EMPLOYMENT AGREEMENT

Exhibit 10.6

 

EMPLOYMENT AGREEMENT

As Amended and Restated Effective January 1, 2009

 

THIS EMPLOYMENT AGREEMENT (the "Agreement") was entered into as of March 31 2005, by and between Northeast Utilities Service Company, a Connecticut corporation ("NUSCO"), with its principal office in Berlin, Connecticut, and Charles W. Shivery, a resident of Avon, Connecticut ("Executive").  This amendment and restatement of the Agreement is effective as of January 1, 2009.

 

WHEREAS, Executive is employed as Chairman, President & Chief Executive Officer of Northeast Utilities ("NU") and holds senior executive positions with certain of the subsidiaries of NU (NU and the Affiliates, as such term is defined in Section 6.1(a), of NU being referred to collectively herein as the "Company") and both parties desire to enter into an agreement to reflect Executive's contribution to the Company's business in Executive's executive capacities and to provide for Executive's continued employment by the Company, upon the terms and conditions set forth herein, and

 

WHEREAS, Executive and NUSCO desire to amend and restate the Agreement to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), effective as of January 1, 2009.

 

NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows:

 

1.

Employment .  The Company hereby agrees to continue the employment of Executive, and Executive hereby accepts such employment and agrees to perform Executive’s duties and responsibilities, in accordance with the terms, conditions and provisions hereinafter set forth.

 

1.1.

Employment Term .  The term of Executive's employment under this Agreement shall commence as of March 31, 2005 (the "Effective Date") and shall continue until December 31, 2006, unless sooner terminated in accordance with Section 5 or Section 6 hereof, and shall automatically renew for periods of one year unless one party gives written notice to the other, at least sixty days prior to December 31, 2006 or at least sixty days prior to the end of any one-year renewal period, that the Agreement shall not be further extended.  The period commencing as of the Effective Date and ending on the date on which the term of Executive's employment under the Agreement shall terminate is hereinafter referred to as the "Employment Term".

 

1.2.

Duties and Responsibilities .  Executive shall serve as Chairman, President & Chief Executive Officer of NU, and in such senior positions as directed by NUSCO's Board of Directors (the "Board") or the Board of Trustees (the "Trustees") of NU that provide Executive with duties and compensation that are substantially

 

equivalent to Executive's current position in terms of duties and responsibilities.  During the Employment Term, Executive shall perform all duties and accept all responsibilities incident to such positions as may be assigned to Executive by the Board.

 

1.3.

Extent of Service .  During the Employment Term, Executive agrees to use Executive's best efforts to carry out Executive's duties and responsibilities under Section 1.2 hereof and, consistent with the other provisions of this Agreement, to devote substantially all Executive's business time, attention and energy thereto.  Except as provided in Section 3 hereof, the foregoing shall not be construed as preventing Executive from making minority investments in other businesses or enterprises provided that Executive agrees not to become engaged in any other business activity which, in the reasonable judgment of the Board, is likely to interfere with Executive's ability to discharge Executive's duties and responsibilities to the Company.

 

1.4.

Base Salary .  For all the services rendered by Executive hereunder, NUSCO shall pay Executive a base salary ("Base Salary"), commencing on the Effective Date, at the annual rate then being paid to Executive by NUSCO, payable in installments at such times as NUSCO customarily pays its other senior level executives (but in any event no less often than monthly).  Executive's Base Salary shall be reviewed annually for appropriate adjustment (but shall not be reduced below that in effect on the Effective Date without Executive's written consent) by the Trustees pursuant to its normal performance review policies for senior level executives.  Executive's annual Base Salary shall not be reduced below $840,000 without Executive's written consent.

 

1.5.

Retirement and Benefit Coverages .  

 

(a) During the Employment Term, Executive shall be entitled to participate in all

 

(i) employee pension and retirement plans and programs (“Retirement Plans”) and

(ii) welfare benefit plans and programs (“Benefit Coverages”),

 

in each case made available to the Company's senior level executives as a group or to its employees generally, as such Retirement Plans or Benefit Coverages may be in effect from time to time, including, without limitation, the Company's Supplemental Executive Retirement Plan for Officers (the “Supplemental Plan”), both as to the Make-Whole Benefit and the Target Benefit.  

(b) In addition, the Company shall provide Executive with a special retirement benefit as hereinafter described (the “Special Retirement Benefit”).  The Special Retirement Benefit equals the positive difference between (i) the amount that would be payable from the Northeast Utilities Service Company Retirement Plan (the “Retirement Plan”) and the Supplemental Plan if (A) actuarial reductions for commencement before

 

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age 65 were equal to 2% for each year younger than age 65 to age 60, if applicable, and 3% for each year younger than age 60, unless actuarial reduction factors more favorable to Executive are adopted in the Retirement Plan, in which case those factors shall apply, (B) three years of service were added to Executive’s actual service, and ( C) all benefits under the Retirement Plan and the Supplemental Plan were fully vested, and ( ii) the amounts payable from the Retirement Plan and the Supplemental Plan without such enhancements . The Special Retirement Benefit shall be paid at the same time and in the same form as the Supplemental Plan benefit subject to the provisions of Section 7.1 of this Agreement.  Upon the death of Executive prior to payment of his Special Retirement Benefit, his spouse, if any, shall be entitled to receive payment of a Special Retirement Benefit in the same form and at the same time that payment of his Supplemental Plan benefit is (or would be) made to his spouse in an amount equal to 50% of the Special Retirement Benefit that would have been paid to Executive if his Termination Date occurred on the day before the date of his death , calculated on the assumption that the Special Retirement Benefit was payable to Executive as a life annuity in accordance with the factors set forth in Addendum 1 to the Supplemental Plan commencing on the date of Executive’s death.

 

(c) In addition, Executive may elect continued participation after termination of employment in the Company’s retiree health plan if the terms of such plan allow Executive’s continued participation; provided, however, that in the event of such election, Executive shall pay the then applicable amount payable in accordance with standard payment rates by retirees of the Company participating in such plan.  If Executive’s age and years of service do not qualify him for benefits under the Company's retiree health plan Executive shall instead be eligible for such continued health benefits as may be provided in Sections 5 or 6, as applicable.

 

1.6.

Reimbursement of Expenses and Dues; Vacation .  Executive shall be provided with reimbursement of expenses related to Executive’s employment by the Company on a basis no less favorable than that which may be authorized from time to time for senior level executives as a group, and shall be entitled to five weeks of vacation annually and holidays and other leave in accordance with the Company's normal personnel policies for senior level executives.  In addition, Executive shall be entitled to taxable reimbursement for an initiation fee of up to $10,000 for membership in a private business or country c lub, and reimbursement of up to $5,000 per year in annual expenses related to such membership.  The Company will review periodically the amount of such expenses it will reimburse to Executive and may make adjustments to said amount based upon changes in the fee structure at such club. All such reimbursements shall be made in accordance with the provisions of Section 7.2 of this Agreement .

 

  

1.7.

Short-Term Incentive Compensation .  Executive shall be entitled to participate in any short-term incentive compensation programs established by the

 

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Company for its senior level executives generally, depending upon achievement of certain annual individual or business performance objectives specified and approved by the Trustees (or a Committee thereof) in its sole discretion; provided, however, that Executive's "target opportunity" and "maximum opportunity" under any such program shall be at least 100% and 200%, respectively, of Executive's Base Salary, except that the Trustees may change these "target opportunity" and "maximum opportunity" percentages as part of a general revision of executive compensation which also applies to other senior level executives of the Company.  Executive's short-term incentive compensation, either in shares of NU or cash, as applicable from time to time, shall be paid to Executive, not later than such payments are made to the Company's senior level executives generally and in accordance with the terms of the applicable plan or program .  Notwithstanding the foregoing, if set forth in applicable program documents specific payouts of Executive’s short-term incentive compensation may be deferred in order to minimize a loss of tax deductions for the Company under Section 162(m) of the Internal Revenue Code.

 

1.8.

Long-Term Incentive Compensation .  Executive shall also be entitled to participate in any long-term incentive compensation programs established by the Company for its senior level executives generally, depending upon achievement of certain business performance objectives specified and approved by the Trustees (or a Committee thereof) in its sole discretion; provided, however, that Executive's "target opportunity" and "maximum opportunity" under any such program shall be at least 250% and 500%, respectively of Executive's Base Salary, except that the Trustees may change these "target opportunity" and "maximum opportunity" percentages as part of a general revision of executive compensation which also applies to other senior level executives of the Company.  Executive's long-term incentive compensation, either in shares of NU, restricted stock units, options or cash, as applicable from time to time, shall be paid to Executive not later than such payments are made to the Company's senior level executives generally and in accordance with the terms of the applicable plan or program .  Notwithstanding the foregoing, if set forth in applicable program documents specific payouts of Executive’s long-term incentive compensation may be deferred  in order to minimize a loss of tax deductions for the Company under Section 162(m) of the Internal Revenue Code.

 

2.  

Confidential Information .  Executive recognizes and acknowledges that by reason of Executive's employment by and service to the Company before, during and, if applicable, after the Employment Term Executive has had and will continue to have access to certain confidential and proprietary information relating to the business of the Company, which may include, but is not limited to, trade secrets, trade "know-how", customer information, supplier information, cost and pricing information, marketing and sales techniques, strategies and programs, computer programs and software and financial information (collectively referred to as "Confidential Information").  Executive acknowledges that such Confidential Information is a valuable and unique asset of the

 

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Company and Executive covenants that Executive will not, unless expressly authorized in writing by the Board, at any time during the course of Executive's employment use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation except in connection with the performance of Executive's duties for the Company and in a manner consistent with the Company's policies regarding Confidential Information.  Executive also covenants that at any time after the termination of such employment, directly or indirectly, Executive will not use any Confidential Information or divulge or disclose any Confidential Information to any person, firm or corporation, unless such information is in the public domain through no fault of Executive or except when required to do so by a court of law, by any governmental agency having supervisory authority over the business of the Company or by any administrative or legislative body (including a committee thereof) with apparent jurisdiction to order Executive to divulge, disclose or make accessible such information, in which case Executive will inform NUSCO in writing promptly of such required disclosure, but in any event at least two business days prior to disclosure.   All written Confidential Information (including, without limitation, in any computer or other electronic format) which comes into Executive's possession during the course of Executive's employment shall remain the property of the Company.  Except as required in the performance of Executive's duties for the Company, or unless expressly authorized in writing by the Board, Executive shall not remove any written Confidential Information from the Company's premises, except in connection with the performance of Executive's duties for the Company and in a manner consistent with the Company's policies regarding Confidential Information.  Upon termination of Executive's employment, Executive agrees immediately to return to the Company all written Confidential Information in Executive's possession.

 

3.

Non-Competition; Non-Solicitation .

 

(a)  

During Executive's employment by the Company and for a period of two years after Executive's termination of employment for any reason, within the Company's "service area," as defined below, Executive will not, except with the prior written consent of the Board, directly or indirectly, own, manage, operate, join, control, finance or participate in the ownership, management, operation, control or financing of, or be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise with, or use or permit Executive's name to be used in connection with, any business or enterprise which is engaged in any business that is competitive with any regulated business or enterprise in which the Company is engaged ("Competitive Company").  For the purposes of this Section, "Service Area" shall mean the geographic area within the states of Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont, or any other state in which the Company, in the aggregate, generates 25% or more of its revenues in the fiscal year of NU in which Executive's termination of employment occurs.  Further, for the purposes of this Section, "Competitive Company" shall mean Consolidated Edison, Inc., Energy East

 

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Corporation, Hydro-Quebec, KeySpan Energy, National Grid USA, NSTAR, or The United Illuminating Company, their assigns or successors, or any other company which in the future engages in competition with the regulated business of the Company in the Service Area.  Executive acknowledges that the listed service area is the area in which the Company presently does business.

 

(b)  

The foregoing restrictions shall not be construed to prohibit the ownership by Executive of less than five percent (5%) of any class of securities of any corporation which is engaged in any of the foregoing businesses having a class of securities registered pursuant to the Securities Exchange Act of 1934 (the "Exchange Act"), provided that such ownership represents a passive investment and that neither Executive nor any group of persons including Executive in any way, either directly or indirectly, manages or exercises control of any such corporation, guarantees any of its financial obligations, otherwise takes any part in its business, other than exercising Executive's rights as a shareholder, or seeks to do any of the foregoing.

 

(c)  

Executive further covenants and agrees that during Executive's employment by the Company and for the period of two years thereafter, Executive will not, directly or indirectly, (i) solicit, divert, take away, or attempt to solicit, divert or take away, any of the Company's "Principal Customers," defined for the purposes hereof to include any customer of the Company, from which $100,000 or more of annual gross revenues are derived at such time, or (ii) encourage any Principal Customer to reduce its patronage of the Company.

 

(d)  

Executive further covenants and agrees that during Executive's employment by the Company and for the period of two years thereafter, Executive will not, except with the prior written consent of the Trustees, directly or indirectly, solicit or hire, or encourage the solicitation or hiring of, any person who was a managerial or higher level employee of the Company at any time during the term of Executive's employment by the Company by any employer other than the Company for any position as an employee, independent contractor, consultant or otherwise.  The foregoing covenant of Executive shall not apply to any person after 12 months have elapsed subsequent to the date on which such person's employment by the Company has terminated.

 

4.

Equitable Relief .

 

(a)

Executive acknowledges and agrees that the restrictions contained in Sections 2 and 3 are reasonable and necessary to protect and preserve the legitimate interests, properties, goodwill and business of the Company, that the Company would not have entered into this Agreement in the absence of such restrictions and that irreparable injury will be suffered by the Company should Executive breach any of the provisions of those Sections.  Executive represents and acknowledges that (i) Executive

 

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has been advised by the Company to consult Executive’s own legal counsel in respect of this Agreement, and (ii) that Executive has had full opportunity, prior to execution of this Agreement, to review thoroughly this Agreement with Executive’s counsel.

 

(b)  

Executive further acknowledges and agrees that a breach of any of the restrictions in Sections 2 and 3 cannot be adequately compensated by monetary damages.  Executive agrees that the Company shall be entitled to preliminary and permanent injunctive relief, without the necessity of proving actual damages, as well as an equitable accounting of all earnings, profits and other benefits arising from any violation of Sections 2 or 3 hereof, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled.  In the event that any of the provisions of Sections 2 or 3 hereof should ever be adjudicated to exceed the time, geographic, service, or other limitations permitted by applicable law in any jurisdiction, it is the intention of the parties that the provision shall be amended to the extent of the maximum time, geographic, service, or other limitations permitted by applicable law, that such amendment shall apply only within the jurisdiction of the court that made such adjudication and that the provision otherwise be enforced to the maximum extent permitted by law.

 

(c)

If Executive breaches any of Executive’s obligations under Sections 2 or 3 hereof, and such breach constitutes “Cause,” as defined in Section 5.3 hereof, or would constitute Cause if it had occurred during the Employment Term, the Company shall thereafter have no Target Benefit obligation pursuant to the Supplemental Plan and no Special Retirement Benefit obligation under this Agreement, but shall remain obligated for the Make-Whole Benefit under the Supplemental Plan, but only to the extent not modified by the terms of this Agreement, and compensation and other benefits provided in any plans, policies or practices then applicable to Executive in accordance with the terms thereof.

 

  

(d)

Executive irrevocably and unconditionally (i) agrees that any suit, action or other legal proceeding arising out of Sections 2 or 3 hereof, including without limitation, any action commenced by the Company for preliminary and permanent injunctive relief and other equitable relief, may be brought in the United States District Court for the District of Connecticut, or if such court does not have jurisdiction or will not accept jurisdiction, in any court of general jurisdiction in Hartford, Connecticut, (ii) consents to the non-exclusive jurisdiction of any such court in any such suit, action or proceeding, and (iii) waives any objection which Executive may have to the laying of venue of any such suit, action or proceeding in any such court.  Executive also irrevocably and unconditionally consents to the service of any process, pleadings, notices or other papers in a manner permitted by the notice provisions of Section 10 hereof.

 

(e)

Executive agrees that for a period of five years following the

 

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termination of Executive’s employment by the Company Executive will provide, and that at all times after the date hereof the Company may similarly provide, a copy of Sections 2 and 3 hereof to any business or enterprise (i) which Executive may directly or indirectly own, manage, operate, finance, join, control or participate in the ownership, management, operation, financing, or control of, or (ii) with which Executive may be connected as an officer, director, employee, partner, principal, agent, representative, consultant or otherwise, or in connection with which Executive may use or permit Executive’s name to be used; provided, however, that this provision shall not apply in respect of Section 3 hereof after expiration of the time periods set forth therein.

 

(f)

For the purposes of this Section 4, the term “Company” shall be deemed to include NU and the Affiliates, as defined in Section 6.1(a), of NU and the Company.

 

5.

Termination .  The Employment Term shall terminate upon the occurrence of any one of the following events and payment to Executive under this Section 5 shall be made at the time specified in Section 5.6 :

 

5.1.

Disability .  The Company may terminate the Employment Term if Executive is unable substantially to perform Executive’s duties and responsibilities hereunder to the full extent required by the Board by reason of illness, injury or incapacity for six consecutive months, or for more than six months in the aggregate during any period of twelve calendar months; provided, however, that the Company shall continue to pay Executive’s Base Salary until the Company acts to terminate the Employment Term.  In addition, Executive shall be (a) entitled to receive any amounts earned, accrued or owing but not yet paid under Section 1 above, and (b) treated as if he retired for the purposes of determining Executive’s vesting and eligibility for any other benefits in accordance with the terms of any applicable plans and programs of the Company.  In the event Executive’s employment terminates by reason of his disability, Executive may elect participation in the Company’s health plan for retired or disabled employees if the terms of such plan allow Executive’s and his spouse’s participation; provided, however, that in the event of such election, Executive shall pay the then applicable amount payable in accordance with standard payment rates by disabled or retired employees of the Company, as applicable, participating in such plan.  If the terms of such plan do not allow Executive’s and his spouse’s participation, Executive and his spouse will be eligible to participate in the Company’s executive retiree health plan for the remainder of their lives.  Such executive retiree health plan coverage shall be provided on a subsidized basis so that the Executive’s net after-tax cost for such coverage will generally not be greater than the cost charged to a retired employee for coverage under the Company’s retiree health plan.  Executive’s cost for such executive retiree health plan coverage shall be paid on an after-tax basis and the Company subsidy for such executive retiree health plan coverage shall be includible in  Executive’s income for tax purposes.   The Company will provide tax gross-up

 

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payments with respect to such taxable subsidized coverage concurrently with the inclusion of the amount of such taxable coverage in Executive’s income (or by reimbursement in accordance with Section 7.2 of the Agreement of any benefit amount that is taxable to Executive under Section 105(h) of the Code) such that the tax gross-up payments will reimburse Executive for all Federal and state income taxes and for the Hospital Insurance portion of FICA tax withholding at the highest marginal rate resulting from the inclusion in Executive’s income of such Company subsidy to the executive retiree health plan coverage and from the reimbursement of such taxes but only to the extent that such taxable subsidized coverage is not also taxable to retirees of the Company who receive health coverage through the Company’s health plan.  Otherwise, the Company shall have no further liability or obligation to Executive for compensation under this Agreement.  Executive agrees, in the event of a dispute under this Section 5.1, to submit to a physical examination by a licensed physician selected by the Board.  

 

5.2.

Death .  The Employment Term shall terminate in the event of Executive's death.  In such event, the Company shall pay to Executive's executors, legal representatives or administrators, as applicable, an amount equal to the installment of Executive’s Base Salary set forth in Section 1.4 hereof for the month in which Executive dies.  In addition, Executive's estate shall be entitled to (a) receive any other amounts earned, accrued or owing but not yet paid under Section 1 above, and (b) be treated as if he retired for the purposes of determining Executive’s vesting and eligibility for any other benefits in accordance with the terms of any applicable plans and programs of the Company.  In the event Executive’s employment terminates by reason of his death, then Executive’s surviving spouse’s Special Retirement Benefit payable under Section 1.5(b) shall be calculated as if Executive had attained three additional years of service.   Executive’s surviving spouse may elect participation in the Company’s retiree health plan if the terms of such plan allow such participation; provided, however, that in the event of such election, Executive’s spouse shall pay the then applicable amounts due in accordance with standard payment rates by surviving spouses participating in such plan.

 

If the terms of such plan do not allow Executive’s surviving spouse’s participation for her life, Executive’s spouse shall be eligible to participate in the Company’s executive retiree health plan for the remainder of her life.  Such executive retiree health plan coverage shall be provided on a subsidized basis so that Executive ‘s spouse’s net after-tax cost for such coverage will generally not be greater than the cost charged to a retiree who had satisfied the eligibility requirements for coverage under the Company’s retiree health plan taking into account Executive’s actual age and years and months of service with the Company prior to his death on the same basis as if he were an eligible retiree under the Company’s retiree health plan. Executive’s spouse’s cost for such executive retiree health plan coverage shall be paid on an after-tax basis and the Company subsidy for such executive retiree health plan coverage shall be

 

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reported as taxable income to Executive’s spouse.  The Company will provide tax gross-up payments with respect to such taxable subsidized coverage concurrently (or by reimbursement in accordance with Section 7.2 of the Agreement of any benefit amount that is taxable to Executive under Section 105(h) of the Code) such that the tax gross-up payments will reimburse Executive for all Federal and state income taxes and for the Hospital Insurance portion of FICA tax withholding at the highest marginal rate resulting from the inclusion in Executive’s income of such Company subsidy to the executive retiree health plan coverage and from the reimbursement of such taxes but only to the extent that such taxable subsidized coverage is not also taxable to retirees of the Company who receive health coverage through the Company’s health plan.  Otherwise, the Company shall have no further liability or obligation under this Agreement to Executive’s executors, legal representatives, administrators, heirs or assigns or any other person claiming under or through Executive.

 

5.3.

Cause .  The Company may terminate the Employment Term, at any time, for “cause” upon written notice, in which event all payments under this Agreement shall cease, except for Base Salary to the extent already accrued, and no Target Benefit and no Special Retirement Benefit shall be due under the Supplemental Plan, but Executive shall remain entitled to the Make-Whole Benefit under the Supplemental Plan, but only to the extent not modified by the terms of this Agreement, and any other benefits in accordance with the terms of any applicable plans and programs of the Company.  For purposes of this Agreement, Executive's employment may be terminated for “cause” if (a) Executive is convicted of a felony, (b) in the reasonable determination of the Board, Executive has (i) committed an act of fraud, embezzlement, or theft in connection with Executive's duties in the course of Executive’s employment with the Company, (ii) caused intentional, wrongful damage to the property of the Company or intentionally and wrongfully disclosed Confidential Information, or (iii) engaged in gross misconduct or gross negligence in the course of Executive’s employment with the Company or (c) Executive materially breached Executive’s obligations under this Agreement and shall not have remedied such breach within 30 days after receiving written notice from the Board specifying the details thereof.  For purposes of this Agreement, an act or omission on the part of Executive shall be deemed “intentional” only if it was not due primarily to an error in judgment or negligence and was done by Executive not in good faith and without reasonable belief that the act or omission was in the best interest of the Company.

 

5.4.

Termination Without Cause and Non-Renewal .

 

(a)

The Company may remove Executive, at any time, without cause from the position in which Executive is employed hereunder (in which case the Employment Term shall be deemed to have ended) upon written notice to Executive; provided, however, that, in the event that such notice is given, Executive shall be under no obligation to render any additional services to the Company and, subject to the

 

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provisions of Section 3 hereof, shall be allowed to seek other employment.  Upon any such removal or if the Company informs Executive that the Agreement will not be renewed after December 31, 2006 or at the end of any subsequent renewal period, Executive shall be entitled to receive, as liquidated damages for the failure of the Company to continue to employ Executive, only the amount due to Executive under the Company's then current severance pay plan for employees.  No other payments or benefits shall be due under this Agreement to Executive, but Executive shall be entitled to any other benefits in accordance with the terms of any applicable plans and programs of the Company.  Notwithstanding anything in this Agreement to the contrary, on or after Executive attains age 65, no action by the Company shall be treated as a removal from employment or non-renewal if on the effective date of such action Executive satisfies all of the requirements for the executive or high policy-making exception to applicable provisions of state and federal age discrimination legislation.

 

(b)

Notwithstanding the provisions of Section 5.4(a) (other than the last sentence), in the event that Executive executes a written release upon such removal or non-renewal, and returns such executed Release to the Company not fewer than eight days before the date provided in Section 5.6 for payment of the amounts provided under this Section 5.4(b), substantially in the form attached hereto as Annex 1, (the "Release"), of any and all claims against the Company and all related parties with respect to all matters arising out of Executive's employment by the Company (other than any entitlements under the terms of this Agreement or under any other plans or programs of the Company in which Executive participated and under which Executive has accrued a benefit), or the termination thereof, Executive shall be entitled to receive, in lieu of the payment described in subsection (a) hereof, which Executive agrees to waive,

(i)

as liquidated damages for the failure of the Company to continue to employ Executive, a single cash payment equal to Executive’s Base Compensation, as defined in Section 6.1( b) below;

 

(ii)

a single cash payment equal to the present value of (A)

 the cost that would be incurred in providing $50,000 life insurance coverage on Executive’s life for two years after Executive’s termination of employment under the individual conversion policy for which Executive will be eligible following the termination of his Company-sponsored group term life insurance coverage; and (B) the cost that would be incurred by the Company in providing two years of long-term disability insurance coverage to Executive under the Company-sponsored group long-term disability insurance program at the coverage level in place for the Executive under such group long-term disability insurance program at Executive's Termination Date, calculated on the basis of a discount rate equal to the rate set forth in Section 7.1(a) of this Agreement, such payment to be provided with a tax gross-up to reimburse Executive for all Federal and state income taxes and for the Hospital Insurance portion

 

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of FICA tax withholding at the highest marginal rate resulting from the inclusion in  Executive’s income of such payment .  

 

(iii)

any other amounts earned, accrued or owing but not yet paid under Section 1 above, determined as if he retired from the Company;  

 

(iv)

 any other benefits in accordance with the terms of any applicable plans and programs of the Company and a payment equal to any unused vacation, including continued reimbursement for tax preparation services and financial planning also will continue for a two-year period;

 

(v)

as a