CHANGE IN CONTROL
AGREEMENT
This Change in
Control Agreement (the “Agreement”) is made and entered
into by and between David M. Feinberg (the “Employee”)
and Allegheny Energy Service Corporation (the
“Company”), effective as of October 18,
2006.
A. It is
expected that the Company’s parent, Allegheny Energy, Inc.
(“Allegheny”), from time to time may consider the
possibility of an acquisition by another company or other Change in
Control (as defined below). The Board of Directors of Allegheny
(the “Board”) recognizes that such consideration can be
a distraction to the Employee and can cause the Employee to
consider alternative employment opportunities. The Board has
determined that it is in the best interests of Allegheny and its
stockholders to assure that Allegheny and the Company will have the
continued dedication and objectivity of the Employee,
notwithstanding the possibility, threat or occurrence of a Change
in Control.
B. The Board
believes that it is imperative to provide the Employee with certain
benefits upon a Change in Control in order to provide the Employee
with enhanced financial security and provide incentive and
encouragement to the Employee to remain with the Company
notwithstanding the possibility of a Change in Control.
THEREFORE, the
parties hereto agree as follows:
(a) The
term of this Agreement shall commence on the date hereof and expire
on the second anniversary of the date hereof; provided ,
however , that such term shall thereafter automatically be
extended for additional one-year periods unless either party shall
give the other party notice of such party’s election not to
extend the term at least thirty days in advance of the date that
the term would otherwise end. This Agreement shall terminate prior
to the expiration of its scheduled term on the earlier of
(i) the date that all obligations of the parties hereto with
respect to this Agreement have been satisfied or (ii) the date
that the Employee’s employment with the Company terminates
for any reason, but only if such termination of employment occurs
prior to the Change in Control Date (as defined below).
(b) The
parties agree that this Agreement shall replace and supersede the
Change in Control Agreement, dated August 2, 2004, between the
Company and the Employee, which effective as of the date hereof, is
hereby terminated and shall be of no further force or
effect.
2.
Definitions . The following definitions shall apply
solely for purposes of this Agreement and such definitions shall
have no application in any other agreement, plan or arrangement
between the Employee and the Company or any if its subsidiaries or
affiliates:
(a)
“Cause” means (i) the Employee’s conviction
of, or plea of guilty or nolo contendere to, (A) a
felony or (B) a lesser crime or offense which, in the
reasonable opinion of the Company, could adversely affect the
business or reputation of Allegheny and its subsidiaries and
affiliates (collectively, the “AE Companies”),
(ii) the Employee’s repeated failure to follow specific
lawful directions of the Board or any officer to whom he reports,
(iii) the Employee’s willful misconduct, fraud,
embezzlement or dishonesty either in connection with his duties to
the AE Companies or which otherwise causes damage or, in the
reasonable opinion of the Company, is likely to cause damage, to
the AE Companies, (iv) the Employee’s failure to perform
a substantial part of his duties following notice and a reasonable
opportunity to cure (if such failure is capable of cure),
(v) the Employee’s material violation of any policy,
procedure or guideline of the AE Companies following notice and
reasonable opportunity to cure (if such violation is capable of
cure), (vi) the Employee’s abuse of alcohol or illegal
drugs, or (vii) the Employee’s violation of any
applicable confidentiality, non-competition or non-solicitation
covenants relating to the AE Companies.
(b)
“Change in Control” means the occurrence of either of
the following events:
(i) the
consummation of a reorganization, merger, statutory share exchange
or consolidation or similar corporate transaction involving
Allegheny, or a sale or other disposition of all or substantially
all of the stock of Allegheny or a sale of all or substantially all
of the assets of Allegheny and its subsidiaries (each, a
“Business Combination”), in each case, unless,
immediately following such Business Combination, the individuals
and entities who were the beneficial owners of Allegheny’s
Outstanding Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, a majority of
the combined voting power of the then outstanding voting
securities, of the entity resulting from such Business Combination,
(including, without limitation, an entity which, as a result of the
Business Combination, owns Allegheny or all or substantially all of
the assets of Allegheny and its subsidiaries either directly or
through one or more subsidiaries) in substantially the same
proportions as their ownership of the Outstanding Voting Securities
immediately prior to such Business Combination; or
(ii) the
approval by Allegheny’s shareholders of a complete
liquidation or dissolution of Allegheny.
(c)
“Change in Control Date” means the first date after the
date hereof on which a Change in Control occurs; provided ,
however , that if a Change in Control occurs and if the
Employee’s employment with the Company is terminated or an
event constituting Good Reason (as defined below) occurs prior to
the Change in Control, and if it is reasonably demonstrated by the
Employee that such termination or event (i) was at the request
of a third party who has taken steps reasonably calculated to
effect the Change in Control, or (ii) otherwise arose in
connection with or anticipation of the Change in Control then, for
all purposes of this Agreement, the Change in Control Date shall
meant the date immediately prior to the date of such termination or
event.
(d)
“Good Reason” means the occurrence of any of the
following events without the prior consent of the
Employee:
2
(i) a
reduction in the Employee’s then current annual base salary,
a reduction in the Employee’s target bonus opportunity under
the Allegheny Energy, Inc. Annual Incentive Plan or any other
incentive compensation plans or arrangements or a material
reduction in the employee benefits provided to the
Employee;
(ii) a
material diminution in the Employee’s title, duties or
authority; provided , however , that the fact that
Allegheny, following a Change in Control, is a subsidiary or
division of another entity, rather than a public company, shall
not, by itself, be deemed to result in a material diminution in the
Employee’s title, duties or authority under this clause;
or
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