EMPLOYMENT AGREEMENT
THIS AGREEMENT is entered into this 10th day of August,
1995 by and between Atlantic Energy, Inc., a New Jersey
corporation (the "Company"), and James E. Franklin, II (the
"Executive").
In consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company
and the Executive as follows:
1. Term of Agreement. The term of this Agreement
shall commence on the date hereof (the "Effective Date") and
shall continue until the second anniversary of the Effective Date
(the "Employment Period"); provided, however, that the Employment
Period shall be automatically renewed for two years unless either
party shall send the other written notice of its intention to
terminate the agreement at the end of such Employment Period one
year prior to the end of such Employment Period; and, provided,
further, that upon the occurrence of a Change of Control, the
Employment Period shall become three years and shall commence on
the date of the Change of Control, and shall thereafter be
automatically renewed for two years unless either party shall
send the other written notice of its intention to terminate the
agreement one year prior to the end of the then current
Employment Period.
2. Place of Employment. The Executive's services
during the term of this Agreement shall be performed primarily at
the principal offices of the Company in Egg Harbor Township, New
Jersey. The Executive shall be furnished with a suitable office
and such other facilities and services as he may reasonably
require in performing his obligations under this Agreement.
3. Employment Obligations.
(a) Position and Duties. The Company hereby agrees
to employ the Executive as its Vice President, Secretary and
General Counsel, as the Senior Vice President, Secretary and
General Counsel of Atlantic City Electric Company ("Electric"),
and as the Secretary of Atlantic Energy Enterprises, Inc. for the
Employment Period. The Executive shall exercise his reasonable
best efforts in furtherance of, and shall devote substantially
all of his working time and attention to the affairs of the
Company and its affiliates, and shall perform such duties and
services as may reasonably be assigned to him by, and shall
report directly to the Chief Executive Officer and the Board of
Directors of the Company (the "Board").
(b) Business Time. From and after the Effective Date,
the Executive agrees to devote his full business time during
normal business hours to the business and affairs of the Company
and to use his best efforts to perform faithfully and efficiently
the responsibilities assigned to him hereunder, to the extent
necessary to discharge such responsibilities, except for (i) time
spent in managing his personal, financial and legal affairs and
serving on corporate, civic or charitable boards or committees on
which he served prior to the Effective Date, in each case only if
and to the extent not substantially interfering with the
performance of such responsibilities, and (ii) periods of
vacation and sick leave to which he is entitled. It is expressly
understood and agreed that the Executive's continuing to serve on
any boards and committees on which he is serving or with which he
is otherwise associated immediately preceding the Effective Date
which is not in violation of any Company policy shall not be
deemed to interfere with the performance of the Executive's
services to the Company. In addition, the Executive may commence
service as a director of other corporations or organizations
after the Effective Date upon approval by the Board which, in the
judgment of the Board, will not present any conflict of interest
with the Company or any subsidiary or affiliate thereof, and
which would not affect the performance of Executive's duties
pursuant to this Agreement, which approval shall not be
unreasonably withheld; provided, however, that the Executive
shall neither (a) become an officer or director of (i) another
entity which has or will have the status of a public utility
under the Federal Power Act, or any successor act, (ii) any bank,
trust company, banking association or firm that is authorized by
law to underwrite or participate in the marketing of securities
of a public utility, or (iii) any company supplying electrical
equipment to the Company, nor (b) accept any such position and
commence the performance of any duties or services in such
capacity (an "Interlock"), unless the Executive shall have first
(x) furnished the Board with at least thirty (30) days prior
written notice of his intention to create such Interlock and (y)
secured, if the Board shall request that such action be taken,
any necessary authorization for such Interlock, in form and
substance satisfactory to the Board, from the Federal Energy
Regulatory Commission, or successor regulatory agency, pursuant
to Section 305(b) of the Federal Power Act, or any supplement or
amendment thereto.
4. Compensation. (a) Base Salary. During the Employment
Period, the Executive shall receive a base salary ("Base Salary")
at an annual rate at least equal to the annual salary paid to the
Executive by the Company and any of its affiliated companies
immediately prior to the Effective Date. The Base Salary shall
be reviewed at least once each year after the Effective Date, and
may be increased (but not decreased) at any time and from time to
time by action of the Board or any committee thereof or any
individual having authority to take such action in accordance
with the Company's regular practices. Once increased, any
reference to Base Salary herein shall be a reference to such
increased amount. Neither the Base Salary nor any increase in
Base Salary after the Effective Date shall serve to limit or
reduce any other obligation of the Company hereunder.
(b) Annual Bonus. During the Employment Period, in
addition to the Base Salary, for each fiscal year of the Company
ending during the Employment Period, the Executive shall have the
opportunity to receive an annual bonus ("Annual Bonus
Opportunity"), based on the achievement of target levels of
performance. Without limiting the generality of the foregoing,
following any Change of Control (as defined hereinafter), the
amount actually payable to the Executive as an annual bonus shall
not be less than an amount equal to the higher of the bonus paid
to the Executive for the most recently completed fiscal year of
the Company or the target bonus for the then current fiscal year
(the "Minimum Bonus Amount"). Any amount payable in respect of
the Annual Bonus Opportunity or the Minimum Bonus Amount shall be
paid no later than sixty (60) days after the close of the fiscal
year for which the amount (or prorated portion) is earned or
awarded, unless electively deferred by the Executive pursuant to
any deferral programs or arrangements that the Company may make
available to the Executive.
(c) Long-term Incentive Compensation Programs and
Equity Programs. During the Employment Period, the Executive
shall participate in all long-term incentive compensation
programs and equity programs for key executives at a level that
is commensurate with the Executive's participation in such plans
immediately prior to the Effective Date, or, if more favorable to
the Executive, at the level made available to the Executive or
other similarly situated executive officers of the Company and
its affiliated companies at any time thereafter.
(d) Benefit Plans. During the Employment Period, the
Executive (and, to the extent applicable, his dependents) shall
be entitled to participate in or be covered under all pension,
supplemental retirement or excess benefit (collectively, the
"Supplemental Retirement Benefits"), deferred compensation,
savings, medical, dental, health, disability, group life,
accidental death and travel accident insurance plans and programs
of the Company and its affiliated companies at a level that is
commensurate with and provides the same level and quality of
coverage as the Executive's participation in such plans
immediately prior to the Effective Date (except for the Medical
Executive Reimbursement Plan (the "MERP"), it being understood
that the MERP shall be terminated as of September 30, 1995), or,
if more favorable to the Executive, at the level made available
to the Executive or other similarly situated executive officers
of the Company and its affiliated companies at any time
thereafter.
(e) Expenses. During the Employment Period, the
Executive shall be entitled to receive prompt reimbursement for
all reasonable expenses incurred by the Executive in accordance
with the policies and procedures of the Company as in effect from
time to time; provided; however, that in no event shall such
policies and procedures after the occurrence of a Change of
Control be less favorable to the Executive than immediately prior
to a Change of Control. Notwithstanding the foregoing, the
Company may apply the policies and procedures in effect after the
Change of Control date to the Executive, if such policies and
procedures are more favorable to the Executive than those in
effect immediately prior to the Change of Control date.
(f) Vacation and Fringe Benefits. During the
Employment Period, the Executive shall be entitled to paid
vacation and fringe benefits at a level that is commensurate with
the paid vacation and fringe benefits available to the Executive
immediately prior to the Effective Date, or, if more favorable to
the Executive, at the level made available from time to time to
the Executive or other similarly situated executive officers at
any time thereafter.
(g) Indemnification. During and after the Employment
Period, the Company shall indemnify the Executive and hold the
Executive harmless from and against any claim, loss or cause of
action arising from or out of the Executive's performance as an
officer, director or employee of the Company or any of its
subsidiaries or in any other capacity, including any fiduciary
capacity, in which the Executive serves at the request of the
Company to the maximum extent permitted by applicable law and the
Company's Certificate of Incorporation and By-Laws (the
"Governing Documents"); provided, however, that in no event shall
the protection afforded to the Executive hereunder be less than
that afforded under the Governing Documents as in effect im-
mediately prior to the Effective Date, or if later, the Change of
Control.
5. Termination. (a) Death, Permanent Disability or
Retirement. Subject to the provisions of Section 1 hereof, this
Agreement shall terminate automatically upon the Executive's
death, Permanent Disability (as defined in Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended (the "Code"),
except that a six month period shall be substituted for the
twelve month period provided for therein) or voluntary retirement
under any of the Company's retirement plans as in effect from
time to time.
(b) Voluntary Termination. Notwithstanding anything
in this Agreement to the contrary, the Executive may, upon not
less than 60 days' written notice to the Company, voluntarily
terminate employment for any reason (including early retirement
under the terms of any of the Company's retirement plans as in
effect from time to time); provided, however, any termination by
the Executive pursuant to Section 5(d) on account of Good Reason
(as defined therein) shall not be treated as a voluntary
termination under this Section 5(b).
(c) Cause. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement, "Cause"
means (i) willful and continuous failure by Executive to perform
his duties under this Agreement (other than resulting from
incapacity due to physical or mental illness),(ii) the
Executive's conviction or plea of nolo contendere to a felony;
(iii) the Executive's willful engagement in misconduct in
connection with employment which results in material damage to
the Company's business or reputation; or (iv) material breach of
Executive's duties hereunder which result in material damage to
the Company's business or reputation, in each of (ii) through
(iv) above, upon 30 days written notice to the Executive, the
opportunity for the Executive to be heard by the Board and the
good faith determination by at least two-thirds of the Company's
non-employee directors that Cause exists; provided, however, that
after the occurrence of a Change of Control (as hereinafter
defined), "Cause" shall be limited to (ii) through (iv) above.
(d) Good Reason. During the Employment Period,
Executive may terminate his employment for Good Reason. For
purposes of this Agreement, "Good Reason" means the occurrence of
any of the following, without the express written consent of the
Executive:
(i (A) the assignment to the Executive of any
duties inconsistent with the Executive's position, authority
or responsibilities as contemplated by Section 3 of this
Agreement, or (B) any other adverse change in such position,
including titles, authority or responsibilities;
(ii reduction of Executives's base salary or bonus
opportunities, or any other material breach by the Company
of this Agreement;
(iii the Company's requiring the Executive to be
based at any office or location more than 25 miles from that
location at which he performed his services specified under
the provisions of Section 2 immediately prior to the Change
of Control, except for travel reasonably required in the
performance of the Executive's responsibilities; or
(iv any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a
successor as contemplated by Section 12(b) upon the
occurrence of a Change of Control; provided, however, the
successor has had actual written notice of the existence of
this Agreement and its terms and an opportunity to assume
the Company's responsibilities under this Agreement during a
period of 10 business days after receipt of such notice.
(e) Notice of Termination. Any termination by the
Company for Cause or by the Executive for Good Reason shall be
communicated by Notice of Termination to the other party hereto
given in accordance with Section 13(f). For purposes of this
Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business
days of the Company's having actual knowledge of the events
giving rise to such termination, and in the case of a termination
for Good Reason, within 180 days of the Executive's having actual
knowledge of the events giving rise to such termination, and
which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the
date of receipt of such notice, specifies the termination date of
this Agreement (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set
forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason shall not waive any right
of the Executive hereunder or preclude the Executive from
asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. For purposes of this
Agreement, the term "Date of Termination" means (i) in the case
of a termination for which a Notice of Termination is required,
the date of receipt of such Notice of Termination or, if later,
the date specified therein, as the case may be, and (ii) in all
other cases, the actual date on which the Executive's employment
terminates during the Employment Period. On or as soon
practicable following the Date of Termination, the Executive
shall return to the Company all property of the Company and all
copies thereof in the Executive's possession or under his
control.
6. Obligations of the Company upon Termination.
(a) Death, Permanent Disability or Retirement. If the
Executive's employment is terminated during the Employment Period
by reason of the Executive's death, Permanent Disability or
voluntary retirement this Agreement shall terminate without
further obligations to the Executive or the Executive's legal
representatives under this Agreement other than those obligations
accrued hereunder at the Date of Termination, and the Company
shall pay or provide to the Executive or the Executive's legal
representative under this Agreement the following amounts either
in a lump sum or in such other form of payment as is provided or
elected by the Executive under the operative plan:
(i the Executive's full Base Salary through the
Date of Termination (the "Earned Salary");
(ii the Supplemental Retirement Benefits and the
amount otherwise payable to or in respect of the Executive
under the Company's otherwise applicable long-term incentive
compensation and equity plans and programs (the "Incentive
and Equity Amounts") it being understood that, in the event
of death or disability, any applicable performance targets
thereunder (to the extent not already determined as of the
Termination Date) shall be deemed to have been met for the
applicable performance period and that payments thereunder
shall be pro-rated as of the Date of Termination; and in the
event of a termination by reason of retirement, then the
Supplemental Retirement Benefits and the Incentive and
Equity Amounts, the Incentive and Equity Amounts being
calculated and payable in accordance with the terms of the
underlying plans and payable to the Executive when awards
are payable to all other participants in such plans in
accordance with the terms thereof, but prorated through the
date of such retirement; and
(iii an amount (the "Pro-Rated Bonus") equal to the
product of (x) times (y), minus (z):
(x) the Minimum Bonus Amount;
(y) a fraction, the numerator of which is the
number of days in the then current calendar
year which have elapsed as of the Date of
Termination, and the denominator of which is
365;
(z) if Executive's termination occurs in the
same calendar year as the Change of Control,
an amount equal to the amount paid to the
Executive under the Company's applicable
bonus plan (the "Actual Bonus Payment")
(iv) all vested amounts or benefits owing to the
Executive under the Company's otherwise applicable employee
benefit plans and programs, including any compensation
previously deferred by the Executive (together with any
accrued earnings thereon) and not yet paid by the Company
and any accrued vacation pay not yet paid by the Company
(the "Accrued Obligations").
Any Earned Salary, Accrued Obligations and Pro-Rated Bonus shall
be paid in cash in a single lump sum as soon as practicable ( but
in no event more than 20 days) following the Date of Termination.
Any Incentive and Equity Amounts and Supplemental Retirement
Benefits accrued by the Executive shall be payable in accordance
with the terms of the underlying plans.
(b) Cause and Voluntary Termination. If, during the
Employment Period, the Executive's employment shall be terminated
for Cause or voluntarily terminated by the Executive (other than
on account of Good Reason), the Company shall pay the Executive
the Earned Salary and the Accrued Obligations (including, but not
limited to, the Incentive and Equity Amounts and Supplemental
Retirement Benefits, each in accordance with the terms of the
underlying plan) in cash in a single lump sum as soon as
practicable (but in no event more than 20 days following) the
Date of Termination, or in accordance with the terms of the
underlying plan.
(c) Termination by the Company other than for Cause
and Termination by the Executive for Good Reason.
(A) Prior to the Occurrence of a Change of Control.
(i Payments. If, prior to a Change of Control, the
Company terminates the Executive's employment other than for
Cause, or the Executive terminates his employment for Good
Reason, the Company shall pay to the Executive the following
amounts, either in a lump sum or in such other form of
payment as is provided or elected by the Executive under the
operative plan:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Pre-Change Severance Amount")
equal to two multiplied by the sum of
(1) the Executive's annual Base Salary; plus
(2) the Minimum Bonus Amount.
(C) the Pro-Rated Bonus;
(D) the Incentive and Equity Amounts;
(E) the Supplemental Retirement Benefits, it being
understood that upon the occurrence of a
termination under this Section 6(c)(A),
Executive's vested interest in such benefits shall
accelerate; and
(F) the Accrued Obligations.
Any Earned Salary, Pre-Change Severance Amount, Accrued
Obligations and Pro-Rated Bonus shall be paid in cash in a
single lump sum as soon as practicable (but in no event more
than 20 days) following the Date of Termination. The
Supplemental Retirement Benefits and Incentive and Equity
Amounts shall be payable in accordance with the terms of the
underlying plans.
(ii Continuation of Benefits. If, during the
Employment Period, the Company terminates the Executive's
employment other than for Cause, or the Executive terminates
employment for Good Reason prior to the occurrence of a
Change of Control:
(A) the Executive (and, to the extent applicable, his
dependents) shall be entitled, after the Date of
Termination until the earlier of (i) the second
anniversary of the Date of Termination or, (ii)
the date on which the Executive is covered under
any comparable plans of a subsequent employer (the
"End Date"), to continue participation (including,
but not limited to, vesting and accruals) in all
of the Company's employee and executive pension,
welfare and fringe benefit plans, it being
understood that for purposes of the calculation of
Supplemental Retirement Benefits, Final Annual
Compensation (as defined in the underlying plans)
shall be equal to Final Annual Compensation as of
the Date of Termination (the "Benefit Plans"). To
the extent any such benefits cannot be provided
under the terms of the applicable plan, policy or
program, the Company shall provide a comparable
benefit under another plan or from the Company's
general assets. The Executive's participation in
the Benefit Plans will be on the same terms and
conditions that would have applied had the
Executive continued to be employed by the Company
through the End Date;
(B) the Executive (or, in the event of the Executive's
death during such period, the Executive's
beneficiary or estate) shall have the right to
exercise any outstanding options to purchase
shares of Common Stock of the Company then
exercisable by the Executive or which would become
exercisable in accordance with the applicable
option agreement and the applicable equity
incentive plan of the Company (such agreements and
plans referred to collectively as the "Equity
Documents") for the period of time permitted in
accordance with the generally applicable terms of
the governing Equity Documents) after the Date of
Termination; and
(C) for purposes of the Benefit Plans and the Equity
Documents, the Executive will be deemed to have
terminated employment under mutually satisfactory
conditions.
(B) After the Occurrence of a Change of Control.
(i Payments. If, following a Change of Control,
the Company terminates the Executive's employment other than
for Cause, or the Executive terminates his employment for
Good Reason, the Company shall pay to the Executive the
following amounts, either in a lump sum or in such other
form of payment as is provided or elected by the Executive
under the operative plan:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance Amount") equal to
three times the sum of
(1) the Executive's annual Base Salary; and
(2) the Minimum Bonus Amount;
(C) the Pro-Rated Bonus;
(D) the Incentive and Equity Amounts, all of which
shall be fully accelerated and deemed earned, and
all applicable performance targets thereunder
shall be deemed to have been met upon the
occurrence of a Change of Control;
(E) the Supplemental Retirement Benefits, which shall
be determined based on the granting of service
credit for a period of three years and, after such
credit has been granted, shall be computed based
upon the deemed age of the Executive at the end of
such three year period, it being understood that
upon the occurrence of a Change of Control,
Executive's vested interest in such benefits shall
accelerate and that for purposes of the
calculation of Supplemental Retirement Benefits,
Final Annual Compensation (as defined in the
underlying plans) shall be equal to Final Annual
Compensation as of the Date of Termination; and
(F) the Accrued Obligations.
Any Earned Salary, Severance Amount, Accrued Obligations,
and Pro-Rated Bonus shall be paid in cash, or in the case of
the Incentive and Equity Amounts, in kind if so provided
under the relevant plan, in a single lump sum as soon as
practicable (but in no event more than 20 days) following
the Date of Termination. The Supplemental Retirement
Benefits shall be payable in accordance with the terms of
the underlying plans (after giving effect to the
acceleration and granting of service credit provided for
herein) and the elections of the Executive thereunder.
(ii) Continuation of Benefits. If, during the
Employment Period and after the occurrence of a Change of
Control, the Company terminates the Executive's employment
other than for Cause or the Executive terminates his
employment for Good Reason:
(A) the Executive (and, to the extent applicable, his
dependents) shall be entitled, after the Date of
Termination until the earlier of (i) the third
anniversary of the Date of Termination, or (ii)
the date on which the Executive is covered under
any comparable plans of a subsequent employer,
(the "End Date"), to continue participation
(including, but not limited to, vesting and
accruals) in all of the Company's employee and
executive pension, welfare and fringe benefit
plans, excluding the Supplemental Retirement
Benefits (the "Benefit Plans"). To the extent any
such benefits cannot be provided under the terms
of the applicable plan, policy or program, the
Company shall provide a comparable benefit under
another plan or from the Company's general assets.
The Executive's participation in the Benefit Plans
will be on the same terms and conditions that
would have applied had the Executive continued to
be employed by the Company through the End Date;
(B) the Executive (or, in the event of the Executive's
death during such period, the Executive's
beneficiary or estate) shall have the right to
exercise any outstanding options to purchase
shares of Common Stock of the Company then
exercisable by the Executive or which would become
exercisable in accordance with the applicable
Equity Documents for the period of time permitted
in accordance with the generally applicable terms
of the governing Equity Documents, after the Date
of Termination; and
(C) for purposes of the Benefit Plans and the Equity
Documents, the Executive will be deemed to have
terminated employment under mutually satisfactory
conditions.
(d) Discharge of the Company's Obligations.
Except as expressly provided in the last sentence of this Section
6(d), the amounts payable to the Executive pursuant to this
Section 6 following termination of his employment shall be in
full and complete satisfaction of the Executive's rights under
this Agreement and any other claims he may have in respect of his
employment by the Company or any of its Subsidiaries. Such
amounts shall constitute liquidated damages with respect to any
and all such rights and claims and, upon the Executive's receipt
of such amounts, the Company shall be released and discharged
from any and all liability to the Executive in connection with
this Agreement or otherwise in connection with the Executive's
employment with the Company and its Subsidiaries. Nothing in
this Section 6(d) shall be construed to release the Company from
its commitment to indemnify the Executive and hold the Executive
harmless from and against any claim, loss or cause of action
arising from or out of the Executive's performance as an officer,
director or employee of the Company or any of its Subsidiaries or
in any other capacity, including any fiduciary capacity, in which
the Executive served at the request of the Company to the maximum
extent permitted by applicable law and the Governing Documents.
(e) Certain Further Payments by the Company.
(i In the event that any amount or benefit paid
or distributed to the Executive pursuant to this Agreement,
taken together with any amounts or benefits otherwise paid
or distributed to the Executive by the Company or any
affiliated company (collectively, the "Covered Payments"),
are or become subject to the tax (the "Excise Tax") imposed
under Section 4999 of the Code or any similar tax that may
hereafter be imposed, the Company shall pay to the Executive
at the time specified in Section 6(e)(v) below an additional
amount (the "Tax Reimbursement Payment") such that the net
amount retained by the Executive with respect to such
Covered Payments, after deduction of any Excise Tax on the
Covered Payments and any Federal, state and local income,
employment or other tax and Excise Tax on the Tax
Reimbursement Payment provided for by this Section 6(e), but
before deduction for any Federal, state or local income or
employment tax withholding on such Covered Payments, shall
be equal to the amount of the Covered Payments.
(ii For purposes of determining whether any of the
Covered Payments will be subject to the Excise Tax and the
amount of such Excise Tax,
(A) such Covered Payments will be treated as
"parachute payments" within the meaning of Section
28OG of the Code, and all "parachute payments" in
excess of the "base amount" (as defined under
Section 28OG(b)(3) of the Code) shall be treated
as subject to the Excise Tax, unless, and except
to the extent that, in the good faith judgment of
the Company's independent certified public
accountants appointed prior to the Effective Date
or tax counsel selected by such Accountants (the
"Accountants"), the Company has a reasonable basis
to conclude that such Covered Payments (in whole
or in part) either do not constitute "parachute
payments" or represent reasonable compensation for
personal services actually rendered (within the
meaning of Section 28OG(b)(4)(B) of the Code) in
excess of the "base amount," or such "parachute
payments" are otherwise not subject to such Excise
Tax, and
(B) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the
Accountants in accordance with the principles of
Section 28OG of the Code.
(iii For purposes of determining the amount of the
Tax Reimbursement Payment, the Executive shall be deemed to
pay:
(A) Federal income taxes at the highest applicable
marginal rate of Federal income taxation for the
calendar year in which the Tax Reimbursement
Payment is to be made, and
(B) any applicable state and local income taxes at the
highest applicable marginal rate of taxation for
the calendar year in which the Tax Reimbursement
Payment is to be made, net of the maximum
reduction in Federal incomes taxes which could be
obtained from the deduction of such state or local
taxes if paid in such year.
(iv In the event that the Excise Tax is subsequently
determined by the Accountants or pursuant to any proceeding
or negotiations with the Internal Revenue Service to be less
than the amount taken into account hereunder in calculating
the Tax Reimbursement Payment made, the Executive shall
repay to the Company, at the time that the amount of such
reduction in the Excise Tax is finally determined, the
portion of such prior Tax Reimbursement Payment that would
not have been paid if such Excise Tax had been applied in
initially calculating such Tax Reimbursement Payment, plus
interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code.
Notwithstanding the foregoing, in the event any portion of
the Tax Reimbursement Payment to be refunded to the Company
has been paid to any Federal, state or local tax authority,
repayment thereof shall not be required until actual refund
or credit of such portion has been made to the Executive,
and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax
authority for the period it held such portion. The
Executive and the Company shall mutually agree upon the
course of action to be pursued (and the method of allocating
the expenses thereof) if the Executive's good faith claim
for refund or credit is denied.
In the event that the Excise Tax is later determined by
the Accountants or pursuant to any proceeding or
negotiations with the Internal Revenue Service (the
"Service") to exceed the amount taken into account hereunder
at the time the Tax Reimbursement Payment is made
(including, but not limited to, by reason of any payment the
existence or amount of which cannot be determined at the
time of the Tax Reimbursement Payment), the Company shall
make an additional Tax Reimbursement Payment in respect of
such excess (plus any interest or penalty payable with
respect to such excess) at the time that the amount of such
excess is finally determined, such that the net amount
retained by the Executive with respect to the Covered
Payments, after deduction of any Excise Tax on the Covered
Payments and any Federal, state and local income, employment
or other tax and Excise Tax on the Tax Reimbursement Payment
provided for by this Section, but before deduction for any
Federal, state or local income or employment tax withholding
on such Covered Payments, shall be equal to the amount of
the Covered Payments.
The Company agrees to reimburse the Executive for reasonable
fees and expenses in connection with any audit or assessment
by the Service if a claim ("Claim") by the Service arises
out of, or results from the treatment by the Service of any
payments made by the Company as parachute payments and for
the cost of preparing the Executive's income tax returns for
the year in which any payment by the Company may be
characterized as a parachute payment. The Executive shall
notify the Company in writing of any such Claim as soon as
practicable but in no event later than ten (10) business
days after the Executive is informed of such Claim and shall
cooperate with the Company in good faith to effectively
contest the Claim. 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 the Executive agrees to prosecute such contest as
the Company shall determine. Notwithstanding the foregoing,
if the Company forgoes further prosecution of such contest,
the Executive may elect to continue such prosecution;
provided, however, that in no event shall the Company be
liable for the fees and expenses in connection with such
further prosecution.
(v The Tax Reimbursement Payment (or portion
thereof) provided for in Section 6(e)(i) above shall be paid
to the Executive not later than 10 business days following
the payment of the Covered Payments; provided, however, that
if the amount of such Tax Reimbursement Payment (or portion
thereof) cannot be finally determined on or before the date
on which payment is due, the Company shall pay to the
Executive by such date an amount estimated in good faith by
the Accountants to be the minimum amount of such Tax Re-
imbursement Payment and shall pay the remainder of such Tax
Reimbursement Payment (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined, but in no event later
than 45 calendar days after payment of the related Covered
Payment. In the event that the amount of the estimated Tax
Reimbursement Payment exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Company to the Executive, payable on the fifth
business day after written demand by the Company for payment
(together with interest at the rate provided in Section 1274
(b)(2)(B) of the Code).
7. Definitions. (a) Change of Control. For purposes of
this Agreement, a "Change of Control" shall be deemed to have
occurred:
(i when any "person" as defined in Section 3(a)(9)
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as used in Section 13(d) and 14(d)
thereof, including a "group" as defined in Section 13(d) of
the Exchange Act but excluding the Company and any
subsidiary and any employee benefit plan sponsored or
maintained by the Company or any subsidiary (including any
trustee of such plan acting as trustee), directly or
indirectly, becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), of securities of the
Company representing 20 percent or more of the combined
voting power of the Company's then outstanding securities;
or
(ii when, during any period of 24 consecutive months
during the Employment Period, the individuals who, at the
beginning of such period, constitute the Board (the
"Incumbent Directors") cease for any reason other than death
to constitute at least a majority thereof; provided,
however, that a director who is not a director at the
beginning of such 24-month period shall be deemed to have
satisfied such 24-month requirement (and be an Incumbent
Director) if such director was elected by, or on the
recommendation of or with the approval of, at least two-
thirds of the directors who then qualified as Incumbent
Directors either actually (because they were directors at
the beginning of such 24-month period) or by prior operation
of this Section; or
(iii) upon the occurrence of a transaction requiring
stockholder approval for the acquisition of the Company by
an entity other than the Company or a subsidiary through
purchase of assets, or by merger, or otherwise.
For purposes of this Section 7, if any of the above occur with
respect to Electric while the Executive is employed by Electric,
"Company" shall include Electric.
8. Non-exclusivity of Rights. Except as expressly
provided herein, nothing in this Agreement shall prevent or limit
the Executive's continuing or future participation in any
benefit, bonus, incentive or other plan or program provided by
the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or
otherwise prejudice such rights as the Executive may have under
any other agreements with the Company or any of its affiliated
companies, including employment agreements or stock option
agreements. Amounts which are vested benefits or which the
Executive is otherwise entitled to receive under any plan or
program of the Company or any of its affiliated companies at or
subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
9. Full Settlement. The Company's obligation to make
the payments provided for in this Agreement and otherwise to
perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the
Company may have against the Executive or others whether by
reason of the subsequent employment of the Executive or otherwise
In the event that the Executive shall in good faith give a Notice
of Termination for Good Reason and it shall thereafter be
determined that Good Reason did not exist, the employment of the
Executive shall, unless the Company and the Executive shall
otherwise mutually agree, be deemed to have terminated, at the
date of giving such purported Notice of Termination, by mutual
consent of the Company and the Executive and, except as provided
in the last preceding sentence, the Executive shall be entitled
to receive only his Earned Salary and the Accrued Obligations.
10. Legal Fees and Expenses. If the Executive asserts
any claim in any contest (whether initiated by the Executive or
by the Company) as to the validity, enforceability or
interpretation of any provision of this Agreement, the Company
shall pay the Executive's legal expenses (or cause such expenses
to be paid) including, without limitation, his reasonable
attorney's fees, on a quarterly basis, upon presentation of proof
of such expenses in a form reasonably acceptable to the Company.
11. Confidential Information; Company Property. By
and in consideration of the salary and benefits to be provided by
the Company hereunder, including the severance arrangements set
forth herein, the Executive agrees that:
(a) 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 businesses, (i) obtained by the Executive during his
employment by the Company or any of its affiliated companies and
(ii) not otherwise public knowledge (other than by reason of an
unauthorized act by the Executive). After termination of the
Executive's employment with the Company, the Executive shall not,
without the prior written consent of the Company, unless
compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such
information, knowledge or data to anyone other than the Company
and those designated by it.
(b) Injunctive Relief and Other Remedies with Respect
to Covenants. The Executive acknowledges and agrees that the
covenants and obligations of the Executive with respect to
confidentiality and Company property relate to special, unique
and extraordinary matters and that a violation of any of the
terms of such covenants and obligations will cause the Company
irreparable injury for which adequate remedies are not available
at law. Therefore, the Executive agrees that the Company shall
(i) be entitled to an injunction, restraining order or such other
equitable relief (without the requirement to post bond)
restraining Executive from committing any violation of the
covenants and obligations contained in this Section 11 and (ii)
have no further obligation to make any payments to the Executive
hereunder following any material violation of the covenants and
obligations contained in this Section 11. These remedies are
cumulative and are in addition to any other rights and remedies
the Company may have at law or in equity. In connection with the
foregoing provisions of this Section 11, the Executive represents
that his economic means and circumstances are such that such
provisions will not prevent him from providing for himself and
his family on a basis satisfactory to him. In no event shall an
asserted violation of the provisions of this Section 11
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
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. The Company
shall require any successor to all or substantially all of the
business and/or assets of the Company, whether direct or
indirect, by purchase, merger, consolidation, acquisition of
stock, or otherwise, by an agreement in form and substance
satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent
as the Company would be required to perform if no such succession
had taken place.
13. Miscellaneous. (a) Effect of this Agreement on
Existing Employment Agreements. Any other agreements between the
Executive and the Company or any of its Subsidiaries relating to
Executive's employment by any such entity shall be automatically
superseded upon the occurrence of the Effective Date, including,
but not limited to, that certain Employment Agreement between the
parties dated as of October 1, 1994.
(b) Applicable Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of New
Jersey, applied without reference to principles of conflict of
laws.
(c) Arbitration. Any dispute or controversy arising
under or in connection with this Agreement shall be resolved by
binding arbitration. The arbitration shall be held in the City
of Atlantic City, New Jersey or in the City of Philadelphia,
Pennsylvania and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Voluntary
Labor Arbitration Rules of the American Arbitration Association
then in effect at the time of the arbitration, and otherwise in
accordance with principles which would be applied by a court of
law or equity. The arbitrator shall be acceptable to both the
Company and the Executive. If the parties cannot agree on an
acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators, one appointed by each of the parties and the
third appointed by the other two arbitrators.
(d) Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal
representatives.
(e) Entire Agreement. This Agreement constitutes the
entire agreement between the parties hereto with respect to the
matters referred to herein. No other agreement relating to the
terms of the Executive's employment by the Company, oral or
otherwise, shall be binding between the parties unless it is in
writing and signed by the party against whom enforcement is
sought. There are no promises, representations, inducements or
statements between the parties other than those that are
expressly contained herein. The Executive acknowledges that he
is entering into this Agreement of his own free will and accord,
and with no duress, that he has read this Agreement and that he
understands it and its legal consequences.
(f) Notices. All notices and other communications
hereunder 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: at the home address of the
Executive noted on the records of
the Company
If to the Company: Atlantic Energy, Inc.
6801 Black Horse Pike
Pleasantville, New Jersey 08232
Attention: Secretary
with a copy to: Simpson Thacher & Bartlett
425 Lexington Avenue
New York, York, NY 10019
Attention: Alvin H. Brown, Esq.
or to such other address as either party shall have furnished to
the other in writing in accordance herewith. Notice and
communications shall be effective when actually received by the
addressee.
(g) Tax Withholding. The Company may withhold from
any amounts payable under this Agreement such Federal, state or
local taxes as shall be required to be withheld pursuant to any
applicable law or regulation.
(h) Severability; Reformation. In the event that one
or more of the provisions of this Agreement shall become invalid,
illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein
shall not be affected thereby. In the event that any of the
provisions of any of Section 11(a) are not enforceable in
accordance with its terms, the Executive and the Company agree
that such Section shall be reformed to make such Section
enforceable in a manner which provides the Company the maximum
rights permitted at law.
(i) Waiver. Waiver by any party hereto of any breach
or default by the other party of any of the terms of this
Agreement shall not operate as a waiver of any other breach or
default, whether similar to or different from the breach or
default waived. No waiver of any provision of this Agreement
shall be implied from any course of dealing between the parties
hereto or from any failure by either party hereto to assert its
or his rights hereunder on any occasion or series of occasions.
(j) Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original but all
of which together shall constitute one and the same instrument.
(k) Captions. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his
hand and the Company has caused this Agreement to be executed in
its name on its behalf, and its corporate seal to be hereunto
affixed and attested by its Secretary, all as of the day and year
first above written.
ATTEST: Atlantic Energy, Inc.
By:/s/ J. Micahel Galvin, Jr.
Secretary J. Michael Galvin, Jr.
(Seal) Title: Chairman, Personnel &
Benefits Committee
By:/s/ J. L. Jacobs
J. L. Jacobs
Title: President & Chief
Executive Officer
EXECUTIVE:
/s/ James E. Franklin II
James E. Franklin II
SUPPLEMENT TO EMPLOYMENT AGREEMENT
BETWEEN
ATLANTIC ENERGY, INC. and JAMES E. FRANKLIN II
Dated August 10, 1995
THIS AGREEMENT SUPPLEMENT is entered into this 10th day of
August, 1995 by and between ATLANTIC ENERGY, INC., a New Jersey
corporation (the "Company") and JAMES E. FRANKLIN II (the
"Executive") and is a supplement to that Employment Agreement
dated
the same date hereof (the "Employment Agreement").
In consideration of the mutual promises and covenants herein
contained and as contained in the Employment Agreement, the
adequacy
and sufficiency of which is deemed by the parties to be fair and
reasonable and to constitute due consideration, the Company and
the
Executive hereby agree as follows:
1. Capitalized Terms. Capitalized terms, when used
herein,
shall have the same meaning as in the Employment Agreement.
2. Agreement Not To Compete. The Executive hereby
represents,
covenants and warrants to the Company that, for a period of one
(1)
year following the Date of Termination Executive shall not
undertake
any activity, employment, task or assignment, whether through
ownership, employment, consulting arrangement or otherwise, with
any
person or entity engaged in any business activity in competition
with
the Company or any of its subsidiaries or affiliates. This
covenant
not to compete is limited to the geographic area which, as of the
date of this Agreement Supplement, comprises the Pennsylvania-New
Jersey-Maryland Interconnection area and is also intended to
include
the southeastern portion of the State of New York which lies
south of
the northern most boundary line of the Commonwealth of
Pennsylvania.
It is the intent of this covenant not to compete that
the
Executive will not, during the one year period following Date of
Termination and within the geographical limits hereinabove
described,
directly or indirectly engage, participate or make any financial
investments in, or become employed by or render (whether or not
for
compensation) any consulting, advisory or other services to or
for
the benefit of any person, firm or corporation, or otherwise
engage
in any business activity which directly or indirectly competes
with
any of the business operations or activities in which the Company
or
any of its subsidiaries or affiliates is engaged as of the Date
of
Termination, nor any business in which the Company or any of its
subsidiaries or affiliates is actively engaged in pursuing or
developing as of the Date of Termination.
Nothing contained herein is intended to restrict the
Executive from making any investments in any corporation,
partnership
or other business enterprise whose outstanding capital stock or
other
equity interests are listed or admitted to unlisted trading
privileges on a national securities exchange or included for
quotation through an inter-dealer quotation system of a
registered
national securities association, provided that such investment
(i)
represents less than five percent (5%) of the aggregate
outstanding
capital stock or other equity interests of such corporation,
partnership or business enterprise and (ii) does not otherwise
provide Executive or any affiliate of Executive with the right or
power (whether or not exercised) to influence, direct or cause
the
direction of the management policies and/or affairs of any such
business or enterprise which is or might directly or indirectly
compete with any business, operations or activities of the
Company or
any of its subsidiaries and affiliates.
IN WITNESS WHEREOF, intending to be legally bound the
Executive
has hereunto set his hand and the Company has caused this
Agreement
to be executed in its name on its behalf, and its corporate seal
to
be hereunto affixed and attested by its Secretary, all as of the
day
and year first above written.
ATTEST: ATLANTIC ENERGY, INC.
(Seal)
_____________________ BY:/s/ J. Michael Galvin, Jr.
J. Michael Galvin, Jr.
Chairman, Personnel & Benefits
Committee
BY:/s/ J. L. Jacobs
J. L. Jacobs
President & Chief Executive Officer
EXECUTIVE:
/s/ James E. Franklin II
James E. Franklin II