EMPLOYMENT AGREEMENT
This AGREEMENT, made this 1st day of January, 1997, by and between
CONSOLIDATED HYDRO, INC. (the "Company"), a Delaware corporation with its
principal office at Stamford Towers, 680 Washington Boulevard, Stamford, CT
06901, and Michael I. Storch ("Executive"), an individual residing at 169 Mill
Brook Road, Stamford, CT 06902.
WHEREAS, the Company and Executive wish to enter into an employment
agreement whereby Executive will be employed by the Company in accordance with
the terms and conditions stated below;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive agrees
to enter the employ of the Company, for the period stated in Section 3 hereof
and upon the other terms and conditions herein provided.
2. Position and Responsibilities. The Company agrees to employ Executive in
the position of Executive Vice President, Strategy and Corporate Development and
Executive agrees to serve for the term and on the conditions hereinafter set
forth. Executive agrees to perform such services not inconsistent with his
position as shall from time to time be assigned to him by the Chief Executive
Officer of the Company, the Company's Board of Directors, or by their respective
designees.
3. Term and Duties.
(a) Term of Employment. This Agreement shall become effective and the terms
of employment pursuant to this Agreement shall commence on January 1, 1997, and
will continue through June 30, 1999 unless earlier terminated in accordance with
the provisions hereof; provided, however, that, unless the Company shall have
delivered to Executive written notice of its intent not to renew this Agreement
prior to July 1, in any year, commencing with July 1, 1998, the term of this
Agreement shall be extended by twelve months from the then effective expiration
date.
(b) Duties. During the period of his employment hereunder Executive shall
serve the Company as its Executive Vice President, Strategy and Corporate
Development and shall also serve as the President and Chief Executive Officer of
the Company's wholly-owned subsidiary, CHI Power Marketing, Inc. ("CHIPMI"), and
except for illnesses, vacation periods, and reasonable leaves of absence,
Executive shall devote all his business time, attention, skill, and efforts to
the faithful performance of his duties hereunder;
provided, however, that with the approval of the Chief Executive Officer of the
Company, from time to time, Executive may serve, or continue to serve, on the
boards of directors of, and hold any other offices or positions in, companies or
organizations, which, in the Chief Executive Officer of the Company's judgment,
will not present any conflict of interest with the Company or any of its
subsidiaries or affiliates or divisions, or materially affect the performance of
Executive's duties pursuant to this Agreement.
So long as Executive is Executive Vice President, Strategy and Corporate
Development of the Company, he will discharge all duties incidental to such
office and such further duties as may be reasonably assigned to him from time to
time by the Chief Executive Officer of the Company, the Company's Board of
Directors, or by their respective designees. Subject to the authority of the
Company's Board of Directors, Executive shall participate in various corporate
activities including, but not limited to, selected corporate financing, capital
sourcing, transaction structuring, business development and strategic planning
activities, including the origination, negotiation, implementation and
transaction of such activities, as directed by the Company's Chief Executive
Officer or his designee and, with respect to CHIPMI, shall be responsible for,
inter alia, the day-to-day general management of all present and future
businesses of CHIPMI, its operating units and subsidiaries, if any; coordinating
CHIPMI's interface with the Company; sourcing CHIPMI's capital and overseeing
the development and implementation of CHIPMI's power marketing and power trading
activities, including those activities necessary to support the value
enhancement of the Company, it being understood that particularly because power
marketing and power trading are new business areas for the Company, and in light
of the considerations and risks inherent in any business development effort, it
is expected that Executive's responsibilities with respect to both the Company
and CHIPMI will change over time, but will continue to be significant
responsibilities, reflective of Executive's senior position with the Company.
4. Compensation and Reimbursement of Expenses.
(a) Salary. For all services rendered by Executive as Executive Vice
President, Strategy and Corporate Development during his employment under this
Agreement, the Company shall pay Executive as compensation a salary at the rate
of $249,900 per year. Executive's salary shall be reviewed on June 30, 1997, and
at least annually thereafter during the term of this agreement. Such review
shall be conducted by the Board of Directors of the Company, or a committee
designated by the Board of Directors, and such Board or committee may increase
said salary. (The salary payable to Executive in any fiscal year is referred to
herein as the "Base Salary" for such fiscal year.)
(b) Incentive Compensation. For each fiscal year, commencing with the
fiscal year ending June 30, 1997, the Company shall pay Executive an incentive
bonus determined, at the discretion of the Board of Directors, upon the
achievement of certain goals and objectives to be agreed upon from time to time
by Executive and the Chief Executive Officer of the Company or his designee.
Such bonuses shall be payable upon completion of the annual audit of the Company
for the applicable year.
(c) Equity Plan. It is the current intention of the Board of Directors of
the Company to adopt an equity plan for the Company's management as part of the
Company's plan of restructuring. It is the Board's current intention, should
such a plan be adopted, that options relating to the Company's common stock
would be granted to the management of the Company upon completion of such
restructuring, and that options would be awarded to the Executive, should he
still be employed hereunder at such time.
(d) Reimbursement of Expenses. The Company shall pay or reimburse Executive
for all reasonable travel and other expenses incurred by Executive in performing
his obligations under this Agreement. The Company further agrees to furnish
Executive with a private office, private secretary, and such other assistance
and accommodations as shall be suitable to the character of Executive's position
with the Company and adequate for the performance of his duties.
5. Participation in Benefit Plans. The payments provided in Sections 4 and
6 hereof are in addition to any benefits Executive is entitled to under group
hospitalization, health, dental care, disability insurance, surety bond, death
benefit plan, travel and/or accident insurance, other allowance and/or executive
compensation plan, including, without limitation, capital accumulation and
termination pay programs, restricted or non-restricted stock purchase plan,
stock option plan, retirement income or pension plan, or other present or future
group employee benefit plan or program of the Company for which key executives
are or shall become eligible, and Executive shall be eligible to receive during
the period of his employment under this Agreement, and during any subsequent
period for which he shall be entitled to receive payment from the Company under
Section 6(a) or Section 7(b) below, all benefits and emoluments for which key
executives are eligible under every such plan or program to the extent
permissible under the general terms and provisions of such plans or programs and
in accordance with the provisions thereof.
6. Benefits Payable Upon Disability or Death.
(a) Disability Benefits. In the event of the disability of Executive, the
Company shall, subject to Section 9 hereof, continue to pay Executive the
monetary compensation and provide the other benefits provided in Section 4
hereof during the period of his disability for the remainder of the term of this
Agreement, except that after the date of Executive's disability (i) Executive
shall not be entitled to payment of any further bonuses under Section 4(b), and
(ii) no further options or other awards shall be granted Executive under Section
4(c) or shall vest, unless the plan or agreement under which such options or
awards are granted provides otherwise. To the extent that disability insurance
is available on Executive, the Company shall be permitted to purchase and pay
for such insurance. Receipt by Executive of such disability benefits shall
reduce by such amount the obligation of the Company set forth in the preceding
sentence.
As used in this Agreement, the term "disability" shall mean the complete
inability of Executive to perform his duties under this Agreement as determined
by an independent physician selected by the Company with the approval of
Executive.
(b) Death Benefits. In the event of the death of Executive during a period
of disability or otherwise during the term of this Agreement, the Company shall
pay, or cause to be paid, to Executive's designated beneficiary or beneficiaries
or legal representatives the payments set forth in Section 7(b) below.
7. Payments to Executive Upon Termination of Employment.
(a) Termination. Upon the death of Executive or the occurrence of an event
of termination (as hereinafter defined) during the period of Executive's
employment under this Agreement, the provisions of this Section 7(a) and Section
7(b) shall apply. As used in this Agreement, an "event of termination" shall
mean and include any one or more of the following:
(i) The termination by the Company of Executive's full-time employment
hereunder for any reason other than pursuant to Section 7(c) or as a result
of a material breach by Executive of this Agreement; or
(ii) Executive's resignation from the Company's employ, pursuant to:
A. a material change by the Company in Executive's function,
duties or responsibilities, which change would cause Executive's
position with the Company to become one of less dignity,
responsibility, importance or scope from the position and
attributes as described in Section 2 above, and any such material
change shall be deemed a continuing breach of this Agreement;
B. any liquidation, dissolution, consolidation or merger of
the Company which results in a change of control of the Company
or transfer of all or substantially all of its assets;
C. failure to elect, re-elect or to appoint Executive to the
office of Executive Vice President, Strategy and Corporate
Development;
D. other material breach of this Agreement by the Company.
Upon the occurrence of any event described in clauses (A),
(B), (C) or (D) above, Executive shall have the right to elect to
terminate his employment under this Agreement by resignation,
upon not less than thirty (30) days' prior written notice given
within a reasonable period of time not to exceed, except in case
of a continuing breach, three (3) calendar months after the event
giving rise to said right to elect.
(b) Continuation of Salary. Upon the death of Executive or the occurrence
of an event of termination under Section 7(a), the Company shall, subject to the
provisions of Section 9 below, monthly for the duration of the Severance Period,
as defined below, pay Executive, or in the event of subsequent death, his
beneficiary or beneficiaries or his estate, as the case may be, as severance pay
or liquidated damages, or both, the monthly Base Salary paid to Executive at the
time of termination of his employment (the "Severance Payments"); shall continue
to provide the other benefits provided for in Sections 5 and 6 hereof for a
period of twelve months from the date of the event of termination; and shall
continue to provide the benefits provided for in Section 4(d) for a period of
six months from the date of such event of termination. For purposes of this
Agreement, the "Severance Period" shall commence on the date of termination of
Executive's employment with the Company and expire on the earlier of (i) the
date Executive obtains subsequent employment, and (ii) the later of (A) the
second anniversary of the date of termination of Executive's employment with the
Company and (B) the expiration of the term of this Agreement. Absent an election
as described in the next sentence, the Severance Payments shall commence on the
last day of the month in which the
event of termination occurs; provided, that the first such payment shall be
reduced by the amount of any Base Salary received by Executive for the portion
of such month prior to the event of termination. If within 30 days of the event
of termination Executive (or, in the case of his death or incapacity, his
beneficiary or legal representative) so elects by written notice to the Company,
the Severance Payments shall be paid by the Company, in lieu of the monthly
payments described above, in a single lump sum as soon as practicable after the
date of such election. Such lump sum payment shall be in an amount equal to the
sum of the monthly Severance Payments that would have been paid under this
Section but for such election (assuming Executive never obtains subsequent
employment), discounted to present value using an interest rate of 5%, and
reduced by the amount of any Severance Payments received by Executive prior to
the date of such lump sum payment.
(c) Other Termination of Employment. Notwithstanding Sections 7(a) and (b)
or any other provision of this Agreement to the contrary, if on or after the
date of this Agreement and prior to the end of the term hereof:
(i) Executive has been convicted of any crime or offense
constituting a felony under applicable law, including, without
limitation, any act of dishonesty such as embezzlement, theft or
larceny;
(ii) Executive shall act or refrain from acting in respect of
any of the duties and responsibilities which have been assigned to him
in accordance with this Agreement and the Board of Directors of the
Company determines that such action or inaction constituted gross
negligence or a willful act of malfeasance or misfeasance of Executive
in respect of such duties;
(iii) Executive shall breach any material term of this
Agreement and shall fail to correct such breach within ten days (or
such longer period of time, not exceeding 90 days, as Executive shall
in good faith and the exercise of reasonable efforts require to cure
such breach) after Executive's receipt of notice from the Company of
such breach; or
(iv) any willful or continuous neglect of or refusal to
perform Executive's duties or responsibilities or the willful taking of
actions which directly and materially impair Executive's ability to
perform his duties and responsibilities hereunder which continues after
detailed written notice thereof has been given to Executive;
then, and in each such case, the Company shall have the right to give notice of
termination of Executive's services hereunder as of a date (not earlier than 10
days from such notice) to be specified in such notice and this Agreement (other
than the provisions of Sections 8 and 9 hereof) shall terminate on such date. In
the case of any such termination, Executive shall be entitled to Base Salary
accrued through the date of termination, and to no further compensation or
benefits hereunder.
8. Duties Upon Termination. Executive agrees that he will, upon termination
of his employment with the Company for any reason whatsoever, deliver to the
Company any and all records, forms, contracts, memoranda, work papers, lists of
names or other customer data and any other articles or papers which have come
into his possession by reason of his employment with the Company or which he
holds for the Company, irrespective of whether or not any of said items were
prepared by him, and he shall not retain memoranda or copies of any of said
items.
9. Post-Termination Obligations. All payments and benefits to Executive
under this Agreement shall be subject to Executive's compliance with the
following provisions during the Compliance Period, as defined in Section 9(b)
below.
(a) Confidential Information and Competitive Conduct.
Executive shall not, to the detriment of the Company, disclose or
reveal to any unauthorized person any trade secret or other
confidential information relating to the Company, its subsidiaries or
affiliates, or to any businesses operated by them, including, without
limitation, any customer lists; and Executive confirms that such
information constitutes the exclusive property of the Company.
Executive shall not otherwise act or conduct himself to the material
detriment of the Company, its subsidiaries or affiliates, or in a
manner which is inimical or contrary to the interests thereof, and
shall not, directly or indirectly, engage in, enter the employ of or
render any service to any person, firm or business within the United
States or Canada in competition with any part of the business being
conducted by the Company; provided, however, that Executive's ownership
of less than 5 percent of the outstanding stock of a corporation (other
than a corporation engaged primarily in a business that directly
competes with the Company) shall not by itself be deemed to constitute
such competition. Executive recognizes that the possible restrictions
on his activities which may occur as a result of his performance of his
obligations under this Section 9(a) are required for the reasonable
protection of the Company and its investments.
(b) Compliance Period. For purposes of this Agreement, the
"Compliance Period" shall commence on the effective date of this
Agreement under Section 3(a). If an event of termination under Section
7(a) hereof occurs prior to the expiration of the term of this
Agreement, the Compliance Period shall end: (i) if Executive elects to
receive Severance Payments in lump sum form under Section 7(b), on the
second anniversary of the termination of Executive's employment; and
(ii) otherwise, on the later of (A) the expiration of six months from
the date of termination of Executive's employment, and (B) the end of
the period for which Executive is entitled to receive Severance
Payments. If Executive's employment by the Company is terminated in
accordance with Section 7(c) hereof prior to the expiration of the term
of this Agreement, the Compliance Period shall end on the later of the
expiration of the term of this Agreement and the first anniversary of
the termination of Executive's employment. In all cases other than
those described in the two preceding sentences, the Compliance Period
shall end on the expiration of the term of this Agreement.
(c) Failure of Executive to Comply. If for any reason other
than death or disability, Executive shall, without written consent of
the Company, fail to comply with the provisions of Section 9(a) above,
his rights to any future payments or other benefits hereunder shall
terminate, and the Company's obligations to make such payments and
provide such benefits shall cease; provided, however, that no failure
to comply with any provision of Section 9(a) above shall be deemed to
have occurred unless and until Executive receives written notice from
the Company, specifying the conduct alleged to constitute such failure,
and Executive has thereafter continued to engage in such conduct after
a reasonable opportunity and a reasonable period to refrain from such
conduct. In no event shall Executive be under any obligation to repay
the Company any amounts theretofore paid him hereunder.
(d) Remedies. Executive agrees that monetary damages would not
be adequate compensation for any loss incurred by the Company by reason
of a breach of the provisions of Sections 8 and 9 of this Agreement and
hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
10. Effect of Prior Agreements. This Agreement contains the entire
understanding between the parties hereto and, upon effectiveness of this
Agreement pursuant to Section 3(a) hereof, supersedes all prior employment
agreements between the Company and Executive, except that this Agreement shall
not affect or operate to reduce any benefit or compensation inuring to Executive
of a kind elsewhere provided and not expressly provided in this Agreement.
11. General Provisions.
(a) Binding Agreement. This Agreement shall be binding upon, and inure to
the benefit of Executive and the Company and their respective permitted
successors and assigns.
(b) Legal Expenses. In the event that Executive incurs legal expenses in
contesting any provision of this Agreement and such contest results in a
determination that the Company has breached any of its obligations hereunder,
Executive shall be reimbursed by the Company for such legal expenses.
12. Successors and Assigns.
(a) Assignment by the Company. This Agreement shall be binding upon and
inure to the benefit of the successor and assigns of the Company and, unless
clearly inapplicable, reference herein to the Company shall be deemed to include
its successors and assigns.
(b) Assignment by Executive. Executive may not assign this Agreement in
whole or in part.
13. Modification and Waiver.
(a) Amendment of Agreement. Except for increases in compensation made as
provided in Section 4(a), this Agreement may not be changed or modified except
by an instrument in writing signed by both of the parties hereto.
(b) Waiver. No term or condition of this Agreement shall be deemed to have
been waived, nor shall there be any estoppel against the enforcement of any
provision of this Agreement, except by written instrument of the party charged
with such waiver or estoppel. No such written waiver shall be deemed a
continuing waiver unless specifically stated therein, and each such waiver shall
operate only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or as to any act
other than that specifically waived.
14. Beneficiaries. This Agreement shall be for the express benefit of the
Company, Executive and, for so long as The Morgan Stanley Leveraged Equity Fund
II, L.P. or its successor ("MSLEFII") or Madison Group, L.P. ("MGLP") shall be a
holder of equity of the Company, MSLEFII or MGLP, as the case may be.
15. Severability. In the event any provision of this Agreement or any part
hereof is held invalid, such invalidity shall not affect any remaining part of
such provision or any other provision, and to this end, the provisions of this
Agreement are intended to be and shall be deemed severable. If any court
construes any provision of this Agreement to be illegal, void or unenforceable
because of the duration or the area or matter covered thereby, such court shall
reduce the duration, area or matter of such provision, and, in its reduced form,
such provision shall then be enforceable and shall be enforced.
16. Withholding. Employer may withhold from any amounts payable under this
Agreement such taxes and governmentally required withholdings as may be required
to be withheld pursuant to any applicable law or regulation.
17. Governing Law. The parties hereto intend that this Agreement shall be
governed by the laws of the State of Connecticut.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and Executive has signed this Agreement, all as of
the day and year first above written.
CONSOLIDATED HYDRO, INC.
By: ________________________
James T. Stewart
Its: Chief Executive Officer
---------------------------
Michael I. Storch