Exhibit 10-5
Forms of Agreement between the Company and Certain Officers
GROUP 1
AGREEMENT
Agreement made as of the ___ day of ____________, 1995, between PECO Energy
Company (the "Company"), and [name of employee] (the "Employee").
WHEREAS, the Employee is presently employed by the Company as its [title];
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control of the Company exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company;
WHEREAS, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of key members of
the Company's management to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a
change in control of the Company; and
WHEREAS, in order to induce the Employee to remain in the employ of the
Company, the Company agrees that the Employee shall receive the compensation set
forth in this Agreement as a cushion against the financial and career impact on
the Employee in the event the Employee's employment with the Company is
terminated subsequent to a "Change of Control" (as defined in Section 1.3
hereof) of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
1.1 "Annual Base Salary" shall mean twelve times the greater of (a) the
highest monthly base salary paid or payable (including any base salary which has
been earned but deferred) to the Employee by the Company, and its affiliates (as
defined in Section 1504 of the Code without regard to subsection (b) thereof),
together with any and all salary reduction authorized amounts under any
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of the Company's benefit plans or programs, in respect of the twelve-month
period immediately preceding the date of the Change in Control, or (b) the
monthly base salary paid or payable to the Employee by the Company (including
authorized deferrals and salary reduction amounts) immediately prior to the
Employee's Termination of Employment.
1.2 "Annual Bonus" shall mean an amount equal to the Employee's highest
annual bonus for the last three full fiscal years prior to the Change of Control
(annualized in the event that the Employee was not employed for the whole of
such fiscal year).
1.3 "Change of Control" shall mean (a) the purchase or other acquisition by
any person, entity or group of persons, within the meaning of section 13(d) or
14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable
successor provisions, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 20 percent or more of either the outstanding
shares of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally, or (b) the approval by
the shareholders of the Company of a reorganization, merger, or consolidation,
in each case, with respect to which persons who were shareholders of the Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated Company's then outstanding securities, or of a
liquidation or dissolution of the Company or the sale of all or substantially
all of the Company's assets, or (c) a change of 25% (rounded up to the next
whole person) in the membership of the Board of Directors of the Company within
a 12-month period, unless the election or nomination for election by
shareholders of each new director within such period was approved by a vote of
85% (rounded up to the next whole person) of the directors then still in office
who were in office at the beginning of the 12-month period.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 "Separation Period" shall mean the two-year period beginning on the
date of the Employee's Termination of Employment.
1.6 "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
1.7 "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.
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1.8 "Termination following a Change of Control" shall mean a Termination of
Employment within three years after a Change of Control either:
1.8 (a) initiated by the Company for any reason other than (i) the
Employee's death, continuous illness, injury or incapacity for a period of
twelve consecutive months or (ii) for "cause," which shall mean misappropriation
of funds, habitual insobriety, substance abuse, conviction of a crime involving
moral turpitude, or gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole; or
1.8 (b) initiated by the Employee upon one or more of the following
occurrences:
(i) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;
(ii) any change resulting in a significant reduction by the Company of
the authority, duties, compensation or responsibilities of the
Employee;
(iii) any removal by the Company of the Employee from the employment
grade, compensation level or officer positions which the Employee
holds as of the effective date hereof except in connection with
promotions to higher office; or
(iv) the requirement that the Employee undertake business travel (or
commuting in excess of seventy-five miles each way from the Company's
current headquarters at 2301 Market Street, Philadelphia,
Pennsylvania) to an extent substantially greater than is reasonable
and customary for the position the Employee holds.
2. Notice of Termination. Any Termination following a Change of Control
shall be communicated by a Notice of Termination to the other party hereto given
in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (a) indicates the specific
termination provision in this Agreement relied upon, (b) briefly summarizes the
facts and circumstances deemed to provide a basis for termination of the
Employee's employment under the provision so indicated, and (c) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
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3. Compensation Upon Termination. Subject to the provisions of Section 10
hereof, in the event of the Employee's Termination following a Change of
Control, the Company shall pay or provide to the Employee during the Separation
Period ( or, in the event of the Employee's death following such termination
during the Separation Period, to the Employee's estate), the following:
3.1 the Employee's earned but unpaid compensation as of the date of
Termination of Employment;
3.2 the benefits, if any, to which the Employee is entitled as a former
employee under the employee benefit programs and compensation plans and programs
maintained for the benefit of the Company's officers and employees;
3.3 continued group hospitalization, health, dental care, life or other
insurance, travel or accident insurance and disability insurance, for the
Separation Period, with coverage equivalent to the coverage to which the
Employee would have been entitled had the Employee continued working for the
Company during the Separation Period at his Annual Base Salary;
3.4 the Annual Base Salary and Annual Bonus the Employee would have earned
if the Employee had continued working for the Company during the Separation
Period;
3.5 the benefits to which the Employee would be entitled under the
Company's long term incentive, stock option, savings and retirement plans if the
Employee had continued working for the Company during the Separation Period at
his Annual Base Salary, and were making the maximum amount of employee
contributions, if any, as are required under such plans, together with dividend
equivalents on awards under the Company's long term incentive plan assuming the
Employee's ratings justified a 100% pay-out. In the event that applicable law
does not permit continued coverage under any tax qualified benefit plan or
incentive or option plan during the Separation Period, the Company shall provide
economically- equivalent benefits to the employee on a nonqualified,
supplemental or other basis;
3.6 in the event the Employee and the Employee's spouse are not otherwise
eligible for the Company's retiree health care coverage, following the end of
the Separation Period, Employee (or if employee is deceased, Employee's
surviving spouse) may continue to purchase health care coverage for himself and
eligible dependents under the Company's health benefits plan at the prevailing
rate then in effect for COBRA continuation coverage, until the Employee and the
Employee's spouse have attained eligibility for Medicare coverage; and
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3.7 a minimum of twenty credited years of service under the Company's
Deferred Compensation and Supplemental Pension Benefit Plan for purposes of
determining the Employee's pension.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the Employee
under any other plan, policy or program of the Company except that no payments
shall be due to the Employee under the Company's then severance pay plan for
employees, if any.
5. Enforcement.
5.1 In the event that the Company shall fail or refuse to make payment of
any amounts due the Employee under Sections 3 and 4 hereof within the respective
time periods provided therein, the Company shall pay to the Employee, in
addition to the payment of any other sums provided in this Agreement, interest,
compounded daily, on any amount remaining unpaid from the date payment is
required under Section 3 and 4, as appropriate, until paid to the Employee, at
the rate from time to time announced by Chase Manhattan Bank as its "prime rate"
plus 2%, each change in such rate to take effect on the effective date of the
change in such prime rate.
5.2 It is the intent of the parties that the Employee not be required to
incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Employee hereunder. Accordingly, the Company shall pay the
Employee on demand the amount necessary to reimburse the Employee in full for
all expenses (including all attorneys' fees and legal expenses) incurred by the
Employee in enforcing any of the obligations of the Company under this
Agreement.
6. No Mitigation. The Employee shall not be required to mitigate the amount
of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in or rights under any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its subsidiaries or affiliates and for which the Employee may qualify;
provided, however, that following a Change of Control, the Employee hereby
waives the Employee's right to receive any payments under any severance pay plan
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or similar program applicable to other employees of the Company (other than
outplacement services, if such services are provided as part of the severance
program) for so long as the Employer is eligible for termination benefits under
this Agreement.
8. No Set-Off. 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 Employee or others.
9. Taxes. Any payment required under this Agreement shall be subject to all
requirements of the law with regard to the withholding of taxes, filing, making
of reports and the like, and the Company shall use its best efforts to satisfy
promptly all such requirements.
10. Parachute Payment Limitations.
10.1 Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the aggregate present value of amounts
payable or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be subject to taxation under Section
4999 of the Code. For purposes of this Section 10, present value shall be
determined in accordance with Section 280G(d)(4) of the Code. In the event that
the amount payable to the Employee shall be limited to the Reduced Amount, then
the Employee shall have the right, in the Employee's sole discretion, to
designate those payments or benefits under this Agreement that should be reduced
or eliminated so as to avoid having the payment to the Employee under this
Agreement be subject to the Excise Tax.
10.2 All determinations as to applicability of the Excise Tax to be made
under this Section 10 shall be made by the Company's independent public
accountant immediately prior to the Change of Control (the "Accounting Firm")),
which firm shall provide its determinations and any supporting calculations both
to the Company and the Employee within 10 days of the Termination Date. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Employee. Within five days after this determination, the Company shall pay (or
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cause to be paid) or distribute (or cause to be distributed) to or for the
benefit of the Employee such amounts as are then due to the Employee under this
Agreement.
10.3 As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that payments under this Agreement, will have been
made by the Company which should not have been made ("Overpayment") or that
additional payments which have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Employee which the Employee shall repay to the Company
together with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount
shall be payable by the Employee to the Company if and to the extent such
payment would not reduce the amount which is subject to taxation under Section
4999 of the Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee together with interest at the
Federal Rate.
10.4 All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections 10.2 and 10.3 above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections 10.2 and 10.3
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
11. Term of Agreement. The term of this Agreement shall be for three years
from the date hereof and shall be automatically renewed for successive one-year
periods unless the Company notifies the Employee in writing that this Agreement
will not be renewed at least sixty days prior to the end of the current term;
provided, however, that (a) after a Change of Control during the term of this
Agreement, this Agreement shall remain in effect until all of the obligations of
the parties hereunder are satisfied or have expired, and (b) this Agreement
shall terminate if, prior to a Change of Control, the employment of the Employee
with the Company or any of its subsidiaries, as the case may be, shall terminate
for any reason, or the Employee shall cease to be an Employee.
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12. Restrictive Covenant. Employee agrees that following any termination of
Employee's employment relationship following a Change of Control which entitles
Employee to the payments due under Section 3, for a period of two years Employee
will not participate (either in any employee or non-employee capacity, e.g., as
a consultant or partner) in the gas or electric business with any corporation,
partnership, sole proprietorship or entity engaged in competition with the
Company or any of its affiliates. For this purpose, an entity shall be
considered to be "engaged in competition" if such entity is, or is a holding
company for, a gas or electric utility or generator with the ability to sell
into the Company's service territory, or the service territory of a gas or
electric utility or generator which is interconnected with the Company's system
or engages in transactions with the members of the Pennsylvania-New
Jersey-Maryland-Interconnection Association. Employee further agrees that if he
were to breach this restrictive covenant, said breach would cause the Company
irreparable harm for which injunctive relief, as well as damages, would be
appropriate. Employee hereby consents to the jurisdiction and venue of the Court
of Common Pleas of Philadelphia County, Pennsylvania as the forum in which any
suit to enforce this restrictive covenant may be instituted.
13. Arbitration; Expenses.
13.1 Except as provided in Section 12, in the event of any dispute under
the provisions of this Agreement, either party shall have the right to have such
dispute, controversy or claim to be settled by arbitration in the City of
Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association, before a panel of three
arbitrators, one of whom shall be selected by the Company, one of whom shall be
selected by the Employee, and the third of whom shall be selected by the other
two arbitrators. Any award entered by the arbitrators shall be final, binding
and nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. The party or parties bringing the
challenge under this Agreement shall in all circumstances have the burden of
proof.
13.2 In the event of an arbitration or lawsuit by either party to enforce
the provisions of this Agreement following a Change of Control, Employee shall
be entitled to recover reasonable costs, expenses and attorney's fees from the
Company pursuant to Section 5.2.
14. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the
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Company in accordance with the terms hereof, and to become jointly and severally
obligated with the Company to perform this Agreement in the same manner and to
the same extent that the Company would be required to perform if no such
succession or successions had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a breach of
this Agreement. As used in this Agreement, the Company shall mean the Company as
hereinbefore defined and any such successor or successors to its business and/or
assets, jointly and severally.
15. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
PECO Energy Company
Attn: Senior Vice President of Human Resources
2301 Market Street
Philadelphia, PA 19101
If to the Employee, to:
[Name of Employee]
[Address]
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 14 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
16. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
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17. Contents of Agreement, Amendment and Assignment.
17.1 This Agreement supersedes all prior agreements, sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified, extended or terminated except upon
written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by the Chairman of the Compensation Committee
of the Board. The provisions of this Agreement may provide for payments to the
Employee under certain compensation or bonus plans under circumstances where
such plans would not provide for payment thereof. It is the specific intention
of the parties that the provisions of this Agreement shall supersede any
provisions to the contrary in such plans, and such plans shall be deemed to have
been amended to correspond with this Agreement without further action by the
Company or the Board.
17.2 Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
17.3 All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
18. Severability. If any provision of this Agreement or application thereof
to anyone or under any circumstances shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application. If any restriction in
this Section 12 of the Agreement is adjudicated to exceed the time, geographic,
service or other limitations permitted by applicable law in any jurisdiction,
the Employee agrees that such may be modified and narrowed, either by a court or
the Company, to the maximum time, geographic, service or other limitations
permitted by applicable law so as to preserve and protect the Company's
legitimate business interest, without negating or impairing any other
restrictions or undertaking set forth in the Agreement.
19. Remedies Cumulative; No Waiver. No right conferred upon the Employee by
this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and shall be in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by the Employee in exercising any right,
remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, including, without limitation, any delay by the
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Employee in delivering a Notice of Termination pursuant to Section 2 hereof
after an event has occurred which would, if the Employee had resigned, have
constituted a Termination following a Change of Control pursuant to Section
1.8(b) of this Agreement.
20. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an original.
It shall not be necessary in making proof of this Agreement or any counterpart
hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: PECO Energy Company
[Seal]
____________________ By_________________________
Secretary Chairman, Compensation Committee
of the Board of Directors
and
By_________________________
Member, Compensation Committee
of the Board of Directors
_________________________ _________________________
Witness [Name of Employee]
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GROUP 2
AGREEMENT
Agreement made as of the ___ day of ____________, 1995, between PECO Energy
Company (the "Company"), and [name of employee] (the "Employee").
WHEREAS, the Employee is presently employed by the Company as its [title];
WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
change in control of the Company exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of key management personnel to the detriment of the
Company;
WHEREAS, the Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of key members of
the Company's management to their assigned duties without distraction in the
face of potentially disturbing circumstances arising from the possibility of a
change in control of the Company; and
WHEREAS, in order to induce the Employee to remain in the employ of the
Company, the Company agrees that the Employee shall receive the compensation set
forth in this Agreement as a cushion against the financial and career impact on
the Employee in the event the Employee's employment with the Company is
terminated subsequent to a "Change of Control" (as defined in Section 1.3
hereof) of the Company;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements hereinafter set forth and intending to be legally bound hereby,
the parties hereto agree as follows:
1. Definitions. For all purposes of this Agreement, the following terms
shall have the meanings specified in this Section unless the context clearly
otherwise requires:
1.1 "Annual Base Salary" shall mean twelve times the greater of (a) the
highest monthly base salary paid or payable (including any base salary which has
been earned but deferred) to the Employee by the Company, and its affiliates (as
defined in Section 1504 of the Code without regard to subsection (b) thereof),
together with any and all salary reduction authorized amounts under any
of the Company's benefit plans or programs, in respect of the twelve-month
period immediately preceding the date of the Change in Control, or (b) the
monthly base salary paid or payable to the Employee by the Company (including
authorized deferrals and salary reduction amounts) immediately prior to the
Employee's Termination of Employment.
1.2 "Annual Bonus" shall mean an amount equal to the Employee's highest
annual bonus for the last three full fiscal years prior to the Change of Control
(annualized in the event that the Employee was not employed for the whole of
such fiscal year).
1.3 "Change of Control" shall mean (a) the purchase or other acquisition by
any person, entity or group of persons, within the meaning of section 13(d) or
14(d) of the Securities Exchange Act of 1934 ("Act"), or any comparable
successor provisions, of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of 20 percent or more of either the outstanding
shares of common stock or the combined voting power of the Company's then
outstanding voting securities entitled to vote generally, or (b) the approval by
the shareholders of the Company of a reorganization, merger, or consolidation,
in each case, with respect to which persons who were shareholders of the Company
immediately prior to such reorganization, merger or consolidation do not,
immediately thereafter, own more than 50 percent of the combined voting power
entitled to vote generally in the election of directors of the reorganized,
merged or consolidated Company's then outstanding securities, or of a
liquidation or dissolution of the Company or the sale of all or substantially
all of the Company's assets, or (c) a change of 25% (rounded up to the next
whole person) in the membership of the Board of Directors of the Company within
a 12-month period, unless the election or nomination for election by
shareholders of each new director within such period was approved by a vote of
85% (rounded up to the next whole person) of the directors then still in office
who were in office at the beginning of the 12-month period.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.5 "Separation Period" shall mean the two-year period beginning on the
date of the Employee's Termination of Employment.
1.6 "Termination Date" shall mean the date of receipt of the Notice of
Termination described in Section 2 hereof or any later date specified therein,
as the case may be.
1.7 "Termination of Employment" shall mean the termination of the
Employee's actual employment relationship with the Company.
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1.8 "Termination following a Change of Control" shall mean a Termination of
Employment within three years after a Change of Control either:
1.8 (a) initiated by the Company for any reason other than (i) the
Employee's death, continuous illness, injury or incapacity for a period of
twelve consecutive months or (ii) for "cause," which shall mean misappropriation
of funds, habitual insobriety, substance abuse, conviction of a crime involving
moral turpitude, or gross negligence in the performance of duties, which gross
negligence has had a material adverse effect on the business, operations,
assets, properties or financial condition of the Company and its Subsidiaries
taken as a whole; or
1.8 (b) initiated by the Employee upon one or more of the following
occurrences:
(i) any failure of the Company to comply with and satisfy any of the
terms of this Agreement;
(ii) any change resulting in a significant reduction by the Company of
the authority, duties, compensation or responsibilities of the
Employee;
(iii) any removal by the Company of the Employee from the employment
grade, compensation level or officer positions which the Employee
holds as of the effective date hereof except in connection with
promotions to higher office; or
(iv) the requirement that the Employee undertake business travel (or
commuting in excess of seventy-five miles each way from the Company's
current headquarters at 2301 Market Street, Philadelphia,
Pennsylvania) to an extent substantially greater than is reasonable
and customary for the position the Employee holds.
2. Notice of Termination. Any Termination following a Change of Control
shall be communicated by a Notice of Termination to the other party hereto given
in accordance with Section 15 hereof. For purposes of this Agreement, a "Notice
of Termination" means a written notice which (a) indicates the specific
termination provision in this Agreement relied upon, (b) briefly summarizes the
facts and circumstances deemed to provide a basis for termination of the
Employee's employment under the provision so indicated, and (c) if the
Termination Date is other than the date of receipt of such notice, specifies the
Termination Date (which date shall not be more than 15 days after the giving of
such notice).
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3. Compensation Upon Termination. Subject to the provisions of Section 10
hereof, in the event of the Employee's Termination following a Change of
Control, the Company shall pay or provide to the Employee during the Separation
Period ( or, in the event of the Employee's death following such termination
during the Separation Period, to the Employee's estate), the following:
3.1 the Employee's earned but unpaid compensation as of the date of
Termination of Employment;
3.2 the benefits, if any, to which the Employee is entitled as a former
employee under the employee benefit programs and compensation plans and programs
maintained for the benefit of the Company's officers and employees;
3.3 continued group hospitalization, health, dental care, life or other
insurance, travel or accident insurance and disability insurance, for the
Separation Period, with coverage equivalent to the coverage to which the
Employee would have been entitled had the Employee continued working for the
Company during the Separation Period at his Annual Base Salary;
3.4 the Annual Base Salary and Annual Bonus the Employee would have earned
if the Employee had continued working for the Company during the Separation
Period;
3.5 the benefits to which the Employee would be entitled under the
Company's long term incentive, stock option, savings and retirement plans if the
Employee had continued working for the Company during the Separation Period at
his Annual Base Salary, and were making the maximum amount of employee
contributions, if any, as are required under such plans, together with dividend
equivalents on awards under the Company's long term incentive plan assuming the
Employee's ratings justified a 100% pay-out. In the event that applicable law
does not permit continued coverage under any tax qualified benefit plan or
incentive or option plan during the Separation Period, the Company shall provide
economically- equivalent benefits to the employee on a nonqualified,
supplemental or other basis;
3.6 in the event the Employee and the Employee's spouse are not otherwise
eligible for the Company's retiree health care coverage, following the end of
the Separation Period, Employee (or if employee is deceased, Employee's
surviving spouse) may continue to purchase health care coverage for himself and
eligible dependents under the Company's health benefits plan at the prevailing
rate then in effect for COBRA continuation coverage, until the Employee and the
Employee's spouse have attained eligibility for Medicare coverage.
4. Other Payments. The payment due under Section 3 hereof shall be in
addition to and not in lieu of any payments or benefits due to the
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Employee under any other plan, policy or program of the Company except that no
payments shall be due to the Employee under the Company's then severance pay
plan for employees, if any.
5. Enforcement.
5.1 In the event that the Company shall fail or refuse to make payment of
any amounts due the Employee under Sections 3 and 4 hereof within the respective
time periods provided therein, the Company shall pay to the Employee, in
addition to the payment of any other sums provided in this Agreement, interest,
compounded daily, on any amount remaining unpaid from the date payment is
required under Section 3 and 4, as appropriate, until paid to the Employee, at
the rate from time to time announced by Chase Manhattan Bank as its "prime rate"
plus 2%, each change in such rate to take effect on the effective date of the
change in such prime rate.
5.2 It is the intent of the parties that the Employee not be required to
incur any expenses associated with the enforcement of his rights under this
Agreement by arbitration, litigation or other legal action because the cost and
expense thereof would substantially detract from the benefits intended to be
extended to the Employee hereunder. Accordingly, the Company shall pay the
Employee on demand the amount necessary to reimburse the Employee in full for
all expenses (including all attorneys' fees and legal expenses) incurred by the
Employee in enforcing any of the obligations of the Company under this
Agreement.
6. No Mitigation. The Employee shall not be required to mitigate the amount
of any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment or benefit provided
for herein be reduced by any compensation earned by other employment or
otherwise.
7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Employee's continuing or future participation in or rights under any
benefit, bonus, incentive or other plan or program provided by the Company or
any of its subsidiaries or affiliates and for which the Employee may qualify;
provided, however, that following a Change of Control, the Employee hereby
waives the Employee's right to receive any payments under any severance pay plan
or similar program applicable to other employees of the Company (other than
outplacement services, if such services are provided as part of the severance
program) for so long as the Employer is eligible for termination benefits under
this Agreement.
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8. No Set-Off. 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 Employee or others.
9. Taxes. Any payment required under this Agreement shall be subject to all
requirements of the law with regard to the withholding of taxes, filing, making
of reports and the like, and the Company shall use its best efforts to satisfy
promptly all such requirements.
10. Parachute Payment Limitations.
10.1 Anything in this Agreement to the contrary notwithstanding, in the
event that it shall be determined that any payment or distribution by the
Company to or for the benefit of the Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise (a "Payment"), would constitute an "excess parachute payment" within
the meaning of Section 280G of the Code, the aggregate present value of amounts
payable or distributable to or for the benefit of the Employee pursuant to this
Agreement (such payments or distributions pursuant to this Agreement are
hereinafter referred to as "Agreement Payments") shall be reduced (but not below
zero) to the Reduced Amount. The "Reduced Amount" shall be an amount expressed
in present value which maximizes the aggregate present value of Agreement
Payments without causing any Payment to be subject to taxation under Section
4999 of the Code. For purposes of this Section 10, present value shall be
determined in accordance with Section 280G(d)(4) of the Code. In the event that
the amount payable to the Employee shall be limited to the Reduced Amount, then
the Employee shall have the right, in the Employee's sole discretion, to
designate those payments or benefits under this Agreement that should be reduced
or eliminated so as to avoid having the payment to the Employee under this
Agreement be subject to the Excise Tax.
10.2 All determinations as to applicability of the Excise Tax to be made
under this Section 10 shall be made by the Company's independent public
accountant immediately prior to the Change of Control (the "Accounting Firm")),
which firm shall provide its determinations and any supporting calculations both
to the Company and the Employee within 10 days of the Termination Date. Any such
determination by the Accounting Firm shall be binding upon the Company and the
Employee. Within five days after this determination, the Company shall pay (or
cause to be paid) or distribute (or cause to be distributed) to or for the
benefit of the Employee such amounts as are then due to the Employee under this
Agreement.
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10.3 As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that payments under this Agreement, will have been
made by the Company which should not have been made ("Overpayment") or that
additional payments which have not been made by the Company could have been made
("Underpayment"), in each case, consistent with the calculations required to be
made hereunder. Within two years after the Termination of Employment, the
Accounting Firm shall review the determination made by it pursuant to the
preceding paragraph. In the event that the Accounting Firm determines that an
Overpayment has been made, any such Overpayment shall be treated for all
purposes as a loan to the Employee which the Employee shall repay to the Company
together with interest at the applicable Federal rate provided for in Section
7872(f)(2) of the Code (the "Federal Rate"); provided, however, that no amount
shall be payable by the Employee to the Company if and to the extent such
payment would not reduce the amount which is subject to taxation under Section
4999 of the Code. In the event that the Accounting Firm determines that an
Underpayment has occurred, any such Underpayment shall be promptly paid by the
Company to or for the benefit of the Employee together with interest at the
Federal Rate.
10.4 All of the fees and expenses of the Accounting Firm in performing the
determinations referred to in subsections 10.2 and 10.3 above shall be borne
solely by the Company. The Company agrees to indemnify and hold harmless the
Accounting Firm of and from any and all claims, damages and expenses resulting
from or relating to its determinations pursuant to subsections 10.2 and 10.3
above, except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of the Accounting Firm.
11. Term of Agreement. The term of this Agreement shall be for three years
from the date hereof and shall be automatically renewed for successive one-year
periods unless the Company notifies the Employee in writing that this Agreement
will not be renewed at least sixty days prior to the end of the current term;
provided, however, that (a) after a Change of Control during the term of this
Agreement, this Agreement shall remain in effect until all of the obligations of
the parties hereunder are satisfied or have expired, and (b) this Agreement
shall terminate if, prior to a Change of Control, the employment of the Employee
with the Company or any of its subsidiaries, as the case may be, shall terminate
for any reason, or the Employee shall cease to be an Employee.
12. Restrictive Covenant. Employee agrees that following any termination of
Employee's employment relationship following a Change of Control which entitles
Employee to the payments due under Section 3, for a period of two years Employee
will not participate (either in any employee or non-employee capacity, e.g., as
a consultant or partner) in the gas or electric business with any
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corporation, partnership, sole proprietorship or entity engaged in competition
with the Company or any of its affiliates. For this purpose, an entity shall be
considered to be "engaged in competition" if such entity is, or is a holding
company for, a gas or electric utility or generator with the ability to sell
into the Company's service territory, or the service territory of a gas or
electric utility or generator which is interconnected with the Company's system
or engages in transactions with the members of the Pennsylvania-New
Jersey-Maryland-Interconnection Association. Employee further agrees that if he
were to breach this restrictive covenant, said breach would cause the Company
irreparable harm for which injunctive relief, as well as damages, would be
appropriate. Employee hereby consents to the jurisdiction and venue of the Court
of Common Pleas of Philadelphia County, Pennsylvania as the forum in which any
suit to enforce this restrictive covenant may be instituted.
13. Arbitration; Expenses.
13.1 Except as provided in Section 12, in the event of any dispute under
the provisions of this Agreement, either party shall have the right to have such
dispute, controversy or claim to be settled by arbitration in the City of
Philadelphia, Pennsylvania, in accordance with the commercial arbitration rules
then in effect of the American Arbitration Association, before a panel of three
arbitrators, one of whom shall be selected by the Company, one of whom shall be
selected by the Employee, and the third of whom shall be selected by the other
two arbitrators. Any award entered by the arbitrators shall be final, binding
and nonappealable and judgment may be entered thereon by any party in accordance
with applicable law in any court of competent jurisdiction. This arbitration
provision shall be specifically enforceable. The party or parties bringing the
challenge under this Agreement shall in all circumstances have the burden of
proof.
13.2 In the event of an arbitration or lawsuit by either party to enforce
the provisions of this Agreement following a Change of Control, Employee shall
be entitled to recover reasonable costs, expenses and attorney's fees from the
Company pursuant to Section 5.2.
14. Successor Company. The Company shall require any successor or
successors (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company, by agreement in form and substance satisfactory to the Employee, to
acknowledge expressly that this Agreement is binding upon and enforceable
against the Company in accordance with the terms hereof, and to become jointly
and severally obligated with the Company to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if
no such succession or successions had taken place. Failure of the Company to
obtain such agreement prior to the effectiveness of any such succession shall be
a breach of this
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Agreement. As used in this Agreement, the Company shall mean the Company as
hereinbefore defined and any such successor or successors to its business and/or
assets, jointly and severally.
15. Notice. All notices and other communications required or permitted
hereunder or necessary or convenient in connection herewith shall be in writing
and shall be delivered personally or mailed by registered or certified mail,
return receipt requested, or by overnight express courier service, as follows:
If to the Company, to:
PECO Energy Company
Attn: Senior Vice President of Human Resources
2301 Market Street
Philadelphia, PA 19101
If to the Employee, to:
[Name of employee]
[Address]
or to such other names or addresses as the Company or the Employee, as the case
may be, shall designate by notice to the other party hereto in the manner
specified in this Section; provided, however, that if no such notice is given by
the Company following a Change of Control, notice at the last address of the
Company or to any successor pursuant to Section 14 hereof shall be deemed
sufficient for the purposes hereof. Any such notice shall be deemed delivered
and effective when received in the case of personal delivery, five days after
deposit, postage prepaid, with the U.S. Postal Service in the case of registered
or certified mail, or on the next business day in the case of overnight express
courier service.
16. Governing Law. This Agreement shall be governed by and interpreted
under the laws of the Commonwealth of Pennsylvania without giving effect to any
conflict of laws provisions.
17. Contents of Agreement, Amendment and Assignment.
17.1 This Agreement supersedes all prior agreements, sets forth the entire
understanding between the parties hereto with respect to the subject matter
hereof and cannot be changed, modified, extended or terminated except upon
written amendment executed by the Employee and approved by the Board and
executed on the Company's behalf by the Chairman of the Compensation Committee
of the Board. The provisions of this Agreement may provide for
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payments to the Employee under certain compensation or bonus plans under
circumstances where such plans would not provide for payment thereof. It is the
specific intention of the parties that the provisions of this Agreement shall
supersede any provisions to the contrary in such plans, and such plans shall be
deemed to have been amended to correspond with this Agreement without further
action by the Company or the Board.
17.2 Nothing in this Agreement shall be construed as giving the Employee
any right to be retained in the employ of the Company.
17.3 All of the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective heirs,
representatives, successors and assigns of the parties hereto, except that the
duties and responsibilities of the Employee and the Company hereunder shall not
be assignable in whole or in part by the Company.
18. Severability. If any provision of this Agreement or application thereof
to anyone or under any circumstances shall be determined to be invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions or applications of this Agreement which can be given effect without
the invalid or unenforceable provision or application. If any restriction in
this Section 12 of the Agreement is adjudicated to exceed the time, geographic,
service or other limitations permitted by applicable law in any jurisdiction,
the Employee agrees that such may be modified and narrowed, either by a court or
the Company, to the maximum time, geographic, service or other limitations
permitted by applicable law so as to preserve and protect the Company's
legitimate business interest, without negating or impairing any other
restrictions or undertaking set forth in the Agreement.
19. Remedies Cumulative; No Waiver. No right conferred upon the Employee by
this Agreement is intended to be exclusive of any other right or remedy, and
each and every such right or remedy shall be cumulative and shall be in addition
to any other right or remedy given hereunder or now or hereafter existing at law
or in equity. No delay or omission by the Employee in exercising any right,
remedy or power hereunder or existing at law or in equity shall be construed as
a waiver thereof, including, without limitation, any delay by the Employee in
delivering a Notice of Termination pursuant to Section 2 hereof after an event
has occurred which would, if the Employee had resigned, have constituted a
Termination following a Change of Control pursuant to Section 1.8(b) of this
Agreement.
20. Miscellaneous. All section headings are for convenience only. This
Agreement may be executed in several counterparts, each of which is an
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original. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the undersigned, intending to be legally bound, have
executed this Agreement as of the date first above written.
Attest: PECO Energy Company
[Seal]
____________________ By_________________________
Secretary Chairman, Compensation Committee
of the Board of Directors
and
By_________________________
Member, Compensation Committee
of the Board of Directors
_________________________ _________________________
Witness [Name of Employee]
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