termination of employment without Good
Reason, as the case may be.
5. OBLIGATIONS OF THE COMPANY UNDER TERMINATION.
(a) BY THE COMPANY OTHER THAN FOR CAUSE OR DISABILITY; BY THE EXECUTIVE FOR
GOOD REASON. (i) If, during the Employment Period, the Company terminates the
Executive's employment, other than for Cause or Disability, or the Executive
terminates employment for Good Reason, the Company (A) shall pay to the
Executive, in a single lump sum, (I) the Accrued Obligations (as defined in
Section 5(b) below), and (II) the aggregate amount of the salary and Annual
Incentive Compensation that he would have received if he had remained employed
for the Severance Period (as defined below) (assuming that the Annual Incentive
Compensation for such period would have equalled the target amounts of such
Incentive Compensation as in effect immediately before the Date of Termination);
(B) shall cause the Executive to continue to accrue benefits under the SERP
during the Severance Period; and (C) shall continue to provide the Executive
with the Life Insurance Coverage and the benefits set forth in Clause (B) of
paragraph (c)(iii) of Section 3, as if he had remained employed by the Company
pursuant to this Agreement during the Severance Period and then retired (at
which time he will be treated as eligible for all retiree welfare benefits and
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other benefits provided to retired senior executives, as set forth in Section
3(c)(iii)); PROVIDED, that to the extent such benefits cannot be provided
pursuant to the plan or program maintained by the Company for its executives,
the Company shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Executive and his
family; and PROVIDED, further, that during any period when the Executive is
eligible to receive welfare benefits of the type described in Clause (B) of
paragraph (c)(iii) of Section 3 under another employer-provided plan, the
corresponding benefits provided by the Company under this clause (iii) of
paragraph (a) of Section 5 may be made secondary to those provided under such
other plan. For purposes of such continued accrual of benefits under the SERP,
the Executive shall be considered to have remained employed for a period equal
to the Severance Period, with annual compensation equal to (x) the amount
required to be paid under the clause (i) (B) of the preceding sentence, divided
by (y) the number of years and fractions thereof in the Severance Period, and
then to have terminated his employment. In addition to the foregoing, any
restricted stock outstanding on the Date of Termination shall be fully vested as
of the Date of Termination and all options outstanding on the Date of
Termination shall be fully vested and exercisable and shall remain in effect and
exercisable through the end of their respective terms, without regard to the
termination of the Executive's Employment (but in the case of options that were
not vested immediately before the Date of Termination, not longer than five
years). The payments and benefits provided pursuant to this paragraph (a) of
Section 5 are intended as liquidated damages for a termination of the
Executive's employment by the Company other than for Cause or Disability or for
the actions of the Company leading to a termination of the Executive's
employment by the Executive for Good Reason, and shall be the sole and exclusive
remedy thereof. For purposes of this Agreement, the Pro Rata Long-Term Incentive
Compensation means the amount of Long-Term compensation that the Executive would
have received with respect to each applicable performance period that begins
before and ends after the Date of Termination, assuming such compensation had
been paid at target, and pro-rated to reflect the portion of the applicable
performance period that ends on the Date of Termination.
(ii) For purposes of this Agreement: (A) the "Severance Period"
shall mean the period from the Date of Termination through the end of the
Employment Period, or, if longer and if the Date of Termination is after a
Change of Control, the third anniversary of the Date of Termination; and (B) a
"Change of Control" shall mean:
(I) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) (a "Person") of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of
20% or more of either (A) the then outstanding shares of
common stock of the Company (the "Outstanding Company Common
Stock") or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for
purposes of this subsection (i), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from
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the Company, (B) any acquisition by the Company, (C) any
acquisition by any employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company or (D) any acquisition by any
corporation pursuant to a transaction which complies with
clauses (A), (B) and (C) of subsection (III) of this
definition of "Change of Control"; or
(II) Individuals who, as of the date hereof, constitute
the Board (the "Incumbent Board") cease for any reason to
constitute at least a majority of the Board; provided,
however, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by
the Company's shareholders, was approved by a vote of at least
a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors
or other actual or threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board; or
(III) Consumption of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of the Company (a "Business
Combination"), in each case, unless, following such Business
Combination, (A) all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the
corporation resulting from such Business Combination
(including, without limitation, a corporation which as a
result of such transaction owns the Company or all or
substantially all of the Company's assets either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Business Combination of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be,
(B) no Person (excluding any corporation resulting from such
Business Combination or any employee benefit plan (or related
trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or
indirectly, 20% or more of, respectively, the then outstanding
shares of common stock of the corporation resulting from such
Business Combination or the combined voting power of the then
outstanding voting securities of such corporation
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except to the extent that such ownership existed prior to the
Business Combination and (C) at least a majority of the
members of the board of directors of the corporation resulting
from such Business Combination were members of the Incumbent
Board at the time of the execution of the initial agreement,
or of the action of the Board, providing for such Business
Combination; or
(IV) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company.
(b) DEATH OR DISABILITY. If the Executive's employment is terminated
by reason of the Executive's death or Disability during the Employment Period,
the Company shall pay to the Executive or, in the case of the Executive's death,
to the Executive's designated beneficiaries (or, if there is not such
beneficiary, to the Executive's estate or legal representative), in a lump sum
in cash within thirty (30) days after the Date of Termination, the sum of the
following amounts (the "Accrued Obligations"): (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not yet
been paid; (2) an amount representing the Annual Incentive Compensation and cash
Long-Term Incentive Compensation for the period that includes the Date of
Termination, computed by assuming that the amount of all such Incentive
Compensation would be equal to the target amount of such Incentive Compensation
as in effect immediately before the Date of Termination, and multiplying that
amount by a fraction, the numerator of which is the number of days in such
period through the Date of Termination, and the denominator of which is the
total number of days in the relevant performance period; (3) any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon) that has not yet been paid; and (4) any Annual Incentive
Compensation and cash Long-Term Incentive Compensation for actually earned but
not yet paid for performance periods ending on or before the Date of Termination
accrued but unpaid and vacation pay, and the Company shall have no further
obligations under this Agreement, except as specified in Section 3(c) and
3(e)(ii) above and Section 6 below.
(c) BY THE COMPANY FOR CAUSE, BY THE EXECUTIVE OTHER THAN FOR GOOD
REASON. If the Executive's employment is terminated by the Company for Cause
during the Employment Period, the Company shall pay the Executive the Annual
Base Salary through the Date of Termination and the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon), in each case to the extent not yet paid, and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below. If the Executive voluntarily terminates employment during the
Employment Period, other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within thirty (30) days of
the Date of Termination, and the Company shall have no further obligations under
this Agreement, except as specified in paragraph (c) of Section 3 above and
Section 6 below.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan, program,
policy or
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practice provided by the Company or any of its affiliated companies for which
the Executive may qualify, nor, subject to paragraph (f) of Section 13, shall
anything in this Agreement limit or otherwise affect such rights as the
Executive may have under any contract or agreement with the Company or any of
its affiliated companies. Vested benefits and other amounts that the Executive
is otherwise entitled to receive under the Incentive Compensation, the SERP, the
Life Insurance Coverage, or any other plan, policy, practice or program of, or
any contract or agreement with, the Company or any of its affiliated companies
on or after the Date of Termination shall be payable in accordance with the
terms of each such plan, policy, practice, program, contract or agreement, as
the case may be, except as explicitly modified by this Agreement.
Notwithstanding the foregoing, the Executive shall have no right to receive any
severance pay or other benefits under any plan or policy of the Company or under
the KeySpan Amended and Restated Senior Executive Change of Control Severance
Plan.
7. FULL STATEMENT. The Company's obligation to make payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement, and except as
specifically provided in the last proviso of the first sentence of Section 5(a),
such amounts shall not be reduced, regardless of whether the Executive obtains
other employment.
8. CONFIDENTIAL INFORMATION. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential information,
knowledge or data relating to the Company or any of its affiliated companies and
their respective business that the Executive obtains during the Executive's
employment by the Company or any of its affiliated companies and that is not
public knowledge (other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time during or after the
Executive's employment with the Company, except in the course of performing his
duties hereunder or with the prior written consent of the Company or as
otherwise required by law or legal process. In no event shall any asserted
violation of the provisions of Section 8 constitute a basis for deferring or
withholding any amounts otherwise payable to the Executive under this Agreement.
9. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
to, or for the benefit of, the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 (the "Code"), as amended or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such
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interest and penalties, are hereinafter collectively refereed to as the "Excise
Tax"), then the Executive shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the Executive of all
taxes (including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section 9,
all determinations required to be made under this Section 9, including whether
and when a Gross- Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by a certified public accounting firm designated by the Executive (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the change
of control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be born solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 9, shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to paragraph (c) of this Section 9 and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but not later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notices the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
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(i) give the Company any information reasonably requested by the Company
relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively
to contest such claim, and
(iv) permit the Company to participate in any proceedings relating
to such claim; PROVIDED, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph (c) of Section 9, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
xxx for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, however, that if the
Company directs the Executive to pay such claim and xxx for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and PROVIDED,
further, that any extension of the statute of limitations relating to payments
of taxes for the taxable year of the Executive with respect to which such
contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to paragraph (c) of this Section 9, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of paragraph (c) of
this Section 9) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to paragraph (c) of this Section 9, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such
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determination, then such advances shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. INDEMNIFICATION.
(a) The Company agrees that if the Executive is made a party, or is
threatened to be made a party, to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "Proceeding"), by reason of the
fact that he is or was a director, officer or employee of the Company or is or
was serving at the request of the Company as a director, officer, member,
employee or agent or another corporation, partnership, joint venture, trust or
other enterprise, including service with respect to employee benefit plans,
whether or not the basis of such Proceeding is the Executive's alleged action in
an official capacity while serving as a director, officer, member, employee or
agent, the Executive shall be indemnified and held harmless by the Company to
the fullest extent legally permitted or authorized by the Company's certificate
of incorporation or bylaws or resolutions of the Company's Board of Directors
or, if greater, by the laws of the State of New York against all cost, expense,
liability and loss (including, without limitation, attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid or to be paid in
settlement) reasonably incurred or suffered by the Executive in connection
therewith, and such indemnification shall continue as to the Executive even is
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of the Executive's heirs, executors
and administrators. The Company shall advance to the Executive all reasonable
costs and expenses incurred by him in connection with a Proceeding within 20
days after receipt by the Company of a written request for such advance. Such
request shall include an undertaking by the Executive to repay the amount of
such advance if it shall ultimately be determined that he is not entitled to be
indemnified against such costs and expenses.
(b) Neither failure of the Company (including its board of
directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of any proceeding concerning payment of
amounts claimed by the Executive under Section 10(a) above that indemnification
of the Executive is proper because he has met the applicable standard of
conduct, nor a determination by the Company (including its board of directors,
independent legal counsel or stockholders) that the Executive has not met such
applicable standard of conduct, shall create a presumption that the Executive
has not met the applicable standard of conduct.
(c) The Company also agrees that if the Executive is made a party,
or is threatened to be made a party, to any action, suit or proceeding by reason
of the termination of his employment with his prior employer or his accepting
employment with the Company, he shall be indemnified and held harmless by the
Company against all cost, expense, liability and loss (including, without
limitation, attorney's fees) reasonably incurred or suffered by the Executive in
connection therewith.
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(d) The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering the Executive to the extent the
Company provides such coverage for its other executive officers.
11. ATTORNEYS' FEES. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Executive or others of the validity or enforceability of or
liability under, or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
12. SUCCESSORS.
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns, provided that the Company may not
assign this Agreement except in connection with the assignment or disposition of
all or substantially all of the assets or stock of the Company, or by law as a
result of a merger or consolidation. In the event of such assignment, a failure
by the successor to specifically assume in writing, delivered to the Executive,
the obligations and liabilities of the Company hereunder shall be deemed a
material breach of this Agreement.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
13. MISCELLANEOUS.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of New York, without reference to principles of
conflict of laws. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified except by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
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(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
If to the Company:
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 13. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement. If any provision of this Agreement shall be held invalid or
unenforceable in part, the remaining portion of such provision, together with
all other provisions of this Agreement, shall remain valid and enforceable and
continue in full force and effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provision of, or to assert any right under, this Agreement
(including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to paragraph (c) of Section 4 of this
Agreement) shall not be deemed to be a waiver of such provision or right or of
any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject matter
hereof.
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name and on its behalf, all as
of the day and year first above written.
/s/ Xxxxxx X. Xxxxxx
-----------------------
Xxxxxx X. Xxxxxx
MARKETSPAN CORPORATION
By: /s/ Xxxxxx X. Xxxxxx
------------------------
Name:
Title:
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APPENDIX A
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
Pursuant to Section 3(c) of the Employment Agreement, the parties agree as
follows:
1. Retirement Benefit
(a) If the Executive terminates employment with the Company, he
shall be eligible to receive a monthly pension, commencing on the first day of
the month following such termination, equal to the excess, if any, of (i) over
the sum of (ii), (iii), (iv), and (v) as follows:
(i) Sixty-five (65%) percent of Final Average Pay on the
Executive's date of termination of employment; if his
years and months of service with the Company or its
predecessors is less than 25, the 65% shall be reduced in
the proportion such service bears to 25.
(ii) The Amount payable monthly from the Employees' Retirement
Plan of the Brooklyn Union Gas Company For Management
Employees and from any successor plan thereto in which
the Executive is a member, payable in the Normal Form of
Benefit for this Plan, as defined in sub-paragraph (d)
herein;
(iii) The amount payable monthly from the Supplemental
Retirement Plan of the Brooklyn Union Gas Company and
from any successor thereto, payable in the Normal Form of
Benefit for this Plan, as defined in sub-paragraph (d)
herein;
(iv) The amount payable monthly from the Excess Benefit Plan
of the Brooklyn Union Gas Company and from any successor
thereto, payable in the Normal Form of Benefit for this
Plan, as defined in sub-paragraph (d) herein;
(v) One-half of the monthly amount of Primary Social Security
benefit to which he would be entitled or is already
receiving as of the date of termination.
(b) For purposes of this Plan, "Final Average Pay" shall mean the
monthly average of base salary and Annual Incentive Compensation payable to the
Executive over the 36 consecutive calendar months of employment for which such
average is highest. For this purpose, no recognition shall be given to voluntary
deferrals, Long-term Incentive Compensation or any special short term
incentives.
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(c) If the Executive terminates his employment prior to age 62, the
amount of monthly benefit otherwise payable under this Section 1 will be reduced
by 6% for each year or portion thereof his termination precedes his 62nd
birthday.
(d) The Normal Form of Benefit under this Plan is a 100% joint &
survivor annuity with the Executive's spouse at the time of termination of
employment. If he has no spouse at that time, the normal form shall be a life
annuity. The Executive may elect to receive benefits under this Plan in any
other actuarially equivalent form of benefit, including a single lump sum.
2. Pre-Retirement Death Benefit. In the event of the death of the
Executive prior to the commencement of benefits under this Plan, his surviving
spouse, if any, shall be eligible to receive a monthly pension for life
commencing on the first of the month following the Executive's death equal to
the benefit which would have been payable to the Executive if he had retired on
the day before his death and elected a 100% joint and survivor annuity with his
spouse.
3. Disability Benefits.
In the event the Executive becomes totally and permanently disabled
as determined by the Company, he shall receive a monthly benefit under this Plan
equal to that which would have been payable if he had terminated employment on
the date of disability.
4. Actuarial Determinations Final. The Company's independent actuarial
consultant's determinations under paragraphs 1, 2 and 3 shall be final and
binding upon the Company and the Executive.
5. Forfeiture of Benefits. If the Executive voluntarily terminates
employment with the Company for any reason other than death or disability prior
to the completion of 10 years of service, all benefits under this Plan shall be
forfeited. For this purpose years of service shall include his employment with
KeySpan Energy Corporation and Brooklyn Union Gas Company.
6. Nature of Payments and Obligations. The Company shall maintain one or
more grantor trusts or other funding vehicle as may be satisfactory to the
Executive, which shall be sufficient at any time to pay all benefits that have
accrued under the Plan. Any payment due the Executive or his surviving spouse
shall be made from the assets of such trust or vehicle which, for all purposes,
shall continue to be general assets of the Company. To the extent that the
Executive is entitled to payments from the Company under this Plan, such right
shall be that of an unsecured general creditor of the Company.
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