IROQUOIS GAS TRANSMISSION SYSTEM
SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
FOR CRAIG R. FREW
THIS AGREEMENT is made and entered into as of the first day of July,
1997, between IROQUOIS GAS TRANSMISSION LIMITED PARTNERSHIP (the "Company") and
CRAIG R. FREW (Mr. Frew).
WHEREAS, Mr. Frew is currently serving as President of Iroquois
Pipeline Operating Company ("IPOC"); and
WHEREAS, the Company highly values the efforts, abilities and
accomplishments of Mr. Frew and desires that he remain in his current position
with IPOC; and
WHEREAS, in order for Mr. Frew to continue to serve as President of
IPOC, it is necessary for him to terminate his employment with TransCanada
Pipelines, Ltd. ("TransCanada");
WHEREAS, in order to induce Mr. Frew to continue in his position as
President of IPOC and to relinquish his employment with TransCanada, the
Management Committee of the Company wishes to enter into an unfunded deferred
compensation arrangement upon the terms and conditions hereinafter stated, to
ensure that Mr. Frew will be provided with retirement benefits, from all
qualified and non-qualified sources, that are at least equal in value to those
benefits he would have been entitled to had he remained employed by
TransCanada.
WHEREAS, Mr. Frew wishes to provide for his retirement and financial
security, and the Management Committee of the Company has approved and
authorized the entry into this Agreement with Mr. Frew.
NOW THEREFORE, the parties agree as follows:
1. Retirement Upon Reaching Normal Retirement Date. Mr. Frew shall be
entitled to retire and commence receiving benefits under this Agreement upon
attaining his sixtieth (60th) birthday (his "Normal Retirement Date").
2. Normal Retirement Benefits. Upon retiring from active service with
IPOC on or after his Normal Retirement Date as defined in this Agreement, Mr.
Frew shall be entitled to receive, beginning on the first day of the month
immediately following Mr. Frew's retirement, and on the first day of each month
thereafter for his life, an amount calculated as a single life annuity payable
at his Normal Retirement Date (or, if later, his actual retirement date), equal
to one-twelfth (1/12) of (a) minus (b):
(a) Sixty Percent (60%) of his Final Average Earnings (as
hereinafter defined),
(b) reduced by the sum of the following:
<PAGE>
(i) Mr. Frew's accrued benefit based upon credited service
calculated through June 30, 1997 (i.e., 17.75 years), which would be
payable to him from the TransCanada Pipelines Limited Executive
Supplemental Retirement Benefits Plan (the "TransCanada SERP") as of
his actual retirement date, regardless whether he actually commences
receiving such accrued benefit, calculated in the form of a single
life annuity, in accordance with the terms of the TransCanada SERP,
with such SERP benefit being calculated assuming that the terms of the
TransCanada SERP provided for an unreduced retirement benefit at age
60 instead of age 65 or, if earlier, when the sum of his age and
service equal at least 85; plus
(ii) Mr. Frew's accrued benefit based on credited service through
June 30, 1997, which would be payable to him from the Pension Plan for
Employees of TransCanada Pipelines Limited and Designated or
Associated, Subsidiary or Affiliated Companies (the "TransCanada
Registered Pension Plan") as of his actual retirement date, regardless
whether he actually commences receiving such accrued benefit on such
date, calculated in the form of a single life annuity, in accordance
with the terms of the TransCanada Registered Pension Plan and using
the conversion factors specified therein; plus
(iii) Mr. Frew's accrued benefit which would be payable to him
from the Iroquois Pipeline Operating Company Cash Balance Retirement
Plan (the "Iroquois Qualified Pension Plan" or "IPOC Cash Balance
Plan") as of his actual retirement date, regardless whether he
actually commences receiving such accrued benefit, calculated in the
form of a single life annuity in accordance with the terms of the
Iroquois Qualified Pension Plan; plus
(iv) Mr. Frew's supplementary pension benefit which would be
payable to him from the Iroquois Pipeline Operating Company
Supplementary Pension Plan based on his Credited Service as of actual
retirement date (his "IPOC Supplementary Pension Benefit"), regardless
whether he actually commences receiving such accrued benefit,
calculated in the form of a single life annuity; plus
(v) Mr. Frew's 401(k) Employer Contribution Account, which
Account is calculated to be the Actuarially Equivalent life annuity
value of an Employer contribution equal to 100% of his salary
reduction contributions up to five percent (5%) of his base annual
salary for each year of his participation in the Iroquois Pipeline
Operating Company Savings Plan and Supplemental Savings Plan (the
"IPOC 401(k) Plan"), plus the Actuarially Equivalent value of any
discretionary contributions that may be made on his behalf under the
IPOC 401(k) Plan, together with interest and earnings actually
accumulated on such account as of Mr. Frew's actual retirement date;
plus the Actuarial Equivalent of Mr. Frew's age 62 Primary
monthly Social Security Benefit based upon Mr. Frew's actual age as of
the determination of his Accrued Benefit. In the event that Mr. Frew
terminates service later than age 62, the Actuarial Equivalent of Mr.
Frew's Primary monthly Social Security benefit payable at his actual
retirement date shall be used.
2
<PAGE>
In calculating the benefit to which Mr. Frew is entitled under
this Agreement, the methodology specified in the Iroquois Gas
Transmission System Proposed SERF Sample Benefit Illustrations, which
are attached hereto as Exhibit A, shall be followed.
(c) For purposes of converting Canadian dollars to U.S. dollars in
determining the amount of the offsets specified in (i) and (ii)above, the
exchange rate shall be the rate as announced by Citbank N.A. in effect on
the last business day prior to the actual retirement of Mr. Frew.
(d) In calculating the benefit to which Mr. Frew is entitled under
this Agreement, the following definitions shall have the following
meanings:
"Actuarial Equivalence" shall mean
(a) for purposes of calculating the offsets specified in
Paragraph 2(b)(iii)-(vi), shall mean a benefit of equivalent current
value to the benefit to which it is being compared, determined on the
basis of the definition of "Actuarial Equivalence" contained in the
IPOC Cash Balance Plan, as those factors may be amended from time to
time. As of July 1, 1997, the following factors were used:
(1) the 1983 Group Annuity Mortality Table blended by 50% of the Male
Table and 50% of the Female Table (the "Applicable Mortality Table"); and
(2) the annual rate of interest on the 30 Year Treasury Bond for the
third month which precedes the commencement of the year containing the
benefit commencement date under this Agreement, for purposes of calculating
lump sums (including the lump sum value of a commuted death benefit); and
(3) for purposes of converting benefits (including death benefits)
into equivalent forms (other than a lump sum), the Applicable Mortality
Table specified in (1) above in combination with an eight percent (8%)
interest rate; and
(b) for purposes of calculating the offsets specified in
Paragraph 2(b)(i)-(ii), the factors for determining actuarial
equivalence specified in the plan referred to in (b)(i) and (ii) or,
in the absence of such factors, the definition of Actuarial
Equivalence specified in (a) above; and
"Credited Service" for purposes of calculating Mr. Frew's IPOC
Supplementary Pension Plan Benefit and the benefit under this
Agreement, Credited Service shall include Mr. Frew's aggregate years
of employment with IPOC, the Company and TransCanada. Credited Service
for purposes of determining offsets specified in Paragraph 2(b) hereof
shall be determined in accordance with the definitions contained in
the specific benefit plan which is the subject of the offset.
"Final Average Earnings" shall mean the average of the three highest
consecutive calendar years of Earnings with IPOC. "Earnings" shall
mean Mr. Frew's annual base salary, plus the actual annual incentive
bonus payment paid with respect to a
3
<PAGE>
calendar year. Final Average Earnings and Earnings shall be calculated
without regard to the dollar limitations imposed by Section 401(a)(17)
of the Internal Revenue Code.
"Primary Social Security Benefit" shall mean (i) Mr. Frew's actual
Social Security Benefit, he provides evidence of that amount to the
Company or, in the absence of such amount, (ii) the estimated annual
amount of benefit under Title II of the Social Security Act that Mr.
Frew would be entitled to receive as of age 62 (or, his actual
retirement date, if later), whether or not he applies for or actually
receives such benefit. For purposes of this Agreement, such estimated
amount shall be determined on the following basis:
(1) the Social Security Act in effect on Mr. Frew's termination of
employment;
(2) the rate of past wage increases equal to the rate in increases in the
average national wage as reported by the Social Security Administration;
(3) assuming no wages for the period following Mr. Frew's termination of
employment; and
(4) assuming no change in the Primary Social Security Benefit amount
occurs after Mr. Frew's termination of employment.
3. Early Retirement Benefit. Mr. Frew shall be entitled to retire from
active service with IPOC as of the first day of any month on or after reaching
age fifty-five (55) (his "Early Retirement Date") and shall be entitled to
receive an immediate supplemental pension under this Agreement calculated in the
manner provided in Paragraph 2 above, except that
(a) the 60% figure provided for in Paragraph 2 above shall be prorated
by multiplying it by a fraction, the numerator of which is Mr. Frew's
credited service as of his actual early retirement date, and the
denominator of which is his credited service had he remained employed by
IPOC until age 60; and
(b) the benefit derived under Paragraph 2 shall be further reduced by
three percent (3%) for each year from ages year from ages 55 through 59, by
which Mr. Frew's benefit commencement date precedes his Normal Retirement
Date as defined in this Agreement.
4. Benefits Subject to a Substantial Risk of Forfeiture. Mr. Frew shall
be vested in his Accrued Benefit under this Agreement as of July 1, 2002. No
benefits shall be payable if Mr. Frew terminates employment for any reason,
including death, prior to having become vested in his Accrued Benefit.
5. Payment of Benefits Upon Termination of Service. If Mr. Frew
terminates service with a vested Accrued Benefit under this Agreement prior to
reaching age fifty-five (55), he may commence payment of his vested Accrued
Benefit under this Agreement, calculated in accordance with Paragraph 2, at any
time on or after having reached age fifty-five (55), provided, however, that:
4
<PAGE>
(a) the 60% figure provided for in Paragraph 2 above shall be prorated
by multiplying it by a fraction, the numerator of which is Mr. Frew's
Credited Service as of his actual termination of service, and the
denominator of which is the Credited Service he would have had had he
remained employed until age 60; and
(b) the benefit derived under Paragraph 2 shall be further reduced by
five percent (5%) for each year from ages year from ages 55 through 59, by
which Mr. Frew's benefit commencement date precedes age sixty (60).
6. Timing and Forms of Benefit Payment.
(a) Normal Form of Benefit Payment. The normal form of benefit payment
under this Agreement shall be an annuity for the life of Mr. Frew.
(b) Actuarially Equivalent Optional Forms. At least twelve full months
prior to the commencement of his benefits under this Agreement, Mr. Frew
may elect to retire and commence benefits under this Agreement in one of
the following Actuarially Equivalent forms of benefit payments:
(i) a joint and sixty percent (60%) survivor annuitant with his spouse
as the joint annuitant; and
(ii) a joint and fifty percent (50%) survivor annuitant with his
spouse as the joint annuitant; and
(iii) a life and ten (10) year certain form of benefit payment with
his spouse or other Beneficiary.
(c) Timing of Election of Optional Forms and Commencement Date. At
least twelve months prior to the date on which benefits otherwise would
commence hereunder, Mr. Frew may elect to change the commencement date of
his benefits or elect an Actuarially Equivalent form of benefit payment;
provided, however, that no election as to the timing of commencement of
benefits under this Agreement, or the form of benefit payments hereunder,
shall be given effect if such election is made by Mr. Frew within twelve
months of his retirement or termination of service from IPOC.
7. Death Benefits.
(a) If Mr. Frew had no vested interest in his Accrued Benefit as of his
death, no death benefit shall be payable under this Agreement.
(b) If Mr. Frew dies after having commenced benefits under this Agreement,
then a death benefit shall be payable to his Spouse or other Beneficiary only if
the form of payment in force for Mr. Frew under this Agreement provides for such
a death benefit.
(c) If Mr. Frew had a nonforfeitable right to his Accrued Benefit under
this Agreement and dies while employed by IPOC prior to benefit commencement,
then a monthly death benefit shall be payable to his Spouse for her life in an
amount equal to sixty percent
5
<PAGE>
(60%) of the benefit to which Mr. Frew would have been entitled had he retired
or terminated service, survived to the earliest date on which he could commence
benefits under this Agreement, and then commenced benefit payments immediately
before his death. In the sole discretion of the Company, the Actuarially
Equivalent present value of this monthly amount may be paid in a lump sum to Mr.
Frew's surviving spouse as soon as administratively feasible following Mr.
Frew's death.
(d) Mr. Frew's Spouse shall be his Beneficiary under this Agreement. With
his Spouse's consent, Mr. Frew may designate another Beneficiary to receive
payments in the form of a life and ten year certain form of benefit payment in
accordance with Paragraph 6(c). In such event, Mr. Frew shall file with the
Company a written designation of a Beneficiary on such form as may be prescribed
by the Company. If Mr. Frew fails to designate a Beneficiary or if a
Participant's designation of Beneficiary fails for any reason, then the
Beneficiary or Beneficiaries designated by Mr. Frew, or deemed to have been
designated by Mr. Frew under the Qualified Plan shall be deemed to be the
Participant's Beneficiary.
8. Unfunded Benefits. The benefits under this Agreement shall be unfunded
and all benefit payments shall be made from the general assets of the Company.
The right of Mr. Frew or his Spouse or other Beneficiary to receive benefits
under this Agreement shall be an unsecured claim against the general assets of
the Company. All benefits accrued under this Agreement shall remain the property
of the Company until paid to Mr. Frew or his spouse or other Beneficiary and
shall be subject only to the claims of the Company's general creditors. The
Company may in its discretion set aside assets, purchase insurance contracts,
and the like to provide a source of funds that the Company may use, in its
discretion, to make payments that become due under the Agreement, however, any
amounts set aside shall remain the general assets of the Company subject to the
claims of the general creditors of the Company.
(a) Provisions for Rabbi Trust. Notwithstanding the provisions of
Paragraph 8, the Company may, in its discretion, enter into a trust
agreement known as a "Rabbi Trust", whereby it contributes to the trust,
from time to time, such amounts as may be approved by the Management
Committee of the Company for the purposes of providing benefits under this
Agreement. The Trust Agreement shall be substantially in the form of the
model trust agreement set forth in Internal Revenue Procedure 92-64, as
that may be modified or revised from time to time, and shall include
provisions that all of the assets of the Trust shall be subject to the
creditors of the Company in the event of insolvency.
9. Administration of this Agreement. The Management Committee of the
Company is appointed to administer the terms of this Agreement. The Committee
shall have the absolute authority and discretion:
(a) to determine the benefits payable under the Plan;
(b) to interpret the Agreement, and to decide all matters arising
under it, including the right to remedy possible ambiguities,
inconsistencies, and omissions;
6
<PAGE>
(c) to employ actuaries, attorneys, accountants, and other agents
and advisors, and to delegate to such persons, and any additional
persons, such powers and responsibilities as it deems appropriate;
(d) to establish the basis for actuarial calculations made
pursuant to the Agreement;
(e) to direct the Company to make appropriate financial
arrangements to facilitate the Company's satisfaction of its
obligations hereunder;
(f) to delegate allocate the administrative responsibilities as
they deem appropriate; and
(g) to maintain all necessary records for the administration of
the Agreement, and file and distribute all reports that may be
required by the Internal Revenue Service, Department of Labor, or
others as required by law.
10. Benefit Upon a Change of Control.
(a) Lump Sum Payment Upon a Change of Control. Notwithstanding any other
provision of the Agreement, upon a Change in Control, Mr. Frew shall
automatically be paid a lump sum amount in cash by the Company which, together
with the payment, if any, under a Rabbi or other trust arrangement established
by the Company to make payments hereunder in the event of a Change in Control,
would provide Mr. Frew with the same benefit as he would have received under
this Agreement if he terminated service upon the date of the Change of Control,
based on the benefits accrued to the Mr. Frew hereunder as of the date of the
Change in Control. Payment under this Paragraph shall not in and of itself
terminate the Agreement, but such payment shall be taken into account in
calculating benefits under the Agreement which may otherwise become due
thereafter.
(b) No Divestment Upon a Change of Control. In no event shall a Change of
Control deprive Mr. Frew of, or adversely affect his right to, any benefit
accrued under this Agreement.
(c) Change of Control Define. For purposes of the Agreement, a "Change in
Control" shall be deemed to have occurred if:
(i) a person, partnership, joint venture, corporation or other entity,
or two or more of any of the foregoing acting as a group (or a `person'
within the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act"), other than the Company, a
majority-owned subsidiary of the Company or an employee benefit plan
maintained or contributed to by the Company), becomes the `beneficial
owner' (as defined in Rule 13d-3 of the Act) of more than 65% of the then
outstanding voting stock of IPOC or more than 65% of the partnership
interests of IGTS; or
(ii) the stockholders of IPOC approve a merger or consolidation of
IPOC with any other corporation, other than (a) a merger or consolidation
which would result in the voting securities of IPOC outstanding immediately
prior thereto continuing to represent
7
<PAGE>
(either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting
power of the voting securities of IPOC or such surviving entity outstanding
immediately after such merger or consolidation, or (b) a merger or
consolidation effected to implement a recapitalization of IPOC (or similar
transaction) in which no "person" (as previously defined ) acquires more
than 65% of the combined voting power of IPOC's then outstanding
securities; or
(iii) the stockholders of IPOC (or the partners of IGTS) approve a
plan of complete liquidation of IPOC or IGTS or an agreement for the sale
or disposition by IPOC or IGTS of all or substantially all of the IPOC's or
IGTS's assets.
(a) Arbitration. Any dispute or controversy arising under or in connection
with the Agreement subsequent to a Change in Control shall be settled
exclusively by arbitration in Connecticut, in accordance with the rules of the
American Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction.
11. Indemnification. The Company shall indemnify and hold harmless any
member of the Committee from any liability incurred in his or her capacity
as administrator of this Agreement for acts which he or she undertakes in good
faith as a member of such Committee.
12. Amendment. This Agreement may be amended or modified only by a writing
signed by both parties thereto.
13. Miscellaneous.
(a) Anti-alienation. Neither Mr. Frew nor any Beneficiary shall have the
right to assign, transfer, encumber or otherwise subject to any lien any payment
or other interest under this Agreement, nor shall such payment or interest be
subject to attachment, execution or levy of any kind.
(b) No Employment Rights. Nothing in this Agreement shall confer any right
upon Mr. Frew to be retained in the service of the Company, IPOC or any of their
Affiliates.
(c) Incompetence. In the event that the Committee determines that Mr. Frew
is unable to care for his affairs because of illness or accident or for any
other reason, any amounts payable under this Agreement may be paid to the duly
appointed guardian, conservator or other legal representative or, if none, to
his Spouse or other relative or person deemed by the Committee to be responsible
for Mr. Frew's care, and any such payment shall be in complete discharge of the
liabilities of the Agreement therefor.
(d) Governing Law. The Agreement shall be construed and governed in
accordance with the laws of the State of Connecticut to the extent not preempted
by ERISA.
(e) Withholding. The Company shall deduct from all amounts paid under this
Agreement any taxes required to be withheld by any federal, state, or local
government tax statutes. Mr. Frew, or if applicable his Spouse or other
Beneficiary or their personal representatives, will be responsible for the
payment of any and federal, foreign, state, local, or other income or other
taxes imposed on amounts paid under this Agreement.
8
<PAGE>
(f) Headings. The headings and subheadings of this Agreement have been
inserted for convenience of reference only and shall not be used in the
construction of this Agreement.
9
<PAGE>
Dated as of July 1, 1997 IROQUOIS GAS TRANSMISSION SYSTEM LIMITED
PARTNERSHIP, by its agent IROQUOIS PIPELINE
OPERATING COMPANY
By:/s/Bernie J. Bradley
-------------------------------------
Bernie J. Bradley
Chairman, HR Committee
By:/s/Robert A.M. Young
-------------------------------------
Robert A. M. Young
Chairman, Management Committee
CRAIG R. FREW
/s/Craig R. Frew
--------------------------------------
10
