EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is amended and restated effective March
1, 2001 (the "Amendment Date") by and between KeySpan Corporation ("KeySpan")
and its successors, with its principal office at One MetroTech Center, Brooklyn,
New York 11201 ("Company"), and Craig G. Matthews, 17 Wynwood Road, Chatham, NJ
07928 ("Employee") with such amendments and restatements to the September 1,1999
Employment Agreement between Company and Employee (the "1999 Agreement").
ARTICLE I
WHEREAS, the Company wishes to continue the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in the
capacities and on the term and conditions set for in the 1999 Agreement and this
Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
Employment Period; Positions and Duties; Etc.
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1.1 Employment Period
The Company shall employ the Executive, and the Executive shall serve
the Company, on the terms and conditions set forth in this Agreement, for the
period beginning on March 1 2001 and ending on March 1 2003; or at the option of
the Executive, until August 31, 2003 (the "Employment Period").
1.2 Positions and Duties
(A) While employed hereunder, Craig G. Matthews shall serve as Vice Chairman &
Chief Operating Officer, or any other such title that is equivalent or higher in
responsibility and status, reporting directly to R.B. Catell, Chairman and CEO,
KeySpan, having such duties and responsibilities commensurate with the position
of Vice Chairman & Chief Operating Officer. The Executive will also serve as a
member of the KeySpan Board of Directors.
(B) While employed hereunder, Craig G. Matthews shall serve on key senior
strategy committees, such as the Strategic Directions Committee (Holding
Company, as member & Utility, as Chairman), the Executive Committee of the SDC,
the Investment Review Committee, etc.
(C) While employed hereunder, Employee shall (i) devote all of his business
time, attention, skill and efforts to the faithful and efficient performance of
his duties hereunder; Employee may engage in the following activities so long as
they do not interfere in any material respect with the performance of Employee's
duties and responsibilities hereunder: (i) serve on corporate, civic, religious,
educational and/or charitable boards or committees and (ii) manage his personal
investments.
1.3 Place of Employment
Employee's place of employment hereunder shall be at the Company's principal
executive offices (or other offices as appropriate) in the greater New York
Metropolitan area.
ARTICLE II
Compensation and Benefits
2.1 Base Salary
For services rendered by Employee under this Agreement, the Company shall pay to
Employee an annual base salary ("Base Salary") no less than $600,000, payable
monthly.
2.2 Incentive Compensation & Restricted Stock
A. During the Employment Period, the Executive shall participate in short-term
incentive compensation plans ("Annual Incentive Compensation & Gainsharing
Plan") and/or long-term incentive compensation plans ("Long-Term Performance
Incentive Compensation Plan") providing him with the opportunity to earn, on a
year-by-year basis, short-term and long-term incentive compensation at least
equal to the amounts that he had the opportunity to earn under the comparable
plans of KeySpan as in effect as of February 28, 2001.
B. This Agreement confirms the February 13, 2001 grant of 20,000 shares of
restricted stock, which restrictions lapse upon retirement, but not earlier than
March 1, 2003. These shares are in addition, to the 10,000 shares of restricted
stock granted in the 1999 Agreement with a restriction period that expires on
August 31, 2003.
2.3 Perquistes
During the Employment Period, the Executive shall be entitled to receive
perquisites as provided for under the KeySpan Perquisites Program.
2.4 Other Benefits
During the Employment Period, the Executive shall be entitled to participate in
all applicable benefit plans, saving and retirement plans, practices, policies
and programs of the Company to the same extent as other senior executives.
2.5 Death or Disability
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the Executive has been unable, for a period of one hundred eighty (180)
consecutive business days, to perform the Executive's duties under this
Agreement, as a result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and acceptable to the
Executive or the Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. A termination of the Executive's
employment by the Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the 30th day after receipt of such
notice by the Executive (the "Disability Effective Date"), unless the Executive
returns to full-time performance of the Executive's duties before the Disability
Effective Date.
2.6 Change Of Control
In the event that Executive's employment is terminated within the time period
and under conditions giving rise to the payment of severance benefits under the
KeySpan Energy Senior Executive Change of Control Severance Plan ("Severance
Plan"), as well as the payment of severance benefits under Sections 3.3 and 4.4
of this Agreement, the Executive shall be entitled to severance benefits under
the Severance Plan or under severance benefits in this Agreement, whichever
benefits are greater.
ARTICLE III
Termination of Employment
3.1 Termination by Employee
Employee may, at any time prior to the end of the Employment Period, terminate
employment hereunder for any reason by delivering a Notice of Termination to the
KeySpan Board of Directors ("Board"). The Employee is required to give 30
calendar days notice.
3.2 Termination by the Company
This agreement shall terminate and the Employee's employment shall cease upon
any of the following: (a) mutual agreement of the Employee and the Company; (b)
death or disability (at the expiration of the 180 day period as defined under
"Disability") of the Employee; or (c) in the discretion of the Board, Good Cause
for termination.
Good Cause for termination ("Good Cause") shall mean Employee's: (i) breach of
the terms in paragraphs 1.2, or Article IV of this agreement, (ii) conduct that
constitutes dishonesty or knowing and willful breach of fiduciary duty; (iii)
insubordination or refusal to perform assigned duties or comply with directions
of the Board; (iv) conviction by a court of competent jurisdiction or entry of a
plea of no contest for a crime involving any act of moral turpitude or unlawful,
dishonest, or unethical conduct that a reasonable person would consider damaging
to the reputation of the Company or improper and unacceptable conduct by an
Employee thereof; or. (v) continued material failure or inability to achieve
required performance results or perform in a competent manner following written
notice and opportunity to improve performance.
If the Executive's employment is terminated by the Company for Good Cause during
the Employment Period, the Company shall pay the Executive, the Annual Base
Salary through the Date of Termination and the amount of any compensation
previously deferred by the Executive (together with any accrued interest or
earnings thereon), in each case to the extent not yet paid, and the Company
shall have no further obligations under this Agreement, except as specified in
Section 3.3 below. If the Executive voluntarily terminates employment during the
Employment Period, other than for Good Reason, the Company shall pay the Accrued
Obligations, as defined below, to the Executive in a lump sum in cash within
(30) days of the Date of Termination, and the Company shall have no further
obligations under this Agreement, except as specified in Section 2.4 and Section
4.3 below.
3.3 Severance Benefits
The following provisions shall apply if the Employee terminates employment for
Good Reason or if the Company terminates Employee's employment for any reason
other than the parties mutual agreement, Good Cause, death or disability of the
Employee.
"Good Reason" shall mean any of the following:
(1) without Employee's express written consent, any action, or failure to take
action, by the Company, the Board or the shareholders of the Company by the
Company that results in a diminution in the Executive's position,
authority, titles, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Executive;
(2) a material breach by the Company of any material provision of this
Agreement which, if capable of being remedied, remains unremedied for more
than 15 days after written notice thereof is given by Employee to the
company;
(3) without Employee's written consent, the relocation of the principal
executive offices of the Company to a location outside the greater New York
area;
(4) any purported termination by the Company of Employee's employment not in
accordance with the provisions of this agreement;
For purposes of this agreement, any good faith determination of "Good Reason"
made by the Employee shall be conclusive.
1. If, during the Employment Period, the Company terminates the Executive's
employment, other than for Good Cause, Death or Disability, or the Executive
terminates employment for Good Reason, the Company (A) shall pay the Executive,
in a single lump sum, the Accrued Obligations (as defined in Section 3.3 (2)
below), except that the following provisions will be substituted for subsection
A & B thereof; and the aggregate amount of the salary and Annual Incentive
Compensation that he would have received if he had remained employed for the
Severance Period (assuming that the Annual Incentive Compensation for such
period would have equaled the target amounts of such Incentive Compensation as
in effect immediately before the Date of Termination); (B) shall cause the
Executive to continue to accrue benefits under Senior Executive Retirement Plan
(SERP) during the Severance Period; and (C) shall continue to provide the
Executive with the Life Insurance Coverage and benefits as if he had remained
employed by the Company pursuant to this Agreement during the Severance Period
and then retired (at which time he will be treated as eligible for all retiree
welfare benefits and other benefits, provided to retired senior executives, to
the extent such benefits can be provided pursuant to the plan or program
maintained by the Company for its executives. In addition to the foregoing, any
restricted stock outstanding on the Date of Termination shall be fully vested as
of the Date of Termination and all options outstanding on the Date of
Termination shall be fully vested and exercisable and shall remain in effect and
exercisable through the end of their respective terms, without regard to the
termination of the Executive's Employment (but in the case of options that were
not vested immediately before the Date of Termination, not longer than three
years). Severance Period used here shall mean the period from the Date of
Termination through the end of the Employment Period.
(2) If the Executive's employment is terminated by reason of the Executive's
death or Disability during the Employment Period, the Company shall pay to the
Executive or, in the case of the Executive's death, to the Executive's
designated beneficiaries(or if there is not such beneficiary, to the Executive's
estate or legal representative), in a lump sum in cash within thirty (30) days
after the Date of Termination, the sum of the following amounts (the "Accrued
Obligations"): (a) any portion or the Executive's Annual Base Salary through the
Date of Termination that has not yet been paid; (b) an amount representing the
Annual Incentive Compensation and cash Long-Term Incentive Compensation for the
period that includes the Date of Termination, computed by assuming that the
amount of all such Incentive Compensation would be equal to the target amount of
such Incentive Compensation as in effect immediately before the Date of
Termination, and multiplying that amount by a fraction, the numerator of which
is the number of days in such period through the Date of Termination, and the
denominator of which is the total number of days in the relevant performance
period; (c) any compensation previously deferred by the Executive that has not
been paid ; and (d) any accrued but unpaid vacation pay, and the Company shall
have no further obligations under this agreement except as specified in Section
2.4.
3.4 Notice of Termination.
If such termination is by Employee for Good Reason or by the Company for
Disability or Good Cause, such notice shall set forth in reasonable detail the
reason for such termination and the facts and circumstances claimed to provide a
basis therefor. Any notice purporting to terminate Employee's employment which
is not in compliance with the requirements of this definition shall be
ineffective. The Date of Termination shall mean ("Date of Termination") the
termination date specified in a Notice of Termination delivered in accordance
with this Agreement.
ARTICLE IV
Miscellaneous
4.1 Confidential Information.
The Executive shall hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data relating to the
Company or any of its affiliated companies and their respective business that
the Executive obtains during the Executive's employment by the Company or any of
its affiliated companies and that is not public knowledge. The Executive shall
not communicate, divulge or disseminate Confidential Information at any time
during or after the Executive's employment with the Company, except in the
course of performing his duties hereunder or with the prior written consent of
the Company or as otherwise required by law or legal process. In no event shall
any asserted violation of the provisions of this Section 4.1 constitute a basis
for deferring or withholding any amounts otherwise payable to the Executive
under this agreement.
4.2 Successors.
This Agreement is personal to the Executive and, without the prior written
consent of the Company, shall not be assignable by the Executive otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive's legal representatives.
This Agreement shall inure to the benefit of and be binding upon the Company and
its successors and assigns, provided that the Company may not assign this
Agreement except in connection with the assignment or disposition of all or
substantially all of the assets or stock of the Company, or by law as a result
of a merger or consolidation. In the event of such assignment, a failure by the
successor to specifically assume in writing, delivered to the Executive, the
obligations and liabilities of the Company hereunder shall be deemed a material
breach of this Agreement.
4.3 Non Exclusivity of Rights.
Nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice provided by the
Company or any of its affiliated companies for which the Executive may qualify.
Vested benefits and other amounts that the Executive is otherwise entitled to
receive under the Incentive Compensation, the SERP, the Life Insurance Coverage,
or any other plan, policy, practice or program of, or any contract or agreement
with, the Company or any of its affiliated companies on or after the Date of
Termination shall be payable in accordance with the terms of each such plan,
policy, practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
4.4. Certain Additional Payments By The Company.
(a) Any thing in this Agreement to the contrary notwithstanding, in the event it
shall be determined that any payment or distribution by the Company to, or for
the benefit of, the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
4.4) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code of 1986 (the "Code"), as amended or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the "Excise Tax"), then the Executive shall be
entitled to receive and additional payment (a "Gross-Up Payment") in an amount
such that after payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an
amount of the Gross-Up payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of paragraph (c) of this Section 4.4, all
determinations required to be made under this Section 4.4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by a certified public accounting firm designated by the Executive (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive with 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company. In the event that the Accounting Firm is serving as
accountant or auditor for the individual, entity or group effecting the change
of control, the Executive shall appoint another nationally recognized accounting
firm to make the determinations required hereunder (which accounting firm shall
then be referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment,
as determined pursuant to this Section 4.4, shall be paid by the Company to the
Executive within five (5) days of the receipt of the Accounting Firm's
determination. Any determination by the Accounting Firm shall be binding upon
the Company and the Executive. As a result of the uncertainty in the application
of Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to paragraph (c) of this Section 4.4 and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.
(c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable but not later than ten (10) business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the thirty (30)
day period following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notices the Executive in writing prior to the
expiration of such period that is desires to contest such claim, the Executive
shall:
(I) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order effectively to
contest such claim, and,
(iv) permit the Company to participate in any proceedings relating to
such claim; PROVIDED, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
inters and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph (c) of Section 4.4, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; PROVIDED, however, that if the
Company directs the Executive harmless, on an after-tax basis, from any Excise
Tax or income tax) including interest or penalties with respect thereto) imposed
with respect to such advance or with respect to any imputed income with respect
to such advance; and PROVIDED, further, that any extension of the stature of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company's control of the
contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.
(d) If, after the receipt by the Executive of an amount advanced by the Company
pursuant to paragraph (c) of this Section 4.4, the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company's complying with the requirements of paragraph (c) of this Section
4.4, promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
paragraph (c) of this Section 4.4, a determination is made that the Executive
shall not be entitled to any refund with respect such claim and the Company does
not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such 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.
4.5 Attorneys' Fees.
The Company agrees to pay, as incurred, to the fullest extent permitted by law,
all legal fees and expenses that the Executive may reasonably incur as a result
of any contest (regardless of the outcome) by the Company, the Executive or
others of the validity or enforceability of or liability under, or otherwise
involving, any provision of the Agreement, together with interest on any delayed
payment at the applicable federal rate provided for in Section 7872(f)(2)(A) of
the Code.
4.6. Governing Law.
(a) This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions here of and
shall have no force or effect. This Agreement may not be amended or modified
except by a written agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under this Agreement shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive: Craig G. Matthews
17 Wynwood Road
Chatham, NJ 07928
If to the Company: KeySpan
One MetroTech Center
Brooklyn, NY 11201
Attention: General Counsel
or such other address as either party furnishes to the other in writing
in accordance with this paragraph (b) of Section 4.6. Notice and communications
shall be effective when actually received by the addressee.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name and on its behalf, all as of
the day and year first above written
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Craig G. Matthews
KeySpan Corporation
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Robert B. Catell
Chairman and Chief Executive Officer