Exhibit 10-1
SEPARATION AGREEMENT
THIS SEPARATION AGREEMENT (this "Agreement") is entered into
as of April 23, 2002 between Exelon Corporation, a Pennsylvania corporation (the
"Company"), and Corbin A. McNeill, Jr. (the "Executive").
W I T N E S S E T H:
WHEREAS, Executive currently serves as Chairman and Co-Chief
Executive Officer of the Company and as a member of its Board of Directors; and
WHEREAS, the Company and Executive desire to set forth herein
their mutual agreement with respect to all matters relating to Executive's
retirement, resignation and separation from the Company and its affiliates;
NOW, THEREFORE, in consideration of the mutual promises and
agreements contained herein, the adequacy and sufficiency of which are hereby
acknowledged, the Company and Executive agree as follows:
1. Retirement; Resignation; Termination of Employment.
Executive hereby resigns, effective as of April 23, 2002, as Chairman and
Co-Chief Executive Officer and as a member of the Board of Directors of the
Company, as Chairman and President of Exelon Generation Company, LLC ("Genco"),
from all other positions (if any) with the Company and from all other
directorships and positions (if any) with Genco and the Company's other
subsidiaries and affiliates. Executive shall continue to be employed by the
Company until (and including) April 23, 2002 (the "Employment Termination
Date"), at which time Executive shall cease to be an employee of, or have any
other position with, the Company, its subsidiaries or their affiliates.
2. Payment of Accrued Amounts. The Company shall pay to
Executive not later than three days after the Employment Termination Date the
following amounts:
(a) $8,576.92, which the Company represents and warrants
equals the portion of his annual salary that has accrued but is unpaid as of the
Employment Termination Date; and
(b) $1,500,300, which the Company represents and warrants
equals the greatest of (i) the annual incentive award paid to Executive for
2001, (ii) the average of the annual incentive awards paid to the Executive for
calendar years 2001, 2000 and 1999 and (iii) Executive's target annual incentive
award for 2002 (such greatest amount being referred to herein as the "Formula
Annual Incentive").
3. Severance Payment. Provided that Executive has not revoked
the releases contained in Section 15(a), the Company shall pay to Executive, not
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less than eight and no more than 15 days following the date of Executive's
execution of this Agreement, a lump sum cash amount equal to $7,845,900,
representing the product of three times the sum of (a) $1,115,000, representing
Executive's annual base salary during calendar year 2001, plus (b) his Formula
Annual Incentive.
4. Tax Withholding. The Company shall deduct from the amounts
payable to Executive pursuant to this Agreement the amount of all required
federal, state and local withholding taxes in accordance with Executive's Form
W-4 on file with the Company (as such form may be modified by Executive from
time to time) and all applicable social security and Medicare taxes. The Company
shall be entitled to withhold from the shares of common stock of the Company to
be delivered to Executive pursuant to Sections 6(b) and 6(c) a number of shares
of common stock of the Company having a value (based upon the closing price of a
share of the Company's common stock as reported on the New York Stock Exchange
on the Employment Termination Date) equal to the minimum amount of all required
federal, state and local withholding taxes and all applicable social security
and Medicare taxes with respect to the lapse of forfeiture conditions applicable
to shares of phantom stock and the vesting of performance shares. In calculating
the amount of withholding on the payment of the SERP Benefit (as hereinafter
defined), the Company will, unless otherwise required by law or regulation (a)
honor the Form W-4 filed by Executive prior to such payment and (b) take into
account all withholding allowances claimed on that W-4.
5. Outplacement Assistance. The Company shall, in lieu of
engaging a professional outplacement organization to provide individual
outplacement services to Executive for a period of up to twelve months following
the Employment Termination Date, pay to Executive on the Employment Termination
Date the sum of $50,000.
6. Stock Awards.
(a) Each of Executive's options to purchase common stock of
the Company granted pursuant to (i) the PECO Energy Company 1998 Stock Option
Plan or the PECO Energy Company Long-Term Incentive Plan, including without
limitation the options originally granted as of May 29, 1992, March 1, 1993,
February 28, 1994, February 27, 1995, February 26, 1996, February 24, 1997,
February 23, 1998 and February 29, 2000, (ii) the Exelon Corporation Long-Term
Incentive Plan, including without limitation the options originally granted as
of October 20, 2000, January 2, 2001 and January 28, 2002, or (iii) any other
plan or agreement, shall (A) to the extent exercisable on the Employment
Termination Date, remain exercisable until the scheduled expiration date of such
option as specified in the grant agreement or plan (as applicable) relating
thereto (which shall not be accelerated by reason of the retirement, resignation
and termination of employment contemplated hereby) and (B) to the extent not
fully exercisable as of the Employment Termination Date, immediately become
fully exercisable and thereafter remain exercisable until the scheduled
expiration date of such option as specified in the grant agreement or plan (as
applicable) relating thereto (which shall not be accelerated by reason of the
retirement, resignation and termination of employment contemplated hereby).
(b) All forfeiture conditions which as of the Employment
Termination Date are applicable to any deferred stock unit, restricted stock or
restricted share units awarded to Executive by the Company or by PECO Energy
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Company, including without limitation any shares of phantom stock of the Company
issued upon the conversion, pursuant to the terms of the PECO Energy Company
Long-Term Incentive Plan, of the 25,000 shares of restricted stock originally
granted as of February 23, 1999, 25,000 shares of restricted stock originally
granted as of February 29, 2000, and 32,500 shares of restricted stock
originally granted as of September 26, 2000, shall lapse as of the Employment
Termination Date.
(c) As of the Employment Termination Date, Executive shall
become fully vested in 73,175 shares of common stock of the Company,
representing grants of performance shares pursuant to the Company's Long Term
Performance Share Award Program, of which prior to the Employment Termination
Date 18,175 shares relating to the grant for calendar year 2001 were unvested
and 27,500 shares relating to the target grant for each of calendar years 2002
and 2003 were unvested.
7. Retirement Benefits.
(a) Executive shall receive a retirement benefit (the "SERP
Benefit") from the Company determined pursuant to Section 7(b).
(b) The SERP Benefit to be provided to Executive during any
year shall equal an amount which, when added to all other retirement benefits
provided to Executive by the Company and its affiliates during such year
(including payments under the PECO Energy Company Service Annuity provisions of
the Exelon Corporation Retirement Program, the PECO Energy Company Supplemental
Pension Benefit Plan, any Social Security supplement paid by PECO Energy Company
until Executive attains age 65, and any other sources), results in an aggregate
annual retirement benefit equal to the annual retirement benefit that would have
been payable under the PECO Energy Company Service Annuity provisions of the
Exelon Corporation Retirement Program (including under the PECO Energy Company
Supplemental Pension Benefit Plan) as in effect on March 10, 1998, calculated as
though Executive had:
(i) attained age 65,
(ii) accrued 37 years of service and
(iii) received the lump-sum severance benefit specified in
Section 3 in equal monthly installments during the period from the
Employment Termination Date through the third anniversary of the
Employment Termination Date.
(c) Executive shall receive the SERP Benefit as a lump-sum
amount, payable on September 30, 2002. The Company represents and warrants that
(i) the SERP Benefit payable as a lump-sum amount on September 30, 2002 equals
$18,094,232 and (ii) the SERP Benefit that would be payable as a lump-sum amount
on September 30, 2002, calculated without making the assumptions set forth in
Sections 7(b)(i), (ii) and (iii), equals $14,052,910 (the excess of the amount
in Section 7(c)(i) over the amount in Section 7(c)(ii) being the "Enhanced SERP
Benefit").
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8. Employee and Other Benefits.
(a) Until the third anniversary of the Employment Termination
Date, (i) Executive (and his family) shall be eligible to participate in, and
shall receive benefits under, the welfare benefit plans, practices, policies and
programs provided by the Company or its subsidiaries (including without
limitation, medical, prescription, dental, vision care, disability, salary
continuance, employee life, group life, dependent life, accidental death and
travel accident insurance plans and programs) generally available to senior
executives of the Company as of the Employment Termination Date (all such
welfare benefit plans, practices, policies and programs, collectively, the
"Plans"), on the same basis as if Executive had remained as Chairman and
Co-Chief Executive Officer and as a member of the Board of Directors of the
Company until the end of such three-year period, and (ii) Executive shall be
entitled to estate and financial planning services and tax preparation services
on the same basis as if Executive had remained as Chairman and Co-Chief
Executive Officer and a member of the Board of Directors of the Company until
the end of such three-year period; provided, however, that the Company shall
provide at no cost to Executive an amount of term life insurance coverage that,
when added to the coverage available at no cost to Executive under the Company's
group or employee life plans or programs, equals $3,345,000 (representing three
times the Executive's annual base salary); and provided further that, until
December 31, 2003, participation in such welfare benefit plans and practices,
policies and programs shall be on terms no less favorable than those available
to John W. Rowe. In the event that some or all of such benefits cannot be made
available by the Company to Executive during the period ending on the third
anniversary of the Employment Termination Date, the Company shall pay to
Executive an amount equal to the economic equivalent of such unavailable
benefits. Following the Employment Termination Date, the Company shall continue
to pay the lease payments, until the end of the term of the lease, required by
the Company's lease of the Acura MDX automobile used by Executive, and Executive
shall continue to have use of such automobile at his own expense (including,
without limitation, the expense of operation, maintenance and insurance, but not
including such lease payments) until the end of the term of the lease. At the
end of such lease term, the Company shall assign to Executive the Company's
right (to the extent such right is assignable) to purchase such automobile in
accordance with the terms of such lease.
(b) On and after the third anniversary of the Employment
Termination Date, Executive and his spouse shall each be entitled to
Post-Retirement Health Care Coverage for the remainder of their respective
lives. Such coverage shall not duplicate any benefits that may then be available
to Executive and his spouse under Section 8(a) and shall be secondary to any
coverage provided by any other employer or Medicare. For purposes of this
Section 8(c), "Post-Retirement Health Care Coverage" means the medical, dental
and vision care coverage provided by the Company from time to time to its
retired senior executives who have retired at or after March 10, 1998.
(c) The Company shall pay to Executive, not more than 60 days
after the Employment Termination Date, his balance in the Company's Deferred
Compensation Plan. The Company represents and warrants that such balance was
$6,070,917.34 on March 31, 2002.
(d) If Executive is entitled to any benefit that is (i) vested
or accrued on the Employment Termination Date under any employee benefit plan of
the Company or any of its subsidiaries and (ii) not expressly referred to in
this Agreement, such benefit shall be provided to Executive in accordance with
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the terms of such employee benefit plan. The Company represents that the terms
of this Agreement comply in all respects with the Company's obligations under
Section 6.16 of the Amended and Restated Agreement and Plan of Exchange and
Merger dated as of October 20, 2000 among PECO Energy Company, the Company and
Unicom Corporation (the "Merger Agreement").
9. Restrictive Covenants.
(a) Confidentiality.
(i) Executive acknowledges that it is the policy of the
Company and its Affiliates (as defined in Section 9(a)(iv)) to maintain
as secret and confidential all Confidential Information (as defined in
Section 9(a)(iv)), and that Confidential Information has been developed
at substantial cost and effort to the Company and its Affiliates.
Executive acknowledges that he has had access to Confidential
Information with respect to the Company and its Affiliates, which
information is a valuable and unique asset of the Company and its
Affiliates, and that disclosure of such Confidential Information would
cause irreparable damage to the business and operations of the Company
and its Affiliates.
(ii) Executive acknowledges that the Confidential Information
is, as between the Company and its Affiliates and Executive, the
exclusive property of the Company and its Affiliates.
(iii) From the date hereof, Executive:
(1) shall not, directly or indirectly, divulge, furnish
or make accessible to any Person (as defined in Section
9(a)(iv)) any Confidential Information (except as may be
compelled by applicable law or administrative regulation;
provided that Executive, to the extent not prohibited from
doing so by applicable law or administrative regulation, shall
give the Company written notice of the information to be so
disclosed as far in advance of its disclosure as is
practicable, shall cooperate with the Company in its efforts
to protect the information from disclosure, and shall limit
the disclosure of such information to the minimum disclosure
required by law or administrative regulation unless the
Company agrees in writing to a greater level of disclosure);
(2) shall not use for his own benefit in any manner, any
Confidential Information;
(3) shall not cause any such Confidential Information to
become publicly known; and
(4) shall take all reasonable steps to safeguard such
Confidential Information and to protect it against disclosure,
misuse, loss and theft.
(iv) For purposes of this Agreement:
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"Affiliate" means, when used with reference to any Person, any
other Person directly or indirectly controlling, controlled by, or
under direct or indirect common control with, the referent Person or
such other Person, as the case may be. For the purposes of this
definition, the term "control," when used with respect to any Person,
means the power to direct or cause the direction of management or
policies of such Person, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
"Confidential Information" means any information not generally
known in the relevant trade or industry, which was obtained from the
Company or any Company Affiliate, or which was learned, discovered,
developed, conceived, originated or prepared during or as a result of
the performance of any services by Executive on behalf of the Company
or any Company Affiliate and which:
(1) relates to one or more of the following:
(A) trade secrets of the Company or an Affiliate thereof
or any customer or supplier of the Company or an Affiliate
thereof;
(B) existing or contemplated products, services,
technology, designs, processes, formulae, algorithms, research
or product developments of the Company or an Affiliate thereof
or any customer or supplier of the Company or an Affiliate
thereof;
(C) business plans, sales or marketing methods, methods
of doing business, customer lists, customer usages and/or
requirements, supplier information of the Company or an
Affiliate thereof or any customer or supplier of the Company
or an Affiliate thereof; or
(2) the Company or an Affiliate thereof or any customer or
supplier of the Company or an Affiliate thereof may reasonably have the
right to protect by patent, copyright or by keeping it secret and
confidential.
Confidential Information does not include any information that is or
may become publicly known other than through the improper actions of
Executive. Confidential Information represents trade secrets subject to
protection under the Uniform Trade Secrets Act, as adopted by the State
of Illinois, or to any comparable protection afforded by applicable
laws.
"Person" means any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust,
unincorporated organization, association, corporation, institution,
entity or government (whether federal, state, county, municipal or
otherwise).
(b) Noncompetition.
(i) During the period ending on the second anniversary of the
Employment Termination Date, Executive shall not, directly or
indirectly, in any capacity, engage or participate in, become employed
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by, serve as a director of, or render advisory or consulting or other
services in connection with, any Competitive Business (as defined in
Section 9(b)(iii)), except that nothing in this Section 9(b) shall
restrict the ability of Executive to serve as a director, member of a
committee of the board of directors or non-executive chairman of the
board of Enron Corporation ("Enron") or, if the Company provides
Executive with its prior express written consent, which consent shall
not be unreasonably withheld or delayed (the "Company Consent"), any
entity that is spun off by Enron (an "Enron Spin-Off"), provided that
(A) in so serving during such period, Executive shall recuse himself
from the consideration of any matter relating to the Company,
including, without limitation, the matters or transactions relating to
a restructuring of Sithe Independence Power Partners, L.P. or otherwise
relating to the Sithe Independence Power Project, and shall abide by
Sections 9(a), 9(c) and 11, (B) this exception shall not apply to
service by Executive to Enron or an Enron Spin-Off in any other
capacity, including, without limitation, as an officer or executive
chairman of the board, (C) if Executive becomes a director of Enron or
non-executive chairman of the board of Enron or, with the Company
Consent, an Enron Spin-Off, amounts equal, in the aggregate, to the
amounts of all cash compensation earned by Executive for service to
Enron or, with the Company Consent, an Enron Spin-Off in any such
capacity during such portion, if any, of the two-year period commencing
on the Employment Termination Date during which Executive serves in any
such capacity, reduced by all applicable federal and state taxes and
all unreimbursed expenses incurred by Executive in the performance of
his duties in any such capacity, shall be paid by Executive to the
Company promptly after such amounts of cash compensation are paid to
Executive by Enron or the Enron Spin-Off, (D) if Executive becomes a
director of Enron or non-executive chairman of the board of Enron or,
with the Company Consent, an Enron Spin-Off, all non-cash compensation
earned by Executive for service to Enron or, with the Company Consent,
an Enron Spin-Off in any such capacity during such portion, if any, of
the two-year period commencing on the Employment Termination Date
during which Executive serves in any such capacity shall be donated by
Executive to one or more tax-exempt charities or charitable foundations
of his choice promptly after such non-cash compensation is paid to
Executive by Enron or the Enron Spin-Off and (E) at least five business
days prior to serving during such period as a director or non-executive
chairman of Enron or, with the Company Consent, an Enron Spin-Off,
Executive shall give written notice to the Company of his intention to
do so, and the Company shall have the right to deliver to Enron or the
Enron Spin-Off, as the case may be, a copy of this Section 9.
(ii) During the period ending on the second anniversary of the
Employment Termination Date, Executive shall not at any time make any
financial investment, whether in the form of equity or debt, or own any
interest, directly or indirectly, in any Competitive Business. Nothing
in this subsection shall, however, restrict Executive from making an
investment in any Competitive Business if such investment does not (i)
represent more than 1% of market value of the outstanding capital stock
or debt (as applicable) of such Competitive Business and (ii) give
Executive any right or ability, directly or indirectly, to control or
influence the policy decisions of any Competitive Business.
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(iii) For purposes of this Agreement, "Competitive Business"
means as of any date any Person (and any branch, office or operation
thereof) which engages in, or proposes to engage in (i) the production,
transmission, distribution, marketing or sale of electricity or (ii)
any other business engaged in by the Company or its Affiliates prior to
the Employment Termination Date which represents for calendar year 2000
or 2001, or is projected by the Company (as reflected in a business
plan adopted by the Company or any Affiliate thereof before the
Employment Termination Date) to yield during any year during the first
three-fiscal year period commencing on or after the Employment
Termination Date, more than 5% of the gross revenues of the Company,
and which is located (i) anywhere in the United States, or (ii)
anywhere outside of the United States where the Company or any
Affiliate thereof is then engaged in, or proposes to engage in, any of
such activities.
(c) Non-Solicitation. (i) During the period ending on the
second anniversary of the Employment Termination Date, Executive shall not,
directly or indirectly:
(1) encourage any Key Employee (as defined in Section
9(c)(ii)) to terminate his or her employment;
(2) employ, engage as a consultant or adviser, or solicit
the employment or engagement as a consultant or adviser of,
any Key Employee (other than by the Company or its
Affiliates), or cause any Person to do any of the foregoing;
(3) establish a business with, or encourage others to
establish a business with, any Key Employee; or
(4) interfere with the relationship of the Company or any
of its Affiliates with, or endeavor to entice away from, the
Company or any of its Affiliates any Person who or which at
any time during the period commencing one year prior to March
16, 1998 was a material customer or material supplier of, or
maintained a material business relationship with, the Company,
PECO Energy Company or any of their Affiliates.
(ii) For purposes of this Agreement, "Key Employee" means any
employee of the Company who is Group Level 12 or above ("Group Level")
or any employee of any Affiliate of the Company who is at a level which
is the equivalent of Group Level.
(d) Reasonableness of Restrictive Covenants.
(i) Executive acknowledges that the covenants contained in
Sections 9(a), 9(b) and 9(c) are reasonable in the scope of the
activities restricted, the geographic area covered by the restrictions,
and the duration of the restrictions, and that such covenants are
reasonably necessary to protect the Company's legitimate interests in
its Confidential Information and in its relationships with employees,
customers and suppliers. Executive further acknowledges such covenants
are essential elements of this Agreement and that, but for such
covenants, the Company would not have entered into this Agreement.
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(ii) The Company and Executive have each consulted with their
respective legal counsel and have been advised concerning the
reasonableness and propriety of such covenants. Executive acknowledges
that his observance of the covenants contained in Sections 9(a), 9(b)
and 9(c) will not deprive him of the ability to earn a livelihood or to
support his dependents.
(e) Right to Injunction; Survival of Undertakings.
(i) In recognition of the confidential nature of the
Confidential Information, in recognition of the necessity of the
limited restrictions imposed by Sections 9(a), 9(b) and 9(c) and in
recognition of the nature of the restriction imposed by Section 11, the
parties agree that it would be impossible to measure solely in money
the damages which the Company would suffer if Executive were to breach
any of his obligations under such Sections. Executive acknowledges that
any breach of any provision of such Sections would irreparably injure
the Company. Accordingly, Executive agrees that if he breaches any of
the provisions of such Sections, the Company shall be entitled, in
addition to any other remedies to which the Company may be entitled
under this Agreement or otherwise, to an injunction to be issued by a
court of competent jurisdiction, to restrain any breach, or threatened
breach, of such provisions, and Executive hereby waives any right to
assert any claim or defense that the Company has an adequate remedy at
law for any such breach.
(ii) If a court determines that any of the covenants included
in this Section 9 is unenforceable in whole or in part because of such
covenant's duration or geographical or other scope, such court shall
have the power to reduce the duration or scope of such provision, as
the case may be, so as to cause such covenant to be thereafter
enforceable.
(f) Breach of Covenants; Exculpation. In the event of (1) a
willful and material breach by Executive of any of the covenants contained in
Section 9(a), 9(b) or 9(c) or any breach by Executive of the covenant contained
in Section 11, or (2) a failure by Executive to cure (to the fullest extent
curable) a non-willful breach of any of such covenants within 10 days after his
receipt of a written notice thereof from the Company, the Company shall be
entitled, after obtaining a final judicial determination (or, if the Company
reasonably determines, based upon the advice of counsel, that it is more likely
than not that each of the Circuit Court of Cook County, Illinois and the United
States District Court for the Northern District of Illinois will decline to
adjudicate the issue, a final decree in an arbitration proceeding conducted in
accordance with the rules of the American Arbitration Association, with such
arbitration proceeding to be conducted in Chicago, Illinois before a panel of
three arbitrators) to the effect that such action by the Company is appropriate
and consistent with the requirements and procedures set forth in this Agreement,
to take any or all of the following actions:
(i) discontinue the Enhanced SERP Benefit set forth in Section
7,
(ii) terminate any options to purchase common stock of the
Company then held by Executive, and
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(iii) require Executive to:
(1) repay to the Company all amounts previously received
by Executive pursuant to the Enhanced SERP Benefit at any time
on or after the Employment Termination Date, and
(2) pay to the Company an amount equal to the aggregate
"spread" on all options to purchase common stock of the
Company exercised on or after the first date on which the
Executive breached any of the covenants contained in Section
9(a), 9(b), 9(c) or 11 (the "Breach Date");
provided, however, that no benefits shall be discontinued or terminated nor
shall Executive have any monetary liability to the Company for any breach of the
covenants contained in Section 9(a), 9(b) or 9(c) for any act or failure to act,
including without limitation simple negligence or an error in judgment, if such
act or failure to act was done in good faith, with a reasonable belief that the
act, or failure to act, was in the best interest of the Company or was required
by applicable law or administrative regulations, and was not done primarily to
benefit Executive; and provided further that no action may be brought under this
Section 9(f) after the third anniversary of the Employment Termination Date in
the event of a willful and material breach by Executive, or a failure by
Executive to cure (to the fullest extent curable) a non-willful breach, of any
of the covenants contained in Section 9(a), 9(b) or 9(c) or after the sixth
anniversary of the Employment Termination Date in the event of any breach by
Executive of the covenant contained in Section 11. For purposes of clause
(iii)(2) of the preceding sentence, "spread" in respect of any option to
purchase common stock of the Company shall mean the product of the number of
shares of common stock of the Company as to which such option has been exercised
on or after the Breach Date multiplied by the difference between the closing
price of the Company's common stock on the exercise date (or if such common
stock did not trade on the New York Stock Exchange on the exercise date, the
most recent date on which such common stock did so trade) and the exercise price
of the option.
10. Nondisparagement. During the two-year period commencing on
the Employment Termination Date, Executive shall not (a) make any written or
oral statement that brings the Company or any of its Affiliates or the
employees, officers or agents of the Company or any of its Affiliates into
disrepute, or tarnishes any of their images or reputations or (b) publish,
comment upon or disseminate any statements suggesting or accusing the Company or
any of its Affiliates or any agents, employees or officers of the Company or any
of its Affiliates of any misconduct or unlawful behavior. This Section shall not
be deemed to be breached by testimony of Executive given in any judicial or
governmental proceeding which Executive reasonably believes to be truthful at
the time given or by any other action of Executive which he reasonably believes
is taken in accordance with the requirements of applicable law or administrative
regulation.
11. Standstill. Executive hereby agrees that, unless
specifically requested in writing in advance by the Company's Chief Executive
Officer or Board of Directors, Executive will not at any time during the period
ending on the fifth anniversary of the Employment Termination Date (and
Executive will not at any time during such period assist or encourage others to)
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participate, directly or indirectly, in any activity that Executive knows or
reasonably should anticipate, if consummated, would result in a Change in
Control. For purposes of this Section 11, a "Change in Control" shall have the
meaning set forth in Section 13(a)(iii). Nothing contained in this Section 11
shall in any manner restrict Executive from voting or disposing of any shares of
common stock of the Company beneficially owned by him, and no such vote or
disposition shall constitute a breach of this Section 11.
12. Other Employment; Other Plans. Executive shall not be
obligated to seek other employment or take any other action by way of mitigation
of the amounts payable to Executive under any provision of this Agreement. The
amounts payable hereunder shall not be reduced by any payments received by
Executive from any other employer; provided, however, that any continued welfare
benefits provided for by Section 8(a) shall not duplicate any benefits that are
provided to Executive and his family by such other employer on terms at least as
favorable to Executive as the terms under which such welfare benefits are
provided by the Company and shall be secondary to any such coverage provided by
such other employer. The provisions of this Section 12 will not limit the
entitlement of Executive to any other benefits available to Executive under any
benefit plan or practice, policy or program that is maintained by the Company or
any Company Affiliate in which Executive participates.
13. Certain Taxes.
(a) Gross-Up for Certain Taxes.
(i) If it is determined by the Company's independent auditors
that any monetary or other benefit received or deemed received by
Executive from the Company or any Affiliate thereof pursuant to this
Agreement or otherwise, whether or not in connection with a Change in
Control (such monetary or other benefits collectively, the "Potential
Parachute Payments"), is or will become subject to any excise tax under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any similar tax under any United States federal, state,
local or other law (such excise tax and all such similar taxes
collectively, "Excise Taxes"), then the Company shall, subject to
Sections 13(f) and 13(g), within five business days after such
determination, pay Executive an amount (the "Gross-Up Payment") equal
to the product of:
(1) the amount of such Excise Taxes multiplied by
(2) the Gross-Up Multiple (as defined in Section 13(d)).
The Gross-Up Payment is intended to compensate Executive for all Excise
Taxes payable by Executive with respect to Potential Parachute Payments
and all federal, state, local or other income, employment or other
taxes ("Taxes") or Excise Taxes payable by Executive with respect to
the Gross-Up Payment.
(ii) The determination of the Company's independent auditors
described in Section 13(a)(i), including the detailed calculations of
the amounts of the Potential Parachute Payments, Excise Taxes and
Gross-Up Payment and the assumptions relating thereto, shall be set
forth in a written certificate of such auditors (the "Company
11
Certificate") delivered to Executive. Executive or the Company may at
any time request the preparation and delivery to Executive of a Company
Certificate. The Company shall cause the Company Certificate to be
delivered to Executive as soon as reasonably possible after such
request.
(iii) For purposes of this Section 13, the term "Change in
Control" means any one or more of the following to occur after the date
of this Agreement:
(1) the acquisition by any Person (including for purposes
of this definition any "person" within the meaning of Section
13(d) (3) or 14(d) (2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (i) the then
outstanding shares of common stock of the Company (the
"Outstanding Common Stock") or (ii) the combined voting power
of the then-outstanding securities of the Company entitled to
vote generally in the election of the directors of the Company
(the "Outstanding Voting Securities"), but excluding (A) any
acquisition directly from the Company (excluding any
acquisition resulting from the exercise of an exercise,
conversion or exchange privilege unless the security being so
exercised, converted or exchanged was acquired directly from
the Company), (B) any acquisition by the Company, (C) any
acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation
controlled by the Company (a "Company Plan") or (D) any
acquisition by any corporation pursuant to a transaction which
complies with clauses (A), (B) and (C) of subsection (3) of
this definition; provided further, that for purposes of clause
(B), if any Person (other than the Company or any Company
Plan) shall become the beneficial owner of 20% or more of the
Outstanding Common Stock or 20% or more of the Outstanding
Voting Securities by reason of an acquisition by the Company,
and such Person shall, after such acquisition by the Company,
become the beneficial owner of any additional shares of the
Outstanding Common Stock or any additional Outstanding Voting
Securities (other than pursuant to any dividend reinvestment
plan or arrangement maintained by the Company) and such
beneficial ownership is publicly announced, such additional
beneficial ownership shall constitute a Change in Control;
(2) individuals who, as of the date of this Agreement,
constitute the Board of Directors of the Company (the
"Incumbent Board") cease for any reason to constitute at least
a majority of the Incumbent Board; provided that any
individual who becomes a director of the Company subsequent to
the date of this Agreement whose election, or nomination for
election by the Company's stockholders, was approved by the
vote of at least a majority of the directors then comprising
the Incumbent Board shall be deemed a member of the Incumbent
Board; and provided further, that any individual who was
initially elected as a director of the Company as a result of
an actual or threatened solicitation by a Person other than
the Board of Directors of the Company for the purpose of
opposing a solicitation by any other Person with respect to
the election or removal of directors, or any other actual or
12
threatened solicitation of proxies or consents by or on behalf
of any Person other than the Board of Directors of the Company
shall not be deemed a member of the Incumbent Board;
(3) consummation of a reorganization, merger or
consolidation or sale or other disposition of more than 50% of
the operating assets of the Company (determined on a
consolidated basis) other than in connection with a
sale-leaseback or other arrangement resulting in the continued
utilization of such assets (or the operating products of such
assets) by the Company (such reorganization, merger,
consolidation, sale or other disposition, a "Corporate
Transaction"); excluding, however, a Corporate Transaction
pursuant to which:
(A) all or substantially all of the individuals or
entities who are the beneficial owners, respectively, of
the Outstanding Common Stock and the Outstanding Voting
Securities immediately prior to such Corporate
Transaction will beneficially own, directly or
indirectly, more than 60% of, respectively, the
outstanding shares of common stock, and the combined
voting power of the outstanding securities of such
corporation entitled to vote generally in the election of
the directors of such corporation ("Voting Securities"),
as the case may be, of the corporation resulting from
such Corporate Transaction (including a corporation which
as a result of such transaction owns the Company or all
or substantially all of its assets either directly or
indirectly) in substantially the same proportions
relative to each other as their ownership, immediately
prior to such Corporate Transaction, of the Outstanding
Common Stock and the Outstanding Voting Securities, as
the case may be;
(B) no Person (other than the Company; any Company
Plan; the corporation resulting from such Corporate
Transaction; and any Person which beneficially owned,
immediately prior to such Corporate Transaction, directly
or indirectly, 20% or more of the Outstanding Common
Stock or the Outstanding Voting Securities, as the case
may be) will beneficially own, directly or indirectly,
20% or more of, respectively, the outstanding shares of
common stock of the corporation resulting from such
Corporate Transaction or the combined voting power of the
outstanding Voting Securities of such corporation; and
(C) individuals who were members of the Incumbent
Board will constitute at least a majority of the members
of the board of directors of the corporation resulting
from such Corporate Transaction; or
(4) approval by the stockholders of the Company of a plan
of complete liquidation or dissolution of the Company, other
than a plan of liquidation or dissolution which results in the
acquisition of all or substantially all the assets of the
Company by its Affiliates.
13
(b) Determination by Executive.
(i) If (1) the Company shall fail to deliver a Company
Certificate to Executive within 30 days after its receipt of his
written request therefor, or (2) at any time after Executive's receipt
of a Company Certificate, Executive disputes either (x) the amount of
the Gross-Up Payment set forth therein or (y) the determination set
forth therein to the effect that no Gross-Up Payment is due (whether by
reason of Section 13(g) or otherwise), then Executive may elect to
require the Company to pay a Gross-Up Payment in the amount determined
by Executive as set forth in an Executive Counsel Opinion (as defined
in Section 13(e)). Any such demand by Executive shall be made by
delivery to the Company of a written notice which specifies the
Gross-Up Payment determined by Executive (together with the detailed
calculations of the amounts of Potential Parachute Payments, Excise
Taxes and Gross-Up Payment and the assumptions relating thereto) and an
Executive Counsel Opinion regarding such Gross-Up Payment (such written
notice and opinion collectively, the "Executive's Determination").
Within 30 days after delivery of an Executive's Determination to the
Company, the Company shall either (1) pay Executive the Gross-Up
Payment set forth in the Executive's Determination (less the portion
thereof, if any, previously paid to Executive by the Company) or (2)
deliver to Executive a Company Certificate and a Company Counsel
Opinion (as defined in Section 13(e)), and pay Executive the Gross-Up
Payment specified in such Company Certificate. If for any reason the
Company fails to comply with the preceding sentence, the Gross-Up
Payment specified in the Executive's Determination shall be controlling
for all purposes.
(ii) If Executive does not request a Company Certificate, and
the Company does not deliver a Company Certificate to Executive, then
(1) the Company shall, for purposes of Section 13(g), be deemed to have
determined that no Gross-Up Payment is due and (2) Executive shall not
pay any Excise Taxes in respect of Potential Parachute Payments except
in accordance with Sections 13(f)(i) or 13(f)(iv).
(c) Additional Gross-Up Amounts. If for any reason (whether
pursuant to subsequently enacted provisions of the Code, final regulations or
published rulings of the Internal Revenue Service ("IRS"), a final judgment of a
court of competent jurisdiction, a determination of the Company's independent
auditors set forth in a Company Certificate or, subject to the last two
sentences of Section 13(b)(i), an Executive's Determination) it is later
determined that the amount of Excise Taxes payable by Executive is greater than
the amount determined by the Company or Executive pursuant to Section 13(a) or
13(b), as applicable, then the Company shall, subject to Sections 13(f) and
13(g), pay Executive an amount (which shall also be deemed a Gross-Up Payment)
equal to the product of:
(i) the sum of (1) such additional Excise Taxes and (2) any
interest, penalties, expenses or other costs incurred by Executive as a
result of having taken a position in accordance with a determination
made pursuant to Section 13(a) or 13(b), as applicable, multiplied by
(ii) the Gross-Up Multiple.
14
(d) Gross-Up Multiple. The Gross-Up Multiple shall equal a
fraction, the numerator of which is one (1.0), and the denominator of which is
one (1.0) minus the lesser of (i) the sum, expressed as a decimal fraction, of
the effective after-tax marginal rates of all Taxes and any Excise Taxes
applicable to the Gross-Up Payment or (ii) 0.80, it being intended that the
Gross-Up Multiple shall in no event exceed five (5.0). (If different rates of
tax are applicable to various portions of a Gross-Up Payment, the weighted
average of such rates shall be used.)
(e) Opinion of Counsel.
(i) "Executive Counsel Opinion" means an opinion of
nationally-recognized executive compensation counsel to the effect (1)
that the amount of the Gross-Up Payment determined by Executive
pursuant to Section 13(b) is the amount that a court of competent
jurisdiction, based on a final judgment not subject to further appeal,
is most likely to decide to have been calculated in accordance with
this Section 13 and applicable law and (2) if the Company has
previously delivered a Company Certificate to Executive, that there is
no reasonable basis or no substantial authority for the calculation of
the Gross-Up Payment set forth in the Company Certificate.
(ii) "Company Counsel Opinion" means an opinion of
nationally-recognized executive compensation counsel to the effect that
(1) the amount of the Gross-Up Payment set forth in the Company
Certificate is the amount that a court of competent jurisdiction, based
on a final judgment not subject to further appeal, is most likely to
decide to have been calculated in accordance with this Section 13 and
applicable law and (ii) for purposes of Section 6662 of the Code,
Executive has substantial authority to report on his federal income tax
return the amount of Excise Taxes set forth in the Company Certificate.
(f) Amount Increased or Contested.
(i) Executive shall notify the Company in writing (an
"Executive's Notice") of any claim by the IRS or other taxing authority
(an "IRS Claim") that, if successful, would require the payment by
Executive of Excise Taxes in respect of Potential Parachute Payments in
an amount in excess of the amount of such Excise Taxes determined in
accordance with Section 13(a) or 13(b), as applicable. Such Executive's
Notice shall include the nature and amount of such IRS Claim, the date
on which such IRS Claim is due to be paid (the "IRS Claim Deadline"),
and a copy of all notices and other documents or correspondence
received by Executive in respect of such IRS Claim. Executive shall
give his Executive's Notice as soon as practicable, but no later than
the earlier of (i) 10 business days after Executive first obtains
actual knowledge of such IRS Claim or (ii) five business days before
the IRS Claim Deadline; provided, however, that Executive's failure to
give such notice shall affect the Company's obligations under this
Section 13 only to the extent that the Company is actually prejudiced
by such failure. If at least one business day before the IRS Claim
Deadline the Company shall:
(1) deliver to Executive a Company Certificate to the
effect that the IRS Claim has been reviewed by the Company's
independent auditors and, notwithstanding the IRS Claim, the
15
amount of Excise Taxes, interest and penalties payable by
Executive is either zero or an amount less than the amount
specified in the IRS Claim,
(2) pay to Executive an amount (which shall also be
deemed a Gross-Up Payment) equal to the positive difference
between (x) the product of the amount of Excise Taxes,
interest and penalties specified in the Company Certificate,
if any, multiplied by the Gross-Up Multiple, and (y) the
portion of such product, if any, previously paid to Executive
by the Company, and
(3) direct Executive pursuant to Section 13(f)(iv) to
contest the balance of the IRS Claim,
then Executive shall pay only the amount, if any, of Excise Taxes,
interest and penalties specified in the Company Certificate. In no
event shall Executive pay an IRS Claim earlier than 30 days after
having given an Executive's Notice to the Company (or, if sooner, the
IRS Claim Deadline).
(ii) At any time after the payment by Executive of any amount
of Excise Taxes or related interest or penalties in respect of
Potential Parachute Payments (whether or not such amount was based upon
a Company Certificate, an Executive's Determination or an IRS Claim),
the Company may in its discretion require Executive to pursue a claim
for a refund (a "Refund Claim") of all or any portion of such Excise
Taxes, interest or penalties as the Company may specify by written
notice to Executive.
(iii) If the Company notifies Executive in writing that the
Company desires Executive to contest an IRS Claim or to pursue a Refund
Claim, Executive shall:
(1) give the Company all information that it reasonably
requests in writing from time to time relating to such IRS
Claim or Refund Claim, as applicable,
(2) take such action in connection with such IRS Claim or
Refund Claim (as applicable) as the Company reasonably
requests in writing from time to time, including accepting
legal representation with respect thereto by an attorney
selected by the Company, subject to the approval of Executive
(which approval shall not be unreasonably withheld or
delayed),
(3) cooperate with the Company in good faith to contest
such IRS claim or pursue such Refund Claim, as applicable,
(4) permit the Company to participate in any proceedings
relating to such IRS Claim or Refund Claim, as applicable, and
(5) contest such IRS Claim or prosecute such Refund Claim
(as applicable) to a determination before any administrative
tribunal, in court of initial jurisdiction and in one or more
16
appellate courts, as the Company may from time to time
determine in its discretion.
The Company shall control all proceedings in connection with such IRS
Claim or Refund Claim (as applicable) and in its discretion may cause
Executive to pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the IRS or other taxing
authority in respect of such IRS Claim or Refund Claim (as applicable);
provided that (i) any extension of the statute of limitations relating
to payment of taxes for the taxable year of Executive relating to the
IRS Claim is limited solely to such IRS Claim, (ii) the Company's
control of the IRS Claim or Refund Claim (as applicable) shall be
limited to issues with respect to which a Gross-Up Payment would be
payable, and (iii) Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the IRS or other taxing
authority.
(iv) The Company may at any time in its discretion direct
Executive to (1) contest the IRS Claim in any lawful manner or (2) pay
the amount specified in an IRS Claim and pursue a Refund Claim;
provided, however, that if the Company directs Executive to pay an IRS
Claim and pursue a Refund Claim, the Company shall advance the amount
of such payment to Executive on an interest-free basis and shall
indemnify Executive, on an after-tax basis, for any Taxes, Excise
Taxes, and any related interest or penalties imposed with respect to
such advance.
(v) The Company shall pay directly all legal, accounting and
other costs and expenses (including additional interest and penalties)
incurred by the Company or Executive in connection with any IRS Claim
or Refund Claim, as applicable, and shall indemnify Executive, on an
after-tax basis, for any Taxes, Excise Taxes and related interest and
penalties imposed on Executive as a result of such payment of costs and
expenses.
(g) Limitation on Gross-Up Payments.
(i) Notwithstanding any other provision of this Section 13, if
the aggregate After-Tax Amount (as defined below) of the Potential
Parachute Payments and Gross-Up Payment that, but for this Section
13(g), would be payable to Executive, does not exceed 110% of the
After-Tax Floor Amount (as defined below), then no Gross-Up Payment
shall be made to Executive and the aggregate amount of Potential
Parachute Payments payable to Executive shall be reduced (but not below
the Floor Amount) to the largest amount which would both (i) not cause
any Excise Taxes to be payable by Executive and (ii) not cause any
Potential Parachute Payments to become nondeductible by the Company by
reason of Section 280G of the Code (or any successor provision). For
purposes of the preceding sentence, Executive shall be deemed to be
subject to the highest effective after-tax marginal rate of Taxes.
(ii) For purposes of this Section:
17
"After-Tax Amount" means the portion of a specified amount
that would remain after payment of all Taxes and Excise Taxes paid or
payable by Executive in respect of such specified amount;
"Floor Amount" means the greatest pre-tax amount of Potential
Parachute Payments that could be paid to Executive without causing him
to become liable for any Excise Taxes in connection therewith; and
"After-Tax Floor Amount" means the After-Tax Amount of the
Floor Amount.
(h) Refunds. If, after the receipt by Executive of any payment
or advance of Excise Taxes by the Company pursuant to this Section 13, Executive
receives any refund with respect to such Excise Taxes, Executive shall (subject
to the Company's complying with any applicable requirements of Section 13(f))
promptly pay the Company the amount of such refund (together with any interest
paid or credited thereon after Taxes applicable thereto). If, after the receipt
by Executive of an amount advanced by the Company pursuant to Section 13(f), a
determination is made that Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify Executive in writing of
its intent to contest such determination within 30 days after the Company
receives written notice of such determination, then such advance 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. Any contest of a denial of refund shall be controlled by Section 13(f).
14. Consent to Jurisdiction. Executive agrees to submit
himself, and the Company agrees to submit itself, to the jurisdiction of the
courts of the State of Illinois in any action by the other to enforce an
arbitration award or to obtain injunctive or other relief.
15. Releases.
(a) Releases by Executive.
(i) Executive, on behalf of himself and anyone claiming
through him, hereby agrees not to sue the Company or any of its
divisions, subsidiaries, or other affiliated entities (whether or not
such entities are wholly owned), or the predecessors, successors or
assigns of any of them (hereinafter referred to as the "Company Entity
Released Parties"), and agrees to release and discharge, fully, finally
and forever, the Company Entity Released Parties from any and all
claims, causes of action, lawsuits, liabilities, debts, accounts,
covenants, contracts, controversies, agreements, promises, sums of
money, damages, judgments and demands of any nature whatsoever, in law
or in equity, both known and unknown, asserted or not asserted,
foreseen or unforeseen, which Executive ever had or may presently have
against any of the Company Entity Released Parties arising from the
beginning of time up to and including the effective date of this
Agreement, including, without limitation, all matters in any way
related to Executive's employment by the Company or his service as an
officer or director of the Company, the terms and conditions thereof,
any failure to promote Executive or the termination or cessation of
Executive's employment with the Company or his service as an officer or
director of the Company, and including, without limitation, any and all
18
claims arising under the Civil Rights Act of 1964, as amended, the
Civil Rights Act of 1991, the Civil Rights Act of 1866, the Age
Discrimination in Employment Act, the Older Workers' Benefit Protection
Act, the Family and Medical Leave Act, the Americans With Disabilities
Act, the Employee Retirement Income Security Act of 1974, the Illinois
Human Rights Act, the Chicago or Cook County Human Rights Ordinance,
the Pennsylvania Human Relations Act, the Philadelphia Fair Practices
Ordinance or any other federal, state, local or foreign statute,
regulation, ordinance or order, or pursuant to any common law doctrine;
provided, however, that nothing contained in this Section 15(a)(i)
shall apply to, or release the Company or any of the other Company
Entity Released Parties from, (A) any obligation of the Company or any
of the other Company Entity Released Parties contained in this
Agreement or the stock option agreements or restricted stock agreements
between the Company or any of the other Company Entity Released Parties
and Executive or (B) any vested or accrued benefit pursuant to any
employee benefit plan of the Company or any of the other Company Entity
Released Parties (such obligations and benefits collectively, the
"Unreleased Claims"). Executive agrees that he has no present or future
right to employment with the Company or any of the other Company Entity
Released Parties and that he will not apply for or otherwise seek
employment with any of them.
(ii) Executive, on behalf of himself and anyone claiming
through him, hereby agrees not to sue any of the past, present or
future directors, officers, administrators, trustees, fiduciaries,
employees, agents, attorneys or shareholders of any of the Company
Entity Released Parties (hereinafter referred to as the "Company
Individual Released Parties"; the Company Entity Released Parties and
the Company Individual Released Parties are sometimes collectively
referred to as the "Company Released Parties" ) with respect to
Executive's employment by the Company or his service as an officer or
director of the Company, the terms and conditions thereof, any failure
to promote Executive or the termination or cessation of Executive's
employment with the Company or his service as an officer or director of
the Company, and agrees to release and discharge, fully, finally and
forever, the Company Individual Released Parties from any and all
claims, causes of action, lawsuits, liabilities, debts, accounts,
covenants, contracts, controversies, agreements, promises, sums of
money, damages, judgments and demands of any nature whatsoever, in law
or in equity, both known and unknown, asserted or not asserted,
foreseen or unforeseen, which Executive ever had or may presently have
against any of the Company Individual Released Parties arising from the
beginning of time up to and including the effective date of this
Agreement, but only to the extent such claims, causes of action,
lawsuits, liabilities, debts, accounts, covenants, contracts,
controversies, agreements, promises, sums of money, damages, judgments
and demands are related to Executive's employment by the Company or his
service as an officer or director of the Company, the terms and
conditions thereof, any failure to promote Executive or the termination
or cessation of Executive's employment with the Company or his service
as an officer or director of the Company, including, without
limitation, claims relating thereto arising under the Civil Rights Act
of 1964, as amended, the Civil Rights Act of 1991, the Civil Rights Act
of 1866, the Age Discrimination in Employment Act, the Older Workers'
Benefit Protection Act, the Family and Medical Leave Act, the Americans
19
With Disabilities Act, the Employee Retirement Income Security Act of
1974, the Illinois Human Rights Act, the Chicago or Cook County Human
Rights Ordinance, the Pennsylvania Human Relations Act or the
Philadelphia Fair Practices Ordinance; provided, however, that nothing
contained in this Section 15(a)(ii) shall apply to, or release the
Company Individual Released Parties from, any of the Unreleased Claims.
(iii) The consideration offered herein is accepted by
Executive as being in full accord, satisfaction, compromise and
settlement of any and all claims or potential claims of Executive
released herein (the "Released Claims"), and Executive expressly agrees
that he is not entitled to, and shall not receive, any further recovery
of any kind from the Company or any of the other Company Released
Parties with respect to the Released Claims, and that in the event of
any further proceedings whatsoever based upon any of the Released
Claims, neither the Company nor any of the other Company Released
Parties shall have any further monetary or other obligation of any kind
to Executive, including any obligation for any costs, expenses or
attorneys' fees incurred by or on behalf of Executive, except as set
forth in Sections 17 and 31.
(b) Release by Company. The Company, the Company's divisions,
subsidiaries, and other affiliated entities (whether or not such entities are
wholly owned), and the predecessors, successors and assigns of any of them, on
behalf of themselves and anyone claiming through them (the "Company Releasing
Parties"), hereby agree not to sue the Executive, his spouse, personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees or legatees, or the Beneficiary (as hereinafter defined) (hereinafter
referred to as the "Executive Released Parties") based upon facts that are known
on the date of this Agreement by any director or executive officer (as defined
in Rule 3b-7 under the Exchange Act) of the Company as of the date of this
Agreement ("Known Facts"), and agree to release and discharge, fully, finally
and forever, the Executive Released Parties from any and all claims, causes of
action, lawsuits, liabilities, debts, accounts, covenants, contracts,
controversies, agreements, promises, sums of money, damages, judgments and
demands of any nature whatsoever, in law or in equity, both known and unknown,
asserted or not asserted, foreseen or unforeseen, which the Company Releasing
Parties ever had or may presently have against any of the Executive Released
Parties arising from the beginning of time up to and including the effective
date of this Agreement, including, without limitation, all matters in any way
related to Executive's employment by the Company or his service as an officer or
director of the Company or the terms and conditions thereof, but only to the
extent such claims, causes of action, lawsuits, liabilities, debts, accounts,
covenants, contracts, controversies, agreements, promises, sums of money,
damages, judgments and demands are based upon Known Facts; provided, however,
that nothing contained in this Section 15(b) shall apply to, or release the
Executive Released Parties from, any obligation of Executive contained in this
Agreement.
16. Authority.
(a) Executive expressly represents and warrants that (i) he is
the sole owner of the actual and alleged claims, demands, rights, causes of
action and other matters that are released by him herein; that the same have not
been transferred or assigned or caused to be transferred or assigned to any
other person, firm, corporation or other legal entity; (ii) he has the full
20
right and power to grant, execute and deliver this Agreement; (iii) the
execution, delivery and performance of this Agreement by Executive does not and
will not conflict with, breach, violate or cause a default under any contract,
agreement, instrument, order, judgment or decree to which Executive is a party
or by which he is bound; (iv) Executive is not a party to or bound by any
agreement with any other person or entity that would interfere with the
execution, delivery or performance of this Agreement by Executive; and (v)
assuming the execution and delivery of this Agreement by the Company, this
Agreement shall be the valid and binding obligation of Executive, enforceable
against the Executive in accordance with its terms, except to the extent its
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting or relating to the enforcement of
creditors' rights generally and by the effect of general principles of equity
(regardless of whether enforcement is considered in a proceeding in equity or at
law).
(b) The Company expressly represents and warrants that:
(i) the Company Releasing Parties are the sole owners of the
actual and alleged claims, demands, rights, causes of action and other
matters that are released by them herein; and that the same have not
been transferred or assigned or caused to be transferred or assigned to
any other person, firm, corporation or other legal entity;
(ii) the Company has all necessary corporate power and
authority to execute and deliver this Agreement and all other
documents, instruments and other writings to be executed and/or
delivered by or on behalf of the Company to Executive or any of his
representatives in connection with the transactions contemplated hereby
or thereby (collectively, the "Company Transaction Documents"), to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance of each of the Company Transaction Documents by the
Company, and the consummation by the Company of the transactions
contemplated hereby and thereby, have been duly and validly authorized
by the Board of Directors of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize the
execution, delivery and performance of the Company Transaction
Documents or the consummation of the transactions contemplated hereby
and thereby. Each of the Company Transaction Documents has been duly
and validly executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof and thereof by Executive,
each constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except to
the extent their enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting or
relating to the enforcement of creditors' rights generally and by the
effect of general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law); and
(iii) the execution, delivery and performance of the Company
Transaction Documents by the Company do not and will not: (A) conflict
with or violate the Company's Amended and Restated Articles of
Incorporation or Bylaws; (B) conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to the Company or by
which its properties are bound or affected; (C) require any consent,
21
approval, authorization or permit of, action by, filing with or
notification to, any governmental entity (other than any filing
required under the Exchange Act); (D) require the approval of the
Company's stockholders, or (E) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of time or
both could become a default) or result in the loss by the Company of a
material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation
of a lien on any of the properties or assets of the Company pursuant
to, any contract, permit or other instrument or obligation to which the
Company is a party or by which the Company or its properties are bound
or affected; other than (x) in the case of clauses (B) and (E), for
such conflicts, violations, breaches, defaults, rights, losses and
liens as would not have a material adverse effect on the Company or its
ability to perform its obligations under the Company Transaction
Documents and (y) in the case of clause (C), such consents, approvals,
authorizations, permits, actions, filings and notifications, the
absence of which would not have a material adverse effect on the
Company or its ability to perform its obligations under the Company
Transaction Documents.
17. Indemnification of Executive.
(a) The Company agrees that (i) the limitation of liability
now existing in favor of Executive contained in Section 505 of the Company's
Amended and Restated Articles of Incorporation and all rights to indemnification
now existing in favor of Executive contained in Article VII of the Company's
Bylaws, in each case as in effect on the date hereof, and (ii) any other
limitation of liability or right to indemnification with respect to the Company
or its Affiliates in effect on the date hereof, shall not be amended in any
manner that would adversely affect the rights of Executive, unless such
amendment is required by law.
(b) Pursuant to the rights to indemnification referred to in
Section 17(a) hereof, the Company agrees to indemnify and hold harmless
Executive and his personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees to the fullest extent
permitted by the laws of the Commonwealth of Pennsylvania with respect to any
claim arising at any time out of any event, action or omission related to or in
connection with Executive having been a director, officer or employee of the
Company or having served as a director, officer, manager or member (or in any
other capacity) of another corporation or other organization at the request of
the Company. This indemnification shall continue in full force and effect for a
period of not less than the duration of all statutes of limitations applicable
to such matters (or in the case of events, actions or omissions giving rise to
matters which have not been resolved prior to the expiration of such period,
until such matters are finally resolved). Without limiting the foregoing, the
Company shall periodically advance all reasonable expenses (including reasonable
attorneys' and paralegals' fees and other costs and expenses) as incurred with
respect to the foregoing to the fullest extent permitted by the laws of the
Commonwealth of Pennsylvania. Executive shall not unreasonably withhold his
consent to the settlement of any claim for which he is entitled to be fully
indemnified hereunder. To the extent that the Company shall maintain in effect a
policy of directors' and officers' liability insurance, Executive shall be
covered by such policy for his actions or omissions as a director or officer in
accordance with the terms of such policy to the maximum extent of coverage
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provided for any other director or officer of the Company, subject to policy
exceptions applicable to directors and officers generally.
18. Arbitration. Except as provided in Section 9, any dispute
or controversy between the Company and Executive, whether arising out of or
relating to this Agreement, the breach of this Agreement, or otherwise, shall be
settled by arbitration in the State of Illinois, administered by the American
Arbitration Association, with any such dispute or controversy arising under this
Agreement being so administered in accordance with its Commercial Rules then in
effect, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. The arbitrator shall have the authority
to award any remedy or relief that a court of competent jurisdiction could order
or grant, including, without limitation, the issuance of an injunction. However,
either party may, without inconsistency with this arbitration provision, apply
to any court having jurisdiction over such dispute or controversy and seek
interim provisional, injunctive or other equitable relief until the arbitration
award is rendered or the controversy is otherwise resolved. Except as necessary
in court proceedings to enforce this arbitration provision or an award rendered
hereunder, or to obtain interim relief, neither a party nor an arbitrator may
disclose the existence, content or results of any arbitration hereunder without
the prior written consent of the Company and Executive. The Company and
Executive acknowledge that this Agreement evidences a transaction involving
interstate commerce. Notwithstanding any choice of law provision included in
this Agreement, the United States Federal Arbitration Act shall govern the
interpretation and enforcement of this arbitration provision.
19. Successors; Binding Agreement. This Agreement shall inure
to the benefit of and be enforceable by the Company and its successors and by
Executive, his spouse, personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees, and the
Beneficiary. Upon the consummation of any Change in Control, the Company shall
obtain from each Person that becomes a successor of the Company by reason of the
Change in Control the unconditional written agreement of such Person to assume
this Agreement and to perform all of the obligations of the Company hereunder.
20. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and shall be deemed to have
been duly given by a party hereto when delivered personally or by a
nationally-recognized courier service that guarantees overnight delivery to the
following address of the other party hereto (or to such other address of such
other party as shall be furnished in accordance herewith):
If to the Company, to:
Exelon Corporation
10 South Dearborn Street - 37th Floor
Chicago, Illinois 60603
Attention: Senior Vice President and Chief
Administrative Officer
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with copies to:
Exelon Corporation
10 South Dearborn Street - 37th Floor
Chicago, Illinois 60603
Attention: Executive Vice President and
General Counsel
and
Michael S. Sigal, Esq.
Sidley Austin Brown & Wood
Bank One Plaza
10 South Dearborn Street
Chicago, Illinois 60603
If to Executive, to:
Corbin A. McNeill, Jr.
Box 8 Skyline Ranch
525 NW Ridge Road
Jackson, Wyoming 83001
with a copy to:
Robert J. Hasday, Esq.
Duane Morris LLP
380 Lexington Avenue
New York, New York 10168
21. Governing Law; Validity. The interpretation, construction
and performance of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Illinois without
regard to the principle of conflicts of laws, except that the interpretation,
construction and performance of Section 17 of this Agreement shall be governed
by and construed and enforced in accordance with the internal laws of the
Commonwealth of Pennsylvania without regard to the principle of conflicts of
laws.
22. Entire Agreement. This Agreement, the Unreleased Claims,
and the agreements referenced herein, constitute the entire agreement and
understanding between the parties with respect to the subject matter hereof and
supersede and preempt any prior understandings, agreements or representations by
or between the parties, written or oral, which may have related in any manner to
the subject matter hereof, including, but not limited to, except to the extent
necessary to preserve the representation set forth in Section 8(d), the Merger
Agreement.
23. Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.
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24. Miscellaneous. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and executed by Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by Executive or the Company to insist upon strict compliance with
any provision of this Agreement or to assert any right which Executive or the
Company may have hereunder shall not be deemed to be a waiver of such provision
or right or any other provision or right of this Agreement.
25. No Admission. Nothing in this Agreement is intended to, or
shall be construed as, an admission by the Company or any of the other Company
Released Parties or by Executive or any of the other Executive Released Parties
that it, he or she violated any law, interfered with any right, breached any
obligation or otherwise engaged in any improper or illegal conduct. The Company,
for itself and the other Company Released Parties, hereby expressly denies any
such illegal or wrongful conduct. Executive, for himself and the other Executive
Released Parties, hereby expressly denies any such illegal or wrongful conduct.
26. Payments. All payments required to be made by the Company
pursuant to Sections 2, 3, 5, 7, 8, and 31 shall be made by the Company by
electronic wire transfer of immediately available funds in accordance with the
following instructions:
Bank Name:
Attn:
ABA#:
F/F/C:
F/F/C:
Account #:
27. Beneficiary. If Executive dies prior to receiving all of
the amounts payable hereunder, such amounts shall be paid, except as may be
otherwise expressly provided herein or in the applicable plans, in a lump-sum
payment to the beneficiary ("Beneficiary") designated by Executive in writing to
the Company during his lifetime, which Executive may change from time to time by
new designation filed in like manner without the consent of any Beneficiary; or
if no such Beneficiary is designated, to his estate.
28. Nonalienation of Benefits. Benefits payable under this
Agreement shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, prior to actually being
received by Executive, and any such attempt to dispose of any right to benefits
payable hereunder shall be void.
29. Severability. If all or any part of this Agreement is
declared by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any portion of this
Agreement not declared to be unlawful or invalid. Any paragraph or part of a
paragraph so declared to be unlawful or invalid shall, if possible, be construed
25
in a manner which will give effect to the terms of such paragraph or part of a
paragraph to the fullest extent possible while remaining lawful and valid.
30. Communications. Nothing in this Agreement, including, but
not limited to, Sections 9(a) and 10, shall be construed to prohibit Executive
from communicating with, including testifying in any administrative proceeding
before, the Nuclear Regulatory Commission or the United States Department of
Labor, or from otherwise addressing issues related to nuclear safety with any
party or taking any other action protected under Section 211 of the Energy
Reorganization Act, and no such communication or action shall constitute a
breach of Section 9(a) or 10 or any other provision of this Agreement; provided,
however, that if Executive is entitled under Section 211 of the Energy
Reorganization Act to pursue a claim, complaint or charge seeking damages, costs
or fees, Executive agrees that the consideration provided to Executive pursuant
to this Agreement shall be fully inclusive of all such damages, costs and fees
that could have been awarded to Executive, that such consideration is being paid
in full and that Executive under no circumstances shall be entitled to
compensation of any kind from the Company or any of the other Company Released
Parties not expressly provided for pursuant to this Agreement.
31. Legal and Other Expenses. The Company shall pay promptly
to Executive all reasonable legal fees and other expenses incurred by Executive
(a) in seeking in good faith to obtain or enforce any benefit or right under
this Agreement, provided that Executive shall have a reasonable basis for his
position, and (b) in connection with his review and negotiation of the terms and
conditions of this Agreement; provided, however, that the Company's obligation
to pay the Executive pursuant to this clause (b) shall not exceed $25,000.
32. Sections. Except where otherwise indicated by the context,
any reference to a "Section" shall be to a Section of this Agreement.
33. Acknowledgment by Executive. By executing this Agreement,
Executive expressly acknowledges that he has read this Agreement carefully, that
he fully understands its terms and conditions, that he has been advised to
consult with an attorney prior to executing this Agreement, that he has been
advised that he has 21 days within which to decide whether or not to execute
this Agreement and that he intends to be legally bound by it. During a period of
seven days following the date of his execution of this Agreement, Executive
shall have the right to revoke the releases contained in Section 15(a) of this
Agreement of claims under the age discrimination in employment act by serving
within such period written notice of revocation. If Executive exercises his
rights under the preceding sentence, he shall forfeit the amount payable to him
pursuant to Section 3 of this Agreement.
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IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and Executive has
executed this Agreement as of the day and year first above written.
EXELON CORPORATION
By:_________________________________
Title:_______________________________
-----------------------------------
CORBIN A. McNEILL, JR.
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