This case concerns the interpretation of an employment agreement. The plaintiff, defendant's former employee, seeks severance, based upon his reading of the agreement, in the amount of $2,000,000. The defendant contends that no sums are due and owing to plaintiff based both on its view of the contract terms and its allegations of plaintiff's breach of his fiduciary duty. The matter was tried before the Court over three days during which four witnesses testified and over eighty exhibits were placed into evidence.

Plaintiff, Kurt Berlinghof ("Berlinghof") testified that he began working for Defendant, Long Island Fiber Exchange, Inc. ("LIFE") on a full-time basis in mid-2003. He set forth that Michael Power ("Power"), a childhood friend, was the founder of LIFE and had asked him to join the company based upon his business experience and in order to move the entity forward as it had been floundering for a couple of years. Berlinghof stated that when he became involved with the company, Power sought to enhance the business of building fiberoptic networks for Long Island school districts and that the existing company faced stiff competition from entities like Verizon, Cablevision and Keyspan. It was, therefore, Berlinghof's role to create a company structure, file past tax returns that had never been filed, and begin the sales process. As Berlinghof testified, the company had to begin bidding on work in order to start revenue flowing into the company coffers.

According to Plaintiff, in 2002 he gave Power funds to pay for his personal bills, including his mortgage, and also provided a $200,000 non-interest loan to the company. He stated that he also signed for the corporation's bonds and lines of credit, in addition to expending $150,000 for a cash bond for one of the client school districts. After Plaintiff made these loans and investments, he was initially provided with 4% ownership of the shares of the entity and ultimately his ownership increased to 25% in 2003 when he joined the company on a full-time basis. According to Plaintiff, he became a board member around the same time period along with Power and one Enrico Scarda ("Scarda"), whom he described as an attorney and real estate developer. He stated that Scarda also provided financing aid for Power and LIFE, including giving Power personal funds and signing for corporate bonding, although he asserted that Scarda never paid for the equivalent cash bond as he did.

According to Berlinghof, he and Power worked full-time for LIFE beginning in 2003. Power handled the bidding process as well as building the network and managing construction crews, based upon his experience in the construction industry, and [*2]Berlinghof handled marketing and sales, as well as creation of a corporate structure. While he described Scarda as attending bi-weekly board meetings and participating in deciding on the terms for bids, he stated that Scarda never worked full-time for LIFE. During his tenure at LIFE from 2003 through 2010, Berlinghof was associated with or brought in directly to the company 75% to 80% of all of the company's sales.

According to Berlinghof, the biggest challenges facing LIFE in 2003 were competition, capitalization, growth, and the need for cash flow. Although LIFE had various lines of credit and the small loans he described, it financed its early operations from the profits it made from its jobs. However, by 2006 LIFE was in need of outside financing. Berlinghof stated that an entity known as Imperium Master Fund, to which he obtained an introduction, loaned the company $2 million. The lender required that he and Power obtain employment agreements with LIFE as part of the financing deal. According to Berlinghof, the LIFE board members voted unanimously to accept Imperium's offer. In 2008 there was another round of financing from Imperium that required LIFE to obtain another $1 million in equity financing. In order not to default on the Imperium note, LIFE reached out to another company known as Rise Above Capital Partners, LLC ("Rise Above"), which was owned, in part, by Scarda, who was also a shareholder of LIFE.

The witness read from a Term Sheet (Exh 3) between Rise Above and LIFE, which set forth that in conjunction with the $1 million equity investment, Rise Above would invest between $5 and $10 million in the entity. The term sheet contained the following provision:

Berlinghof testified that the employment agreement was included in this term sheet at the insistence of Power because Scarda had demanded voting proxies from both him and Power. According to Berlinghof, Power then required what he referred to as the $5 million "golden parachute" to prevent Scarda from using the proxies to take over operation of LIFE and decimate its value. The required proxies were assertedly provided to Scarda (Exh 4); however, the deal contemplated by the term sheet (Exh 3) never did come to fruition. Thereafter, according to the witness, Scarda attempted to remove Power and Berlinghof from the LIFE board, and they in turn attempted to remove Scarda from [*3]the board. The parties then became involved in a litigation at the end of 2009.

In September 2010, Rise Above and LIFE settled that lawsuit, which included an employment contract for Berlinghof (Exh 27). Berlinghof stated that the employment agreement was drafted by LIFE's corporate attorney and that it went through several stages of negotiations throughout 2010. In a series of emails beginning in March 2010, Berlinghof informed the corporate attorney that he wanted his employment agreement to provide for a golden parachute (Exh 11) and that he wanted to see the old proposed employment agreement that had been part of the term sheet for the Rise Above financing that never came to fruition (Exh 12). The March 9, 2010 email from Berlinghof (Exh 11) states that its subject matter is the "Agreement" and sets forth a list of categories including the word "Parachute" which contains a handwritten notation of "$5M." According to Berlinghof, he wanted to make sure that an employment agreement with certain protections would be part of the settlement especially because his relationship with Scarda had become quite strained during the course of the litigation. Exh 11 contains his own marked-up copy of the 2006 agreement that had been a part of the term sheet in the proposed deal with Rise Above that never came to fruition. Paragraph 1 of the Berlinghof proposal states that:

In this proposal, Berlinghof handwrote in "5 yr" which set forth his desire that the initial term be increased.

Paragraph 9C of this Berlinghof proposal stated as follows:

In response to this request, Berlinghof received on March 10, 2010, a copy of Power's proposed employment agreement including the golden parachute provision from the prior term sheet (Exh 12). It was identical to the language set forth above, except that it did not include Berlinghof's suggestion regarding the increase of the initial term from three to five years. Berlinghof then marked up the old proposal again and sent it with an email to Power, who then sent it on to corporate counsel (Exh 14).

Berlinghof testified that in the marked-up version of the proposed employment agreement he had made certain changes to paragraph 9C so that the first sentence began with the words "[i]f the company terminates this agreement or the employee's employment hereunder for any reason," so that the golden parachute provision would apply whether the company terminated either the agreement or the employee's employment and so that, in his words, it would "kick in" in either case. In addition, the marked-up version contained in Exhibit 14 also reduced the amount of the so-called golden parachute to $2 million from the prior proposed agreement of $5 million. Exhibit 14 is dated April 9, 2010. Thereafter, according to Berlinghof, he, Power, and Scarda, as well as attorneys for Rise Above and for LIFE, continued to negotiate the terms of the employment contracts for him and Power for two more months.

Thus, on June 12, 2010, Power sent the various parties an email stating that "[i]f we are to plan a closing this Monday, we need to receive the sign offs from the appropriate parties on the Settlement agreement . . ." Later that same evening, Rise Above's attorney sent the parties the following statement: "[t]he employment agreements contain provisions that were not discussed or agreed to, including $2 million payments to each of Mike and Kurt in the event of termination without cause . . . Since it is contemplated the company will be sold in the near future, what is the purpose of the employment agreement, especially when Mike and Kurt will be the sole directors?" (Exh 17). Berlinghof testified that he and Power were never the sole directors of LIFE.Thereafter, the same parties held a telephone conference on June 13, 2010, followed by an email from LIFE's attorney to the attorney for Rise Above, stating as follows:

According to Berlinghof, this new provision was a good one for both Scarda and for him and Power because it meant that he could not be terminated without cause unless there had been the approval of independent directors, and it also meant that Scarda would be protected from Berlinghof and Power firing each other and voting for the same in order to collect the golden parachute. As he believed this provision protected both sides of the negotiating process, he agreed to the change.

Ultimately, the language with the amendments set forth was adopted and the employment agreements for Berlinghof and Power were unanimously approved by the LIFE board of directors, consisting of Berlinghof, Power and Scarda, on June 16, 2010 (Exh 19).

Thereafter, before the parties settled the above-described litigation in full, the court issued a decision in favor of Rise Above. According to Berlinghof, Scarda then essentially took over the operations of LIFE and, in response to correspondence from the CFO of the company, on August 2, 2010 Scarda took the position that the employment agreements "were not properly authorized by the board and are, therefore, null and void" (Exh 22). Again, the parties entered into negotiations, with Scarda taking the position that the June 10, 2010 vote was somehow conditional. On August 4, 2010, Scarda's attorney sent another communication stating that:

Berlinghof testified that he made it known that he was unwilling to give up his

Berlinghof agreed to give up his board seat as he stated because he felt protected by his remaining employment agreement with its severance provisions and because it provided a way to finally settle the Rise Above lawsuit while LIFE was contemplating a sale of its business to another entity. The final settlement occurred on September 10, 2010 and contained the following provisions:

"The parties agree that notwithstanding the Order in place in conjunction or connection with the action immediately preceding the execution of this agreement, Power has been elected as director of LIFE and as the sole member of a special committee of the board to consider and recommend the approval of this agreement. . . and is serving as a member of a two person Board with Scarda. . . . In addition, the Board has ratified the employment agreement in the form attached as Exhibit C hereto, as modified by the Berlinghof employment agreement amendment; . . . ratified the resolutions presented to the Board for approval at the June 16, 2010 meeting of the Board. . ." (Exh 27).

The amendment to the employment agreement changed the term from three years to one year in paragraph one and retained the same notice of termination provision as well as the $2 million severance provision upon termination without cause. (Exh 28). In October of the same year, a new company, called Sidera Networks, Inc. ("Sidera") was negotiating with Scarda's attorney, now also the attorney for LIFE, for the purchase of LIFE. Berlinghof identified an email between attorneys for the two entities which attached an employment agreement proposed by Sidera for Berlinghof. (Exh 29). When Berlinghof received this information, he was opposed to the proposed terms because it would have made him an at-will employee and reduced his severance payment to $400,000. Again, Berlinghof found himself in a process of negotiations. In November 2010, Berlinghof wrote to Sidera's counsel setting forth that the Sidera proposal did not meet his requirements (Exh 30). Ultimately, he stated that Sidera agreed to allow him to retain his employment agreement as it had been adopted in September 2010, and he signed a five year noncompetition and nonsolicitation agreement in December 2010 with Sidera, which was to take effect upon Sidera's acquisition of LIFE (Exh 39). According to Berlinghof, the merger agreement contained and specifically ratified, among other [*5]things, the Berlinghof employment agreement (Exh O). Berlinghof testified that he has complied in full with this noncompetition, nonsolicitation agreement since his termination from LIFE and that such has impacted his ability to obtain a position in the telecommunications industry where he believed he could earn salary and benefits amounting to $400,000 per annum.

Berlinghof testified that he was ultimately terminated from his employment with LIFE after it had been purchased by Sidera. On March 11, 2011, Berlinghof received a letter from Power (Exh 41) stating:

"Long Island Fiber Exchange, Inc. ("LIFE") hereby provides you with formal notification of its decision not to renew your July 16, 2010 Employment Agreement with LIFE, as amended on September 10, 2010 ("Employment Agreement"). By its terms and consistent with this notice, your Employment Agreement will expire and terminate effective July 16, 2011."

Berlinghof testified that he understood this notice to mean that LIFE was not extending his employment contract and terminating it as of June 16, 2011 (setting forth that the July 16 date was a typographical error). It was his understanding that his termination was supposed to approved by the board of directors and he assumed that the same had occurred since board approval was required in order to effectuate a termination. He also testified that he believed that at least two of the persons copied on this notice were then board members of LIFE.

Berlinghof testified that received certain emails after the termination notice, again offering him at-will employment with $400,000 severance (Exh 43). He stated that he made a proposal for a consulting agreement which Sidera rejected. On June 15, 2011, Berlinghof received both an email and a letter stating that if he did not accept a new at-will employment agreement, his "[l]ife employment will terminate effective June 16, 2011 (Exh 44). On June 17, 2011, Berlinghof notified both Power and the CEO of Sidera that he was entitled to his severance pay in the amount of $2,000,000 and that he was prepared to sign the release set forth in his employment agreement (Exh 45). Three days later, an attorney for LIFE rejected Berlinghof's demand stating that the notices sent to him constituted nonrenewal of his employment agreement and since he had been offered the alternative of a new at will agreement and could have negotiated its terms, the severance provision did not apply and was rejected in toto. He was also reminded of his obligation to abide by the noncompetition and nonsolicitation agreement (Exh 46).

Mark Holdsworth, Esq. testified as an expert witness on behalf of the Plaintiff. He was qualified as an expert in the field of executive compensation based on his 19 years of experience in the field during which he has reviewed hundreds of employment agreements. According to Holdsworth, the primary purposes of employment agreements include the setting forth of the terms and conditions of employment, including compensation, title and benefits as well as the description of what will occur when the employee leaves the subject company. He stated that he has found that an employer's goals are to attract an employee to join the organization, and to provide incentives and motivation to the employee to excel in his/her position, as well as to set forth compensation, to work out incentive compensation such as bonuses, equity awards, and retirement benefits, and to ensure that there exist adequate protections should the relationship not work, which he described as severance arrangements. Holdsworth described a severance provision as one that entitles an employee to certain payments and benefits when the employment is terminated. In his experience, almost all contracts for senior executives include severance provisions. He set forth that a severance provision both protects the employee who is let go from the entity and the employer by encouraging critical employees to remain during periods where the company needs them. He described the term "golden parachute" as a form of severance, which can be linked to the sale of a business or merely provide a large severance package. The witness testified that golden parachutes are contained in a large majority of executive employment agreements and that he has both drafted and reviewed many of them. As with any severance package, golden parachutes encourage the employee not to depart and provide the employer with management that will use its best efforts during a critical period. The golden parachute severance also assertedly provides the shareholders of a corporation with the ability to deliver management in connection with the sale of the entity, often increasing the corporate value.

Mr. Holdsworth stated that the amount of a severance package is a function of many things, including the seniority of the executive, the importance of the employee to the business, the size of the company, and the industry involved. He stated that these severance packages range in value from one percent to up to ten percent of the executive's compensation, and where a sale of a business is concerned, are often approximately three times the total compensation. He stated that he has never drafted a severance provision that has not been upheld as a matter of law.

The witness testified that he has reviewed executive compensation agreements where the severance is triggered by the nonextension of the agreement and that such typically provides that if the employer elects to terminate via a notice of termination, the executive is entitled to a stipulated amount. Where the employer does not provide for severance in case of failure to extend, typically the agreement will specifically state that [*6]either party can terminate upon the completion of the stated term without liability to the other party.

Holdsworth reviewed Berlinghof's employment agreement (Exh 1A) and stated that he believed it contained a severance payment constituting a golden parachute in the amount of $2 million referring to paragraph 9C. He also was aware that the employment agreement contained a noncompetition and nonsolicitation agreement that ran for a period of 60 months (Exh 1C). Berlinghof's compensation consisted of $208,000 in salary, an annual bonus of $70,000, additional reasonable bonuses as determined by the board, a car allowance of $600 per month, an insurance premium payment of $50,000, and the ability to participate in corporate medical, dental, disability and pension plans. Based on the above, Holdsworth estimated Berlinghof's annual compensation with LIFE to amount to approximately $400,000. He, of course, agreed that when multiplied by five (the number of years in the noncompetition agreement) such equaled $2 million. He did not believe that a $2 million golden parachute was in any way above the norm, especially in a case where the executive was responsible for a large percentage of the corporate sales and had a compensation package of $400,000 annually. The noncompetition/ nonsolicitation provisions, in his view, added significant support for this opinion.

According to Holdsworth, Berlinghof's executive agreement constituted an "evergreen" agreement, which he described as allowing for automatic renewal of terms of employment unless one of the parties opted not to renew and provided adequate notice to the other party. He stated that it is not uncommon for such evergreen agreements to provide for severance payments in the event of nonrenewal of a term of employment. Holdsworth also stated that it is common for executive compensation agreements to require some sort of board approval before an executive can be terminated. It is his opinion that the agreement in question requires the approval of an independent director before the subject employee could be terminated without cause. Holdsworth has never seen an agreement that permits severance if terminated without cause with board approval and disallows severance where the executive is terminated without cause without board approval. Such an interpretation, in his view of the employment agreement at issue in this case, would render the severance protection illusory. He opined that his reading of the agreement required board approval before any termination without cause, including termination of the agreement, could occur.

Plaintiff's counsel directed the Court to certain exhibits for the purpose of attempting to demonstrate that the action of Sidera's CEO ("Sicoli") in "terminating" the employment of Berlinghof was based upon the knowledge and approval of Sidera's board of directors. He referred the Court to Exh 58, which reflects the appointment of Sicoli as a member of the board and chief executive officer of the Sidera companies (prior to its [*7]merger with LIFE) and granted him broad executive powers. Once one James Mooney ("Mooney"), named by the Defendant in this action as an independent director, was on the Board of Directors of Sidera, Sidera's board voted on December 7, 2010 to authorize the acquisition of LIFE (Exh 64). On December 22, 2010, with Mooney on the board of Sidera, Sicoli was appointed as the chief executive officer of LIFE and Power was appointed as the President of LIFE (Exh 57). Sidera granted such officers very broad powers to take such actions as they determined necessary to carry out their duties (id). A December 11, 2011 Sidera board meeting refers to the Berlinghof v LIFE litigation, redacting commentary (Exh 60); and a November 30, 2011 Sidera Litigation report contains a brief reference to Berlinghof's claims for $2 million under the terms of his employment agreement (Exh 65). Mooney is again noted on these as a member of the board of directors. On January 16, 2012, under an Omnibus Written Consent of Boards of the Sidera entities, Sicoli was reappointed as the chief executive officer of the Sidera entities (Exh 63). The omnibus written consent paragraph read, in pertinent part, as follows:

Enrico Scarda testified that he was a shareholder, employee and director of LIFE during the relevant period. He confirmed Berlinghof's testimony that he also made a financial contribution to the entity and then became a shareholder. He stated he was also a part owner of the entity known as Rise Above, which made an equity investment in LIFE. He recalled the litigation between Rise Above and LIFE, as well as the June 2010 board of directors meeting of LIFE held prior to the settlement of the lawsuit. According to Scarda, it was decided that it would be best for LIFE if the entity could be sold. He testified, viewing the agenda and meeting minutes of the LIFE board of June 16, 2010, that the board voted to terminate the earlier employment agreements that had been in existence and to vote new employment agreements for Power and Berlinghof. (Exh 19).

According to Scarda, he was not shown the marked up and proposed employment agreements that were attached to the Power email of April 9, 2010 (Exh 14) prior to the LIFE board meeting of June 16, 2010. He stated, rather, that the first time he actually received copies of the employment agreements that were acted upon on June 16, 2010, was in connection with a series of emails he received in the June 12/June 13, 2010 time period (Exh G).

As reflected in the emails contained within Exhibit G, Scarda stated that he participated in a conference call with the attorneys for Rise Above and LIFE as well as Berlinghof and Power. During this conference, paragraph 9C of the employment agreements was discussed. It was Scarda's purported concern that the $2 million severance provision, as proposed, would have allowed Power or Berlinghof to terminate the other and receive the $2 million. Therefore, Scarda stated that the paragraph was restructured to require an independent director to rectify the problem. However, he averred that at no time did Berlinghof or anyone on his behalf make the claim that the liquidated damages provision would come into play in the event that the company decided not to extend the employee's employment beyond the original term set forth. Moreover, Scarda testified that at no time during the negotiations leading to the June 16, 2010 agreement, did Berlinghof discuss the terms of the subject employment agreements. He further opined that it was his understanding that LIFE would only be required to pay the liquidated damages if it failed to protect Berlinghof during the pendency of his term of employment.

Scarda testified that at the time of the June 2010 board meeting, the LIFE board was looking to sell the entity and needed to make it as marketable as possible. A provision requiring the company to pay Berlinghof $2 million if the initial term were not extended would, in his opinion, have made the entity far less marketable. Thus, had he believed it provided for such, he set forth he would have voted against such a provision. In addition, Scarda stated that there was nothing about Berlinghof's sevices that made him believe he would be entitled to such a large sum.

Following the June 16, 2010 meeting, Scarda stated that he discussed reducing Berlinghof's term of employment from three years to one year, again to make LIFE more marketable. He stated that both Mike Power and Berlinghof agreed to this change. Thereafter, in September 2010, LIFE and Rise Above entered into the ultimate settlement agreement, resolving the earlier litigation and calling for the subject employment agreements to be adopted (Exh 27). Again, the witness stated that had he believed that the employment agreement required LIFE to pay Berlinghof $2 million if it declined to extend his initial term of employment, he would not have voted in favor of such.

Scarda testified that in or around September 2010, he was referred to Sidera and began negotiations for LIFE to be purchased by that entity. On October 7, 2010, he and Sicoli of Sidera entered into a letter of intent calling for the ultimate purchase of LIFE by Sidera (Exh N). The letter of intent stated that Power and Berlinghof would enter into employment agreements with the company. The merger agreement closed in December 2010 (Exh O), and Scarda pointed out the substantial representations made by LIFE as part of this transaction. Exh O contains not only the results of financial audits of LIFE [*8]but also expresses in several paragraphs that LIFE has no contingent liabilities except for those set forth. The Berlinghof employment agreement is listed as an employment agreement under the closing documents. According to Scarda, if the Berlinghof employment agreement really required the company to pay him $2 million if the company elected not to extend his term, it would have explicitly said so and that such would constitute, in his opinion, a contingent liability, calling for such disclosure. Scarda averred that no such contingent liability was listed in Exh O because none existed nor had ever been discussed. Moreover, he pointed out that Article 7 of Exh O created an indemnification obligation by the stockholders of LIFE in the event the entity breached its obligations to disclose the company's liabilities in an accurate fashion. Finally, he set forth that in the 2009 audited financial statement for LIFE, which was provided to Sidera, there is no contingent liability listed in connection with Berlinghof's employment agreement. Scarda defined a "contingent liability" as one where the exact nature and amount of the liability is uncertain.Michael Power testified that he was the founder and former president of Long Island Fiber Exchange. He was able to identify the Berlinghof employment agreement of June 16, 2010 (Exh 1A) as well as the September 10, 2010 agreement which shortened the Berlinghof initial term of employment to one year (Exh 1B). Although Power was a recipient of the various emails in March and April of 2010 regarding Berlinghof's marked up and changed copies of his proposed employment agreement (Exh 14), he testified that he really did not read them; but, rather, forwarded them directly to LIFE's counsel. He also stated that he and Berlinghof never had a discussion in which Berlinghof stated that he would be entitled to $2 million in severance if LIFE gave notice that it was not going to extend the term of the agreement. Like Scarda, Power testified that he would not have approved an employment agreement that obligated LIFE to pay Berlinghof $2 million if the company decided not to extend the term. Again, like Scarda, Power stated that he had no discussions with Berlinghof about this $2 million potential liability when they discussed the obligations to disclose all potential liabilities in connection with their upcoming merger with Sidera. Power did state that he wanted the "golden parachute" for himself when negotiations were going on with Rise Above so that Scarda would not be allowed to fire him without consequences. He believed that the golden parachute was in the best interest of LIFE at that time because he stated that the company could not have existed without him. He also set forth that both he and Berlinghof were the key LIFE employees at the time of these negotiations.

Power testified that he now owns a company called Telcom Construction Group that in its first six months has generated $1.2 million in revenue. He stated that 99% of his new company's business comes from a company known as Lightower, into which Sidera has now been merged. Although he was also bound by a five year restrictive [*9]covenant agreement with Sidera, it was reduced to two years at the time of his purchase of the new company and it has been waived in part so that he can participate as a contractor in the telecommunications industry.

Differing interpretations of the terms of a contract often lead to a commercial dispute. Under our common law, certain principles have developed to aid in discerning the meaning of contractual terms and provisions. As stated by Judge Learned Hand:

As a general principle, where the meaning of a contract is clear on its face, it must be interpreted in accordance with its terms as set forth. South Road Associates, LLC v International Business Machines Corp., 4 NY3d 272, 793 NYS 2d 835, 826 NE 2d 806 (2005); Greenfield v Philles Records, Inc., 98 NY2d 562, 750 NYS 2d 565, 780 NE 2d 166 (2002). A contract will be considered clear on its face and enforced without reference to extrinsic evidence where it is found to be susceptible to one meaning and one meaning only. White v Continental Casualty Co., 9 NY3d 264, 848 NYS 2d 603, 878 NE 2d 1019 ( 2007); Matter of Riconda, 90 NY2d 733, 665 NYS 2d 392, 688 NE 2d 248 (1997); Greenfield v Philles Records, Inc., supra. In examining the writings of the parties to a contractual dispute, the approach condoned by our common law is to read the entire agreement as a whole in the context of the parties' relationship and, if possible, to reconcile two separate provisions which may seem to be at odds with one another. Bombay Realty Corp. v Magna Carta Inc., 100 NY2d 124, 760 NYS 2d 734 , 790 NE 2d 1163 (2003) Kass v Kass, 91 NY2d 554, 673 NYS 2d 350, 696 NE 2d 694 (1998); Long Island Lighting Co. v Allianz Underwriters Insurance Company, 301 AD2d 23, 749 NYS 2d 48 (2d Dep't 2002).

The issue of whether a particular agreement is ambiguous is considered one of law for the Court in the first instance. WWW. Assoc. v Giancontieri, 77 NY2d 157, 565 NYS 2d 440, 566 NE 2d 639 (1990); Dobbs v North Shore Hematology-Oncology Assoc. PC, 106 AD3d 771, 965 NYS 2d 520 (2d Dep't 2013). Where the court finds ambiguity to exist in the language utilized by the parties to the dispute, extrinsic evidence of the parties' intent outside the four corners of the agreement may be considered, in such [*10]instance by the trier of fact. Dobbs v North Shore Hematology-Oncology Assoc., Inc, supra; see, Banco Espirito Santo S.A. v Concessionaria Do Rodonel Oeste, 100 AD3d 100, 951 NYS 2d 19 (1st Dep't 2012). In Dobbs, supra, for example, the court properly considered extrinsic evidence where a written agreement was found by the court to be ambiguous on the issue of whether individual physician shareholders of a practice were personally liable to a withdrawing physician for payments owed by the corporate entity. Id.

Where ambiguities exist in contractual language and/or in discerning the intent of the parties to such agreement, extrinsic evidence may include the course of dealing between the parties and third persons, as well as the custom prevailing in the trade that is the subject of the contract, which may also include expert evidence. CT Chems (USA), Inc .v Vinmar Impex Inc., 81 NY2d 174, 597 NYS 2d 284, 613 NE 2d 159 (1993); Korff v Corbett, 18 AD3d 248, 794 NYS 2d 374 (1st Dep't 2005); Weiner v Anesthesia Associates of Western Suffolk PC, 203 AD2d 454, 610 NYS 2d 606 (2d Dep't 1994). In addition, a review of the parties' conduct after the subject agreement was signed can lead to significant evidence of the parties' intent vis a vis an ambiguous contract. Wolfson v Faraci Lange, LLP, 103 AD3d 1272, 959 NYS 2d 792 (4th Dep't 2013); TLC West v Fashion Outlets of Niagara, LLC, 60 AD3d 1422, 875 NYS 2d 367 (4th Dep't 2009); Waverly Corp .v New York, 48 AD3d 261, 851 NYS 2d 176 (1st Dep't 2008).

In any event, any interpretation of a contract that would result in leaving one of its clauses without meaning or which would render the contract illusory when the parties made clear the intent to be bound must be avoided. Two Guys from Harrison-NY Inc v S.F.R. Realty Associates, 63 NY2d 396, 482 NYS 2d 4654, 472 NE 2d 315 (1984); McCabe v Witteveen, 34 AD3d 652, 825 NYS 2d 499 (2d Dep't 2006).

The gravamen of the dispute between the parties to this litigation concerns the interrelationship between paragraphs 1 and 9C of Berlinghof's employment agreement. While Berlinghof contends that these clauses should be read in conjunction with each other and contain the same conditions and benefits, the Defendant has taken the opposite position. In considering two rounds of substantive motions on this subject, this Court found the language of the agreement ambiguous in this regard, necessitating the trial and the introduction of significant extrinsic evidence of the extensive history of negotiations that led to the current agreement at issue. The evidence demonstrates that Berlinghof (initially in conjunction with Power), LIFE (initially with Rise Above, and ultimately with Sidera) entered into extensive negotiations before the June 2010/September 2010 employment agreement was approved and became part of the Sidera merger with LIFE in December 2010.

In March 2009, Rise Above and LIFE signed a term sheet which provided that Power and Berlinghof would have five year employment agreements including severance payments of $5 million each if employment was terminated without cause (Exh 3). These never went into effect because the connected financing by Rise Above never occurred. However, in connection with extensive negotiations from March through June of 2010, resulting from a litigation between Rise Above and LIFE, Berlinghof's emails demonstrate that he insisted on the basic terms of an employment agreement, somewhat similar in form to the one contained in the 2009 term sheet but with certain modifications. Thus, in April 2010, Berlinghof sent a modified version of his proposed employment agreement to Power, which was then forwarded to LIFE's corporate counsel. The new proposal (Exh 14) specifically changed the first sentence of paragraph 9C from "[i]f the Company terminates Employee's employment hereunder for any reason other than . . .for cause. . ." to "[i]f the Company terminates this agreement or the Employee's employment hereunder for any reason other than . . . for cause. . . .". (emphasis added). The April 2010 proposal also reduced the severance set forth in paragraph 9C from $5 million to $2 million.

After this proposal was sent to LIFE's attorneys, it was obviously also sent to the attorneys for Rise Above because they responded on June 12, 2010 objecting to the $2 million severance payment (Exh 17). Thereafter, the emails demonstrate that a conference call was held on June 13, 2010, after which LIFE's attorney communicated to Rise Above's attorney that Berlinghof had agreed that termination without cause triggering the $2 million severance would require the approval of independent directors (Exh 18). The Employment Agreement with the new terms added by Berlinghof and by Rise Above were incorporated in the new agreement approved by LIFE's board of directors on June 16, 2010.Despite the LIFE board vote, Scarda then took the position that the employment agreements for Power and Berlinghof were never properly authorized and then a new series of negotiations ensued (Exh 23 and Exh 24). As a result of this continued negotiation between LIFE and Rise Above, Power released his employment agreement and was placed on the LIFE board with Scarda and Berlinghof retained the employment agreement essentially as adopted in June 2010. On September 10, 2010, Rise Above and LIFE finally settled their dispute and set forth that the June 10, 2010 agreement was to be in effect (Exh 27); however, the September employment agreement changed the term of employment from three years to one year; in addition, it was considered to have commenced June 16, 2010 (Exh 28).

The agreement at issue in this litigation became the subject of yet another set of negotiations, this time with Sidera, which was looking at the opportunity to purchase [*11]LIFE. As with other negotiations, Sidera initially took the position that it would provide Berlinghof with an at will employment agreement with a $400,000 severance payment (Exh 29) in October 2010. After Berlinghof's rejection of the new proposal, Sidera, through extensive negotiations between its counsel and Berlinghof's counsel, agreed that Berlinghof would be permitted to retain his employment agreement in the form in which it had been adopted by the settlement agreement between Rise Above and LIFE (Exhs 33-38) in connection with Sidera's acquisition of LIFE. Again, Berlinghof compromised by entering into a four year noncompetition agreement as part of this package (Exh 39) as per the merger of LIFE into Sidera on December 10, 2010. The purchase was ultimately accomplished on December 9, 2010, and by its terms ratified the Berlinghof employment agreement which was contained as an exhibit thereto (Exh O).

Slightly over three months following the merger with Sidera, Berlinghof received

In addition to the above, the sole expert witness to testify, Mark Holdsworth, Esq., set forth that he has both drafted and reviewed hundreds of executive compensation agreements, and that almost all of them contain severance provisions designed to retain critical employees by offering them what is commonly termed the "golden parachute." The amount of severance is generally tied to the seniority of such executive as well as his importance to the business involved. He testified that severance can be triggered by both outright termination as well as nonextension of an employment agreement; but that where the employer does not provide any severance in the case of a failure to extend the agreement, the agreement should and will state specifically that either party can terminate the agreement upon the completion of a stated term without liability to the other party. Upon his review of the subject employment agreement, Holdsworth opined that it was what he termed an "evergreen" agreement, allowing for automatic renewal absent notice to the other party and he stated that it is common for such agreements to provide for severance in the event of nonrenewal of a term of employment and also for such to require the approval of a board of directors. He opined that the agreement in question required the approval of an independent director before the subject employee could be terminated without cause or the agreement itself was terminated. He stated further that in his experience, he has never seen an employment agreement that permits severance if terminated without cause with board approval and disallowed severance where the executive is terminated without cause without board approval. Such an interpretation, in [*12]his view, would render the severance protection illusory. Thus, it is his opinion that this agreement required board approval before termination without cause could occur.

All this evidence demonstrates that Plaintiff, Kurt Berlinghof, has proven, by a fair preponderance of the credible evidence, that his employment agreement entitled him to a $2,000,000 severance payment, whether he was terminated without cause under paragraph 9C or his agreement was terminated under paragraph 1. This agreement was negotiated repeatedly and extensively. It is clear that Berlinghof was a valued employee, responsible for the great majority of LIFE's sales. He, like Power at the beginning of this negotiation process, wanted what are commonly known in the industry as "golden parachutes" and proposed them in the form of extremely lucrative amounts. When Berlinghof's proposed agreement was renegotiated, he placed new language therein to make certain that he would receive his severance, which had now been reduced in amount, both upon termination without cause as well as upon termination of the agreement, as described in paragraph 1. He also agreed to the Rise Above condition that termination triggering severance would require the vote of an independent board of directors. As his negotiations over the form of such agreement progressed, he also agreed to the reduction of his term from three years to one year. Finally, when LIFE was purchased by Sidera, he signed a five year noncompetition and nonsolicitation agreement. Accordingly, the negotiations involved a process of give and take.

As testified by Plaintiff's expert witness, these kinds of agreements are common for senior executives and often provide for severance both where no cause is involved and where a term is not renewed. Further, the Court accepts the opinion of the expert that if the employer wanted to limit its liability upon nonrenewal of a term, it could have and should have so stated. It did not do so in this case. It is also this Court's view that the employment agreement is far from punitive to the employer, as Berlinghof's compensation was in the hundreds of thousands of dollars, indeed as high as $400,000 in the view of his expert and, therefore, his acceptance of and unopposed testimony that he has abided by the noncompetition agreement, lasting for five years, makes the $2 million severance package a reasonable one.

Finally, if the Defendant's interpretation were to prevail, the severance package would, in this Court's view, be rendered totally illusory and worthless. The final agreement was not entered into until September 10, 2010, yet was made referable to a term of one year commencing June 16, 2010 and, therefore, terminable by June 16, 2011. Sidera did not complete its merger until December 2010, attaching the agreement which was terminable by its terms six months later. Why would LIFE and then Sidera have argued against granting Berlinghof such an agreement, if all the entities had to do to avoid the golden parachute was to wait a few months and then terminate the agreement? [*13]In fact, Sidera actually offered Berlinghof more than what LIFE is now suggesting when it made its initial severance offer of $400,000. The negotiating process itself proves that this agreement only had real value if the severance was payable both when the executive employee was terminated without cause and when the employment agreement itself was terminated.

A motion for leave to amend a pleading may be granted at any period of the litigation, even during trial, but only so long as there is no prejudice to the other party. Galarraga v City of New York, 54 AD3d 308, 863 NYS 2d 47 (2d Dep't 2008). However, where the motion is made on the eve of trial, the court should be especially careful and grant such motions "sparingly" and only when the movant has submitted a reasonable excuse for delay. American Cleaners Inc v American Intern. Ins. Co., 68 AD3d 792, 891 NYS 2d 127 (2d Dep't 2009);

A condition precedent in a contract is tied to the obligation of the other party not to do anything that "[w]ill have the effect of destroying or injuring the right of the other party to receive the fruits of the contract". See, AHA General Construction Inc v New York City Hosing Authority, 92 NY2d 20, 677 NYS 2d 9, 699 NE 2d 368 (1998). Therefore, a party who has caused the non performance of a condition precedent by his own actions is not in a position to insist upon the same. Id. As stated by the Court of Appeals:

"Put another way, a party to a contract cannot rely on the failure of another to perform a condition precedent where he has frustrated or prevented the occurrence of the condition'".AHA General Construction Inc, supra, citing Kooleraire Serv & Installation Corp v Board of Educ, 28 NY2d 101, 320 NYS 2d 46, 268 NE 2d 782 (1971).

Defendant made a request to amend its answer to add the affirmative defense of Plaintiff's failure to comply with the condition precedent of obtaining the approval of a majority of its independent directors before entitlement to the $2 million severance at issue in this litigation. As this request was made within two weeks prior to trial in a case that had been pending for over two years, the Court gave the parties the following choice: agree to adjourn the trial and conduct discovery on the issue, in which case the Defendant's application would be granted or, in the alternative, the Court told the parties [*14]that it would consider the application provided Defendant gave Plaintiff the opportunity to conduct whatever discovery it needed in the two weeks remaining before trial, including reviewing documents and taking the deposition of the one person identified as an independent board member of Sidera. The parties opted not to delay the trial and Defendant's counsel made the witness available for a deposition and provided certain documents. Plaintiff opposed the application on the grounds that the witness was unavailable for trial and that it had received the documents literally a day or two before a trial that required extensive preparation, including review of numerous documents. In order that the record be complete, the Court admitted into evidence as Court exhibits both the Defendant's proposed amended answer with the affirmative defense and the Plaintiff's amended pleadings, should the Court grant the application to amend.

It is the Court's determination after consideration of the issue that the application should be denied as it placed the burden of proof concerning compliance with the condition precedent on the Plaintiff literally on the eve of trial. In this case, the facts concerning the issue of the membership of the board of directors was solely in the possession of the Defendant. In view of the significant burden, as well as the lateness of the request, the Court believes to grant the same would prejudice the Plaintiff.

However, even assuming that the Court were to permit the amendment, based upon the law as set forth above, the Defendant, by its own actions, is barred from requiring the Plaintiff to demonstrate compliance with the condition precedent. As this Court has already ruled, the requirements of paragraphs 1 and 9C of the subject employment contract must be read together. Therefore, the approval of independent directors was required both before termination without cause and before termination of the agreement, both of which this Court has found, triggered the $2 million severance payment. If, as Defendant now claims, no independent member of the board of directors ever approved the termination triggering the severance payment, then Defendant's actions in communicating to Plaintiff that his agreement was terminated as of June 16, 2011 frustrated the Plaintiff's ability to demonstrate compliance with the same. In other words, Defendant's insistence that Plaintiff's agreement was terminated itself constituted a breach of the condition precedent, relieving the Plaintiff of any need to prove that the same had occurred.

In order to establish a claim that a party has breached his fiduciary duty, the claimant must demonstrate the existence of a fiduciary relationship, misconduct by the other party, and resulting harm directly caused by the alleged misconduct. Deblinger v Sani-Pine Products Co, Inc., 107 AD3d 659, 967 NYS 2d 395 (2d Dep't 2013); [*15]Kurtzman v Begstol, 40 AD3d 588, 835 NYS 2d 644 (2d Dep't 2007). Officers and directors of a corporation stand in a fiduciary relationship to the corporation and owe their undivided and unqualified loyalty to the corporation. Yu Han Young v Chiu, 49 AD3d 535, 853 NYS 2d 575 (2d Dep't 2008); Adirondack Capital Management Inc v Ruberti, Girvin and Ferlazzo, PC, 43 AD3d 1211, 842 NYS 2d 603 (3d Dep't 2007 ). An employee generally owes his or her employer a fiduciary duty as well as a duty of loyalty. Duane Jones Company Inc. v Burke, 306 NY 182, 117 NE 2d 237 (1954). Pursuant to such duty, the employee is prohibited from acting in any manner inconsistent with his or her agency or trust and is at all times bound to exercise the utmost good faith in the performance of his or her duties. Qosina Corp. v C & N Packaging Inc., 96 AD3d 1032, 948 NYS 2d 348 (2d Dep't 2012).

Defendant has taken the position in this case that Plaintiff breached his fiduciary duty both as a director and an employee of LIFE to the Defendant by failing to disclose the contingent liability of his "golden parachute" in his negotiations with that entity and in the context of LIFE's merger with Sidera, which required disclosure of contingent liabilities. However, as the evidence demonstrates, counsel for both LIFE and Sidera were aware of the employment agreement and both negotiated its terms with Plaintiff and his counsel. In addition, the agreement itself was part and parcel of the merger agreements as set forth in Exh O. While the Court heard statements to the effect that neither LIFE nor Sidera were aware of the severance provision and its applicability to the termination of the agreement, the extensive negotiations, which included both their opposition to the agreement as well as the concessions they extracted from the Plaintiff in each negotiation segment, make this claim unconvincing. This there simply is no evidence that Berlinghof breached his fiduciary duty either as a director or as an employee of LIFE to the Defendant herein.

Based upon the above, the Court finds that the Plaintiff, Kurt Berlinghof, has proven by a fair preponderance of the credible evidence that he is entitled to severance in the amount of $2,000,000 from the Defendant Long Island Fiber Exchange Inc., Plaintiff's claim having accrued on the date of termination of his employment agreement, i.e. June 16, 2011.

This constitutes the DECISION and ORDER of the Court.

Submit Judgment on notice.