Exhibit 10.1
December 23, 2005
Mr. John D.
McMahon
c/o Consolidated Edison,
Inc.
4 Irving Place
New York, New York 10003
Dear John:
The Board of Directors (the “
Board ”) of Consolidated Edison, Inc. (the “
Company ”) is delighted that you will be continuing in
your position as President and Chief Executive Officer (“
CEO ”) of Orange and Rockland Utilities, Inc. (“
O&R ”). The following outlines certain of the
terms and conditions of your continued employment with the Company
and O&R.
1. During the Term (as defined
below), you will be employed as the President and CEO of O&R,
reporting to the CEO of the Company. In your capacity as President
and CEO of O&R, you shall have the authorities and duties
commensurate with that position. In such capacity, you shall also
have responsibility for regulatory services of the Company. You
agree to devote your full attention and time and efforts during
normal business hours to the business and affairs of the Company
and to the performance of your duties in accordance with the
Company’s policies and procedures. You may (a) serve on
corporate, civic or charitable boards or committees,
(b) deliver lectures or fulfill speaking engagements and
(c) manage personal investments, so long as such activities do
not interfere with the performance of your responsibilities as
President and CEO of O&R and are in compliance with the
Company’s policies and procedures.
2. Your base salary, annual
incentive compensation and long-term incentive compensation shall
be determined by the Management Development and Compensation
Committee of the Company on an annual basis. Effective
September 1, 2005, your base salary shall be $635,000.00. Your
target annual bonus for 2005 under the Orange and Rockland Annual
Team Incentive Plan, or other applicable bonus plan of the Company,
shall be 80% of your base salary, pro-rated for the period
September 1, 2005 through December 31, 2005 (with you
receiving a pro-rated bonus for the period January 1, 2005 to
August 31, 2005 based on your base salary and bonus percentage
in effect prior to September 1, 2005). You shall also receive
an award under the Company’s Long Term Incentive Plan
(“ LTIP ”), the terms and conditions of which
shall be governed by the LTIP and an award agreement under the
LTIP. You will also be eligible to participate in all of the
Company’s plans, practices, policies and programs, and to
receive all fringe benefits and perquisites, generally available to
senior executives of the Company on terms and conditions that are
commensurate with your position as President and CEO of O&R. In
the event
your employment is terminated by the Company
without Cause (as defined below), or by you with or without Good
Reason (as defined below), and the treatment of any of your
benefits or awards upon retirement is more favorable to you than
would otherwise be the case based on the grounds for your
termination of employment, you shall be entitled on a benefit by
benefit basis to such more favorable retirement
treatment.
3. The Company agrees that upon
termination of your employment during the Term of this Agreement,
you will be entitled to the following payments and
benefits:
(a) In the event your employment is
terminated by the Company other than for Cause (as defined in
Exhibit A), or by you with Good Reason (as defined in
Exhibit A) during the period commencing six months prior to
and ending twenty-four months following a Change in Control (as
defined in the Severance Program (as defined below)), subject to
your executing a written release substantially in the form of
Annex 1 to the Severance Program (as revised to provide that
you are not releasing any rights of indemnification or to directors
and officers liability insurance coverage or any amounts due
hereunder upon a termination), you shall be entitled to severance
benefits under the Company’s Severance Program for Officers
(the “ Severance Program ”), as in effect on the
date hereof, provided , however , that in calculating
the amount of your payments and benefits (x) the number two
shall be substituted for the number one in
Sections III.A.1.a.(2), b., c. and d. of the Severance Program
and (y) the number two shall be increased to three in
Section III.A.2 of the Severance Program.
(b) In the event your employment is
terminated for Cause or you terminate your employment voluntarily
(other than with Good Reason during the period commencing six
months prior to and ending twenty-four months following a Change in
Control), you shall be entitled to your Base Compensation (as
defined in the Severance Program) and any accrued vacation pay, in
each case to the extent not previously paid and the Other Benefits
(as defined under the Severance Program), but for purposes of this
Agreement also including any unpaid bonus for any completed prior
fiscal year through the date of termination (unless the terms of
such Other Benefits provide for forfeiture upon termination for
Cause or termination for other than Good Reason).
(c) In the event your employment
terminates by reason of your death, your estate or beneficiary
shall be paid, as applicable, in a lump sum in cash within 30 days
of the date of termination, the Accrued Obligations (as defined in
the Severance Program) and the Other Benefits.
(d) In the event your employment
terminates by reason of your Disability (as defined in
Exhibit A) or mandatory retirement, you shall be entitled to
receive all Accrued Obligations in a lump sum cash within 30 days
of the date of termination of your employment and the Other
Benefits in accordance with their terms.
Except to the extent otherwise
provided in this Agreement, the terms of the Severance Program as
in effect on the date hereof shall govern your rights on
termination of your employment during the Term. The Company further
agrees that notwithstanding any amendments to the Severance
Program, if your employment terminates during the Term, you shall
be entitled to
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the payments and benefits under the Severance
Program as in effect on the date hereof, and as modified pursuant
to the terms of this Agreement. Notwithstanding anything in the
Severance Program to the contrary, the definitions of
“Cause”, “Good Reason” and
“Disability” and the notice and cure provisions set
forth in Appendix A shall govern your rights upon termination of
your employment during the Term. The Company also agrees that in
the event of a termination of your employment by the Company other
than for Cause, all amounts mandatorily deferred under the
Company’s Executive Incentive Plan shall be immediately
vested and nonforfeitable and paid to you in accordance with your
payment election then in effect.
4. The Company agrees that upon
termination of your employment, the equity-based awards granted to
you prior to or during the Term under the LTIP or other
equity-based compensation plan of the Company shall be treated as
follows (whether such termination occurs during or after the
Term):
(a) In the event that the Company
terminates your employment without Cause, or you terminate your
employment for Good Reason during the period commencing six months
prior to and ending twenty-four months following a Change in
Control, (i) any performance-based equity awards granted to
you prior to or during the Term shall (A) fully vest and
(B) be paid out within 30 days of the date your employment
terminates as if targeted performance had been achieved through the
applicable performance period; and (ii) any
non-performance-based equity awards granted to you prior to or
during the Term, including restricted stock awards, restricted
stock unit awards, options and stock appreciation rights, shall
fully vest and (A) be paid out within 30 days of the date
your employment terminates or (B) (x) in the case of options
granted to you prior to April 19, 2001 be exercisable until
the third anniversary of the date your employment terminates and
(y) in the case of options or stock appreciation rights
granted to you after April 19, 2001, be exercisable until the
tenth anniversary of the grant date, provided ,
however , that in no event shall such options or stock
appreciation rights be exercisable beyond the expiration of their
respective terms.
(b) In the event that you terminate
your employment voluntarily for any reason more than six months
prior to a Change in Control, or without Good Reason during the
period commencing six months prior to and ending twenty-four months
following a Change in Control, or your employment terminates as a
result of your death or Disability, (i) any performance-based
equity awards granted to you shall (A) vest pro-rata based on
the number of full months that have elapsed from the date of grant
of such award to the date of your termination of employment;
(B) be payable at the time such award would otherwise have
been paid had your employment not terminated; and (C) be based
on the Company’s achievement of applicable performance
criteria through the end of the applicable performance period,
(ii) any non-performance-based restricted stock or restricted
stock unit awards granted to you prior to or during the Term shall
vest pro-rata based on the number of full months that have elapsed
from the date of grant of such award to the date of termination of
your employment and be paid out within 30 days of the date
your employment terminates, and (iii)(A) in the case of options
granted prior to April 19, 2001, such options shall be
exercisable until the third anniversary of the date your employment
terminates and (B) in the case of options or stock
appreciation rights granted after April 19, 2001, such options
or stock appreciation rights shall be exercisable until the tenth
anniversary of the grant date, provided , however ,
that in no event shall such options or stock appreciation rights be
exercisable beyond the expiration of their respective
terms.
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(c) In the event your employment is
terminated by the Company for Cause, any equity awards granted to
you prior to or during the Term under the LTIP or other equity
based compensation plan of the Company shall be forfeited in their
entirety (regardless of whether such awards are vested).
5. Notwithstanding anything in the
Severance Program to the contrary, if any payments or benefits made
to you under this Agreement or otherwise constitute
“parachute” payments within the meaning of
Section 280G of the Internal Revenue Code of 1986, as amended
(the “ Code ”), you shall be entitled to the
additional payments and benefits set forth in Appendix
B.
6. You understand that you hold in a
fiduciary capacity for the benefit of the Company all confidential
information, knowledge or data (defined below) relating to the
Company or any of its affiliates or subsidiaries, and their
respective businesses, which you obtain during your employment by
the Company or any of its affiliated companies and which shall not
be or become public knowledge (other than by acts by you or your
representatives in violation of this Agreement). Upon termination
of your employment, you shall return to the Company, all Company
information. After termination of your employment, you will not
without the prior written consent of the Company or as may
otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other
than the Company and those designated by it, except
(x) otherwise publicly available information, (y) as may
be necessary to enforce your rights under this Agreement or
necessary to defend yourself against a claim asserted directly or
indirectly by the Company or its affiliates or (z) in
compliance with legal process or governmental inquiry. As used
herein, the term “confidential information, knowledge or
data” means all trade secrets, proprietary and confidential
business information belonging to, used by, or in the possession of
the Company or any of its affiliates and subsidiaries, including
but not limited to information, knowledge or data related to
business strategies, plans and financial information, mergers,
acquisitions or consolidations, purchase or sale of property,
leasing, pricing, sales programs or tactics, actual or past
sellers, purchasers, lessees, lessors or customers, those with whom
the Company or its affiliates and subsidiaries has begun
negotiations for new business, costs, employee compensation,
marketing and development plans, inventions and technology, whether
such confidential information, knowledge or data is oral, written
or electronically recorded or stored, except information in the
public domain, information known by you prior to employment with
the Company and information received by you from sources other than
the Company or its affiliates or subsidiaries, without obligation
of confidentiality, and your rolodex and similar address
books.
7. The confidential knowledge,
information and data, as defined in the previous paragraph, gained
in the performance of your duties hereunder may be valuable to
those who are now, or might become, competitors of the Company or
its affiliates and subsidiaries. Accordingly, you agree that you
will not, for the period of two years from the date of termination
of your employment for any reason, directly own, manage, operate,
join, control, become employed by, consult to or participate in the
ownership, management, or control of any company that competes with
Consolidated Edison Company of New York, Inc., Orange and Rockland
Utilities, Inc. or other regulated business of the Company, or
other than with the consent of the Company which shall not be
unreasonably withheld, any other material business of the Company;
provided that the foregoing shall not prevent you from owning less
than two percent (2%) of the stock of any publicly-traded
company. Further, you agree that for a period of two years
following
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the date of termination of your employment, you
will not, 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 your
employment by the Company by any employer other than the Company
for any position as an employee, independent contractor, consultant
or otherwise. The foregoing agreement in the immediately preceding
sentence shall not apply to any person after 6 months have elapsed
subsequent to the date on which such person’s employment by
the Company has terminated. You shall also not be prohibited from
serving as a reference for an employee with regard to an entity
with which you are not affiliated or generally advertising for
employees, provided such advertising is not targeted at employees
of the Company. In the case of any material violations of any
activity prohibited under this paragraph 7, you shall
(a) not be entitled to post-employment payments under the
Severance Program or this Agreement; (b) forfeit any unvested
equity awards granted to you under the LTIP; and (c) return or
repay to the Company a portion of any equity awards that vested or
paid out during the two year period immediately preceding such
prohibited activity which is equal to the amount of such equity
aw
