Exhibit 10(b)
SECOND AMENDED AND RESTATED
CHANGE IN CONTROL SEVERANCE AGREEMENT
This second amended and restated
agreement (the “Agreement”) is made as of the 31st day
of December, 2008, by and between CONSTELLATION ENERGY GROUP, INC.
(the “Company”) and Michael J. Wallace (the
“Executive”).
WHEREAS, the Company and the
Executive are parties to a Change in Control Severance Agreement
dated as of August 9, 2004 (the “Original
Agreement”);
WHEREAS, the Company and the
Executive are parties to an Amended and Restated Change in Control
Severance Agreement dated as of December 20
th , 2005, and modified by letter agreement dated
February 15, 2006 (“the Amended
Agreement”);
WHEREAS, the Company and the
Executive desire to amend and restate the Amended Agreement so that
the Amended Agreement will be replaced in its entirety with this
Agreement;
WHEREAS, the Company wishes to
encourage the orderly succession of management in the event of a
Change in Control (as hereinafter defined);
WHEREAS, the Company desires to
maintain a severance benefit for the Executive covering the period
from the date of a Change in Control until the end of the
twenty-four month period following the date of a Change in Control,
to avoid the loss or the serious distraction of the Executive to
the detriment of the Company and its stockholders prior to and
during such period when the Executive’s undivided attention
and commitment to the needs of the Company would be particularly
important;
WHEREAS, the Executive desires to
devote the Executive’s time and energy for the benefit of the
Company and its stockholders and not to be distracted as a result
of a Change in Control.
NOW, THEREFORE, the parties agree as
follows:
1.
Definitions
.
1.1
Annual Award Amount
. The term “Annual Award
Amount” means, as of the applicable date of determination,
the average of the two highest annual incentive awards under the
Company’s annual incentive plan (or the annual incentive plan
maintained by a successor Company or a Subsidiary) payable or
actually paid under the terms of such annual incentive plan for the
performance year during which the date of determination occurs, and
in respect of the last four years to the Executive prior to the
date of determination; provided, however, that (a) if the
Executive has not been employed by the Company or a Subsidiary for
a sufficient length of time to have been eligible for payment of at
least two annual incentive awards, deemed target award payout shall
be used for the one or two years for which the Executive was not so
eligible, except that the maximum payout shall be used for the
performance year in which the date of determination occurs;
(b) for any year during which an annual incentive award was
paid or is payable to the Executive that
was prorated because of less than a
year of plan participation, such award shall be annualized, except
that for the year in which the date of determination occurs, the
maximum payout shall be used; and (c) for any year during
which a guaranteed minimum annual incentive award amount was paid
or is payable to the Executive, such full (not prorated because of
less than a full year of plan participation) guaranteed annual
incentive amount shall be used for such year.
1.2
Board . The term “Board” means the
Board of Directors of the Company .
1.3
Cause . The term “Cause” means the
occurrence of any one or more of the following:
(a)
The Executive is convicted of a
felony involving moral turpitude or that involves the
misappropriation of property of the Company or a Subsidiary;
or
(b)
The Executive engages in conduct or
activities that constitutes disloyalty to the Company or a
Subsidiary and such conduct or activities are materially damaging
to the property, business or reputation of the Company or a
Subsidiary; or
(c)
The Executive persistently fails or
refuses to comply with any written direction of an authorized
representative of the Company other than a directive constituting
an assignment described in Section 1.7(a); or
(d)
The Executive embezzles or
knowingly, and with intent, unlawfully appropriates any corporate
opportunity of the Company or a Subsidiary.
A termination of the
Executive’s employment for Cause for purposes of this
Agreement shall be effected in accordance with the following
procedures. The Company shall give the Executive written
notice (“Notice of Termination for Cause”) of its
intention to terminate the Executive’s employment for Cause,
setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the specific
provision(s) of this Agreement on which it relies, and stating
the date, time and place of the Board Meeting for Cause. The
“Board Meeting for Cause” means a meeting of the Board
at which the Executive’s termination for Cause will be
considered, that takes place not less than ten (10) and not
more than twenty (20) business days after the Executive receives
the Notice of Termination for Cause. The Executive shall be
given an opportunity, together with counsel, to be heard at the
Board Meeting for Cause. The Executive’s Termination
for Cause shall be effective when and if a resolution is duly
adopted at the Board Meeting for Cause by a two-thirds vote of the
entire membership of the Board, excluding employee directors,
stating that in the good faith opinion of the Board, the Executive
is guilty of the conduct described in the Notice of Termination for
Cause, and that conduct constitutes Cause under this
Agreement.
Notwithstanding the foregoing, no
event described hereunder shall constitute Cause if such event is a
result of an isolated, insubstantial and inadvertent action that is
not taken in bad faith and that is remedied by the Executive within
ten (10) days after receipt of the Notice of Termination for
Cause by the Executive from the Company.
1.4
Change in Control
. The term “Change in
Control” means the occurrence of any one of the following
events:
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(a)
individuals who, on January 24,
2003, constitute the Board (the ‘‘Incumbent
Directors”) cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director
subsequent to January 24, 2003, whose election or nomination
for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board (either by a specific vote or
by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without written
objection to such nomination) shall be an Incumbent Director;
provided, however , that no individual initially elected or
nominated as a director of the Company as a result of an actual or
threatened election contest with respect to directors or as a
result of any other actual or threatened solicitation of proxies by
or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;
(b)
any “person” (as such
term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”)
and as used in Sections 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more
of the combined voting power of the Company’s then
outstanding securities eligible to vote for the election of the
Board (the “Company Voting Securities”); provided,
however , that the event described in this paragraph
(b) shall not be deemed to be a Change in Control by virtue of
any of the following acquisitions: (A) by the Company or any
Subsidiary, (B) by any employee benefit plan (or related
trust) sponsored or maintained by the Company or any Subsidiary,
(C) by any underwriter temporarily holding securities pursuant
to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (c)), or
(E) pursuant to any acquisition by Executive or any group of
persons including Executive (or any entity controlled by Executive
or any group of persons including Executive);
(c)
there is consummated a merger,
consolidation, statutory share exchange or similar form of
corporate transaction involving the Company or any of its
Subsidiaries (a “Business Combination”), unless
immediately following such Business Combination: (A) more than
60% of the total voting power of (x) the corporation resulting
from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of
at least 95% of the voting securities eligible to elect directors
of the Surviving Corporation (the “Parent
Corporation”), is represented by Company Voting Securities
that were outstanding immediately prior to such Business
Combination (or, if applicable, is represented by shares into which
such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no person
(other than any employee benefit plan (or related trust) sponsored
or maintained by the Surviving Corporation or the Parent
Corporation), is or becomes the beneficial owner, directly or
indirectly, of 20% or more of the total voting power
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of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there
is no Parent Corporation, the Surviving Corporation) and
(C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) following the consummation
of the Business Combination were Incumbent Directors at the time of
the Board’s approval of the execution of the initial
agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A),
(B) and (C) above shall be deemed to be a
“Non-Qualifying Transaction”); or
(d)
the stockholders of the Company
approve a plan of complete liquidation or dissolution of the
Company, or the consummation of a sale of all or substantially all
of the Company’s assets.
Notwithstanding the foregoing, a
Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more
than 20% of the Company Voting Securities as a result of the
acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding;
provided, that if after such acquisition by the Company such
person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company
Voting Securities beneficially owned by such person, a Change in
Control of the Company shall then occur.
1.5
Effective Date
. The term “Effective
Date” means the first date during the term of this Agreement
on which a Change in Control occurs provided that the Executive is
employed by the Company or a Subsidiary on such date.
Anything in this Agreement to the contrary notwithstanding, if the
Executive’s employment with the Company or a Subsidiary has
terminated for any reason prior to the first date on which a Change
in Control occurs, this Agreement shall be null and void as of the
date of such termination of employment; provided, however, that if
it is reasonably demonstrated that such termination (i) was at
the request of a third party who has taken steps reasonably
calculated to effect a Change in Control, or (ii) otherwise
arose in connection with or anticipation of a Change in Control,
then for all purposes of this Agreement the “Effective
Date” shall mean the date immediately prior to the date of
such termination.
1.6
Eligible to Retire
. The term “Eligible to
Retire” means an Executive who has met the eligibility
requirements for retirement under any Company or Subsidiary
supplemental executive non-qualified defined benefit retirement
plan in which the Executive participated immediately prior to the
occurrence of a Qualifying Termination.
1.7
Good Reason
. The term “Good
Reason” means, without the Executive’s express written
consent, the occurrence after the Effective Date of any one or more
of the following:
(a)
The assignment to the Executive of
duties materially inconsistent with the Executive’s
authorities, duties, responsibilities, and status (including
offices, title and reporting relationships) as an executive and/or
officer of the Company or a Subsidiary immediately prior to the
Effective Date, or a material reduction or
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alteration in the nature or status
of the Executive’s authorities, duties, or responsibilities
from those in effect immediately prior to the Effective Date,
(including as a type of such reduction or alteration for an
Executive who is an officer of a publicly traded company
immediately prior to the Effective Date, the Executive occupying
the same position or title but with a company whose stock is not
publicly traded) unless such act is remedied by the Company or such
Subsidiary within 10 business days after receipt of written notice
thereof given by the Executive; or
(b)
A reduction by the Company or a
Subsidiary of the Executive’s base salary in effect
immediately prior to the Effective Date or as the same shall be
increased from time to time, unless such reduction is less than ten
percent (10%) and it is either (i) replaced by an incentive
opportunity equal in value; or is (ii) consistent and
proportional with an overall reduction in management compensation
due to extraordinary business conditions, including but not limited
to reduced profitability and other financial stress (i.e., the base
salary of the Executive will not be singled out for reduction in a
manner inconsistent with a reduction imposed on other executives of
the Company or such Subsidiary); or
(c)
The relocation of the
Executive’s office more than 50 miles from the
Executive’s office immediately prior to the Effective Date;
or
(d)
Failure of the Company or a
Subsidiary (whichever is the Executive’s employer) to provide
(i) the Executive the opportunity to participate in all
applicable incentive, savings and retirement plans, practices,
policies and programs of the Company or such Subsidiary to the same
extent as other senior executives (or, where applicable, retired
senior executives) of the Company or such Subsidiary, and
(ii) the Executive and/or the Executive’s family, as the
case may be, the opportunity to participate in, and receive all
benefits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company or such Subsidiary,
including, without limitation, medical, prescription, dental,
disability, sick benefits, accidental death and travel insurance
plans and programs, to the same extent as other senior executives
(or, where applicable, retired senior executives) of the Company or
such Subsidiary; or
(e)
Failure of the Company or a
Subsidiary (whichever is the Executive’s employer) to provide
the Executive such perquisites as the Company or such Subsidiary
may establish from time to time which are commensurate with the
Executive’s position and at least comparable to those
received by other senior executives at the Company or such
Subsidiary; or
(f)
The aggregate benefits provided to
the Executive by the Company following a Change in Control are
materially less than the aggregate benefits made available to the
Executive immediately prior to such Change in Control;
or
(g)
The failure by the Company to comply
with paragraph (c) of Section 14 of this Agreement;
or
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(h)
Any other substantial breach of this
Agreement by the Company that either is not taken in good faith or
is not remedied by the Company promptly after receipt of notice
thereof from the Executive.
The Executive’s right to
terminate employment for Good Reason shall not be affected by the
Executive’s incapacity due to physical or mental
illness. The Executive’s continued employment shall not
constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason herein; provided, however, a
termination of employment by the Executive for Good Reason for
purposes of this Agreement shall be effectuated by giving the
Company written notice (“Notice of Termination for Good
Reason”) of the termination, at any time during the
Protection Period, setting forth in reasonable detail the specific
conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive
relied. Unless the parties agree otherwise, a termination of
employment by the Executive for Good Reason shall be effective on
the thirtieth (30 th
) day following the date when the
Notice of Termination for Good Reason is given during which time
the Company shall have the opportunity to remedy the conduct,
unless the notice sets forth a later date (which date shall in no
event be later than sixty (60) days after the notice is given);
provided, however, that no event described hereunder shall
constitute Good Reason if such event is a result of an isolated,
insubstantial and inadvertent action that is not taken in bad faith
and that is remedied by the Company within ten (10) days after
receipt of the Notice of Termination for Good Reason by the Company
from the Executive. If the Executive continues to provide
services to the Company after one of the events giving rise to Good
Reason has occurred, it will be in no way considered a waiver of
the Executive’s right to terminate his employment at any time
during the Protection Period for Good Reason in connection with
such event.
1.8
Ineligible to Retire
. The term “Ineligible
to Retire” means an Executive who has not met the eligibility
requirements for retirement under any Company or Subsidiary
supplemental executive non—qualified defined benefit
retirement plan in which the Executive participated immediately
prior to the occurrence of a Qualifying Termination.
1.9
Qualifying Termination
. The term “Qualifying
Termination” means
(a)
The occurrence of any one or more of
the following employment termination events during the period
beginning with the Effective Date and ending on the second
anniversary of such date, shall constitute a “Qualifying
Termination”:
(i)
The Company’s termination of
the Executive’s employment without Cause (as defined in
Section 1.3); or
(ii)
The Executive’s resignation
for Good Reason (as defined in Section 1.7).
(b)
A Qualifying Termination shall not
include a termination of employment by reason of death, disability,
the Executive’s voluntary termination of employment without
Good Reason, or the Company’s termination of the
Executive’s employment for Cause.
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(c)
The date of a Qualifying Termination
shall be the date the Executive has a separation from service under
Internal Revenue Code Section 409A and the regulations
thereunder.
1.10
Protection Period
. The Term “Protection
Period” means the two (2) year period commencing on the
Change in Control and ending on the second anniversary of the
Change in Control.
1.11
Subsidiary
. The term
“Subsidiary” means any corporation with respect to
which the Company owns a majority of the outstanding shares of
common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the
directors.
2.
Severance Benefits for an
Executive Ineligible to Retire . Upon the occurrence of a Qualifying
Termination with respect to an Executive who is Ineligible to
Retire:
(a)
Severance Payment
. The Company shall pay to the
Executive an amount equal to three times the sum of (i) the
greater of (A) the Executive’s annual base salary as of
immediately prior to the occurrence of the Change of Control or
(B) the Executive’s annual base salary (as in effect on
the date of the Qualifying Termination, not reduced by any
reduction described in Section 1.7(b) above that would
constitute Good Reason) and (ii) the greater of (A) the
Annual Award Amount, determined with the date of the Change of
Control as the date of determination, or (B) the Annual Award
Amount, determined with the date of the Qualifying Termination as
the date of determination. The payment shall be made in a
lump sum after the Qualifying Termination, and within 5 business
days after the Company receives the executed agreement referred to
in 2(e) below but in no case prior to the expiration of any
period during which the Executive is permitted to revoke such
agreement.
(b)
Supplemental Retirement
Benefits . For
purposes of determining the Executive’s supplemental
retirement benefits which the Executive is entitled to under the
Company’s supplemental non-qualified retirement plan in which
the Executive participated immediately prior to the Qualifying
Termination (or the supplemental retirement plan maintained by a
successor company or a Subsidiary), (i) the Executive’s
service percentage shall be computed by adding three years of
executive-level service to the Executive’s actual service,
provided that the Executive’s service percentage shall not be
deemed to be less than 40%; (ii) any minimum age and service
eligibility requirements for such benefits shall be waived and such
benefits shall be fully vested; (iii) Annual Award Amount
shall be used to compute such benefits in lieu of any other annual
incentive award amount under such plan and (iv) for purposes
of computing the present value of the benefit to be paid to the
Executive at age 62, three years will be added to the
Executive’s age. Notwithstanding the foregoing, on a
Qualifying Termination, the Executive will be entitled to receive
an amount equal to the greater of (i) the amount that would
have been payable under this Section 2(b) under the
supplemental non-qualified retirement plan in which he participated
had the Qualifying Termination occurred on the Change in Control or
(ii) the amount
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payable under this
Section 2(b) under the supplemental non-qualified
retirement plan in which he participated as of the date of the
Qualifying Termination.
(c)
Severance Health
Benefits .
Commencing upon a Qualifying Termination and continuing through the
third anniversary of such Qualifying Termination, the Executive
and/or the Executive
