EXHIBIT 10
EMPLOYMENT AGREEMENT
(JAMES H. DODGE)
This EMPLOYMENT AGREEMENT is made and entered into as of this 15th day of
November, 1999, by and between Southern Union Company (hereinafter referred to
as the "Company"), a Delaware corporation, and James H. Dodge (hereinafter
referred to as the "Executive").
WHEREAS, pursuant to contract dated October 1, 1999, the Executive is presently
employed by the Providence Energy Corporation, a Rhode Island corporation
("PVY"), in the capacity of President, Chief Executive Officer and Chairman of
the Board of Directors; and
WHEREAS, pursuant to an Agreement and Plan of Merger entered into as of the 15th
day of November, 1999, by and among the Company, SUG Acquisition Corporation, a
wholly owned subsidiary of the Company ("Newco"), and PVY ("Merger Agreement"),
as of the "Effective Time" (as such term is defined in the Merger Agreement),
Newco will merge into PVY and thereafter, PVY and its subsidiaries will merge
into the Company with the Company being the surviving corporation (the
"Merger"), and thereafter, the businesses of PVY and any successor businesses
will be operated as divisions and/or subsidiaries of the Company (the "PVY
Division"); and
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the New England energy industry and the business and affairs of
PVY, its policies, methods, personnel, and operations; and
WHEREAS, the Company recognizes that the Executive's contribution has been
substantial and meritorious and, as such, the Executive has demonstrated unique
qualifications to act in an executive capacity for the Company, the PVY
Division, and all other energy-related businesses of the Company conducted in
New England (collectively, the PVY Division and all other energy-related
businesses of the Company presently or in the future to be conducted in New
England are hereinafter referred to as the "New England Business Unit"); and
WHEREAS, effective as of the Effective Time, the Company is desirous of assuring
the continued employment of the Executive in the capacity of President and Chief
Executive Officer of the Company's New England Business Unit, and Executive is
desirous of having such assurance.
NOW, THEREFORE, in consideration of the foregoing and of the mutual covenants
and agreements of the parties set forth in this Agreement, and of other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
Section 1. Effectiveness;Term of Employment;Prior Agreements
1.1 Effectiveness. Notwithstanding any other provision of this Agreement,
while this Agreement shall constitute a binding obligation of the
parties as of the date hereof, it shall become effective only upon the
consummation of the Merger and the occurrence of the Effective Time.
In the event the Merger Agreement is terminated for any reason without
the Effective Time having occurred, this Agreement shall thereupon
terminate without obligation of any party hereto.
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1.2 Employment Term. Subject to the provisions of Section 1.1 and Section
6 of this Agreement, the Company hereby agrees to employ the Executive
and the Executive hereby agrees to serve the Company and the New
England Business Unit, in accordance with the terms and conditions set
forth herein, for a period of three (3) years, commencing as of the
Effective Time ("Term"). Notwithstanding the above, commencing on the
day following the Effective Time and each successive day thereafter
until the Executive attains age sixty-two (62), the Agreement shall
automatically be extended for an additional day, such that at all
times and at any time until such time as the Executive attains age
sixty-two (62), the remaining Term shall be three (3) years, unless
either party hereto gives written notice to the other of its intent
not to renew, in which case, this Agreement shall terminate at the end
of three (3) years following the date of delivery of such notice. All
references herein to the Term shall include any extension that becomes
applicable pursuant to the preceding sentence.
1.3 Prior Agreements. At the Effective Time, this Agreement will supersede
all prior agreements and understandings (including verbal agreements)
between Executive and the Company and/or PVY and/or any affiliates of
either regarding the terms of Executive's employment with the Company
and/or its affiliates including, without limitation, the agreement
dated October 1, 1999 between the Executive and PVY (the "Prior
Agreement") and the parties shall have no liabilities under the Prior
Agreement, except for obligations due and payable under the Prior
Agreement as of the Effective Time.
Section 2. Position and Responsibilities
During the Term of this Agreement, the Executive agrees to serve as a senior
executive of the Company, with the titles of President and Chief Executive
Officer of the New England Business Unit. In such capacities, the Executive
shall maintain the level of duties and responsibilities as in effect as of the
Effective Time, or such higher level of duties and responsibilities as he may be
assigned from time to time by the President of the Company. The Executive shall
have the same status, privileges, and responsibilities normally inherent in
similarly situated Divisional/Regional Presidents of the Company.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote his full
business time, and reasonable best efforts to the business of the Company and
the New England Business Unit and shall not be engaged in any other business
activity, whether or not such business activity is pursued for gain, profit, or
other pecuniary advantage, during normal business hours and/or which would
interfere (other than in an inconsequential manner) with the rendition of such
services, either directly or indirectly, without the prior written consent of
the President of the Company. However, the Executive may continue to serve on
the board of directors or trustees of any business corporation or charitable
organization on which he currently serves and may serve as a director of other
companies so long as such service is not injurious to the Company and is agreed
upon by the President of the Company. This Section 3 shall not be construed as
preventing the Executive from holding, as a passive investor, up to two percent
(2%) of the common stock of any public company.
Section 4. Compensation
As remuneration for all services to be rendered by the Executive during the term
of this Agreement, and as consideration for complying with the covenants herein,
the Company shall pay and provide to the Executive the following:
4.1 Base Salary. During the Term, the Company shall pay the Executive a
Base Salary in an amount which shall be established from time to time
by the Board of Directors of the Company ("Board") or the Board's
designee; provided, however, that such Base Salary shall not be less
than $400,000 per year. This Base Salary shall be paid to the
Executive in equal installments throughout the year, consistent with
the normal payroll practices of the New England Business Unit.
While this Agreement is in force, the annual Base Salary shall be
reviewed at least annually, to ascertain whether, in the judgment of
the Board or the Board's designee, such Base Salary should be
increased, based primarily on the performance of the Executive during
the year and on the then current rate of inflation. If so increased,
the Base Salary as stated above shall, likewise, be increased for all
purposes of this Agreement.
4.2 Special Bonus. The Company shall pay to the Executive the amount of
$2,000,000 ("Special Bonus"), payable in three (3) installments, as
follows: (i) at the Effective Time, an amount equal to $1,000,000 as a
sign-on bonus; and (ii) (A) on the first anniversary of the Effective
Time, an amount equal to $500,000, and (B) on the second anniversary
of the Effective Time, an amount equal to $500,000, the amounts
payable pursuant to (ii) (A) and (B) being in recognition of
Executive's efforts above and beyond Executive's usual and customary
duties with respect to the integration of the New England Business
Unit into the Company.
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4.3 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive
compensation payment, at a level no less favorable than that provided
to similarly situated Divisional/Regional Presidents of the Company,
based upon goals and measures for the Executive and the New England
Business Unit and/or the Company established annually by the Board or
the Board's designee, but in no event less than fifty percent (50%) of
the Executive's then current Base Salary.
4.4 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award by participating in
the Company's Long-Term Incentive Stock Option Plan at a level no less
favorable than that provided to similarly situated Divisional/Regional
Presidents of the Company.
4.5 Retirement Benefits. The Company shall provide to the Executive
immediate participation in (i) all Company qualified defined benefit
and defined contribution retirement plans maintained for employees of
the New England Business Unit and (ii) (without duplication of
benefits), all nonqualified retirement programs providing for ongoing
accruals offered to senior executives having the same or similar
duties and responsibilities at the Company, other than the Company's
Supplemental Deferred Compensation Plan. In addition, it is agreed
that the Merger shall constitute a "Change in Control" for all
purposes under the Providence Gas Company Supplemental Retirement Plan
("PVY SERP") and that, prior to the Effective Time, PVY shall
establish an irrevocable grantor ("Rabbi") trust and shall deposit (or
shall cause to be deposited) with the trustee thereof an amount equal
to the actuarial present value of the benefits accrued by the
Executive thereunder as of the Effective Time, as determined by PVY
with the Company's reasonable consent, it being understood that for
purposes of calculating actuarial present value, the Executive shall
be treated as being the greater of his actual age or age 62. It is
further agreed that, notwithstanding any provisions to the contrary in
any qualified or non-qualified retirement plan maintained for
employees of the New England Business Unit in which the Executive
participates, upon termination of employment for any reason, the
Executive shall be entitled to receive a lump sum cash payment equal
to the actuarial present value (treating the Executive as if he had
attained the greater of age 62 or his actual age) of the full
retirement benefit payable pursuant to Section 3.1 of the PVY SERP as
in effect immediately prior to the Effective Time, under which
Executive is provided a monthly benefit equal to one-twelfth (1/12th)
of sixty-five percent (65%) of the Executive's "Final Average
Compensation" (as defined in the PVY SERP), including any compensation
paid by the Company, but specifically excluding the Special Bonus
payable under Section 4.2 hereof, and all amounts payable under
Sections 6.4(a), (b), (d), (e), and (g) and similar amounts payable
under Section 6.6 hereof, reduced by (a) the equivalent normal
retirement benefit payable to him in any form under all "Company
Plans" (as such term is defined in the PVY SERP), (b) the equivalent
annual normal retirement benefit payable to him in any form under all
"Other Retirement Plans" (as such term is defined in the PVY SERP),
and (c) the Executive's annual Social Security Benefit.
4.6 Employee Benefits. During the Term of this Agreement or through the
Executive's attainment of age 65, if later, the Company shall provide
to the Executive all Welfare Benefits (as defined below) to which
other senior executives of the New England Business Unit are generally
entitled; provided, that such Welfare Benefits shall be no less
favorable in the aggregate to the Executive than those afforded to the
Executive by PVY immediately prior to the Effective Time. Such
benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major
medical benefits, dental benefits, vision benefits, and short-term and
long-term disability benefits ("Welfare Benefits"). Upon attainment of
age 65, the Executive shall be eligible to participate in
post-retirement medical and life insurance plans no less favorable in
the aggregate to the Executive than those maintained by PVY
immediately prior to the Effective Time. To the extent any Welfare
Benefits cannot be provided pursuant to a Company plan, the Company
shall provide such Welfare Benefits outside such plan.
The Executive shall be entitled to paid vacation in accordance with
the standard written policy of the Company with regard to vacations of
employees, but no less than five (5) weeks per year.
4.7 Perquisites. The Company shall provide to the Executive, at the
Company's cost, all perquisites to which other similarly situated
Division Presidents are entitled and such other perquisites as are
suitable to the character of Executive's position with the Company and
adequate for the performance of his duties hereunder; provided, that
such perquisites shall be no less favorable to the Executive than
those afforded to the Executive by PVY immediately prior to the
Effective Time.
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4.8 Deferred Compensation. The Company agrees to maintain for the benefit
of the Executive all deferred compensation plans or programs available
to senior executives of the New England Business Unit at the Effective
Time.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses that the Executive incurs in performing his duties under this
Agreement including, but not limited to, travel, entertainment, professional
dues and subscriptions, and all dues, fees, and expenses associated with
membership in various professional, business, and civic associations and
societies in which the Executive's participation is in the best interest of the
Company, including but not limited to any membership held by the Executive
immediately prior to the Effective Time.
Section 6. Termination of Employment
6.1 Termination Due to Death. In the event of the death of the Executive
during the term of this Agreement, or during any period of Disability
during which he is receiving compensation pursuant to Section 6.2
herein, the Company's obligation to pay and provide to the Executive
additional Base Salary, Additional Incentive Compensation and Long
Term Incentives (as provided in Sections 4.2, 4.3 and 4.4
respectively) shall immediately expire, except as otherwise provided
in the terms of any existing grants or awards. However, the Company
shall pay to the Executive's surviving spouse, or other beneficiary as
so designated by the Executive during his lifetime, or to the
Executive's estate, as appropriate, all accrued but unpaid Base Salary
and accrued but unpaid vacation through date of death, any remaining
Special Bonus (as provided in Section 4.2), a pro rata portion of the
total annual incentive compensation (both cash and long-term),
calculated at target, to which he otherwise would have been entitled
during the year in which termination due to death occurs (unless
previously paid pursuant to Section 6.2), as well as all benefits in
which the Executive had a vested interest pursuant to this Agreement
or pursuant to other plans and programs of the Company or the New
England Business Unit, including, but not limited to, retirement
benefits as described in Section 4.5, and any reimbursement for any
unreimbursed business expenses properly incurred by Executive in
accordance with Company policy prior to the date of Executive's death.
In addition, Executive's surviving spouse shall continue to receive
all Welfare Benefits and post-retirement medical insurance to which
she is entitled pursuant to Section 4.6.
6.2 Termination Due to Disability. In the event that the Executive becomes
Disabled during the term of this Agreement and is, therefore, unable
to perform his duties herein for a period of more than six (6) months
in the aggregate during any period of twelve (12) consecutive months,
the Company shall have the right to terminate the Executive's active
employment as provided in this Agreement. However, the President of
the Company shall deliver written notice to the Executive of the
Company's intent to terminate for Disability at least thirty (30)
calendar days prior to the effective date of such termination.
A termination for Disability shall become effective upon the end of
the thirty (30) day notice period. Upon such effective date, the
Company's obligation to pay and provide to the Executive additional
Base Salary, Annual Incentive Compensation and Long-Term Incentives
(as provided in Sections 4.1, 4.3, and 4.4, respectively) shall
immediately expire. However, the Executive shall receive all accrued
but unpaid Base Salary and accrued but unpaid vacation through date of
termination, all remaining payments of his Special Bonus (as provided
in Section 4.2), as well as a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at
target, to which he otherwise would have been entitled during the year
in which termination due to Disability occurs and shall receive all
rights and benefits in which he has a vested interest pursuant to
other plans and programs of the Company, including, but not limited
to, retirement benefits as described in Section 4.5, Welfare Benefits
and post-retirement medical and life insurance as described in Section
4.6, and any reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy prior
to the date of such termination.
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The term "Disability" shall mean, for all purposes of this Agreement,
the incapacity of the Executive, due to injury, illness, disease, or
bodily or mental infirmity, to engage in the performance of
substantially all of the usual duties of employment with the Company
as contemplated by Section 2 herein, such Disability to be determined
by the President of the Company upon receipt of and in reliance on
competent medical advice from one or more individuals, selected by the
President, who are qualified to give such professional medical advice.
If the Executive and the Company shall not be in agreement as to
whether the Executive has suffered a Disability for the purposes of
this Agreement, the matter shall be referred to a panel of three (3)
medical doctors, one (1) of which shall be selected by the Executive,
one (1) of which shall be selected by the Company, and one (1) of
which shall be selected by the two (2) doctors as so selected, and the
decision of a majority of the panel with respect to the question of
whether the Executive has suffered a Disability shall be binding upon
the Executive and the Company. The expenses of any such referral shall
be borne by the party against whom the decision of the panel is
rendered.
6.3 Voluntary Termination by the Executive. The Executive may terminate
this Agreement at any time other than for Good Reason, death or
Disability by giving the President of the Company written notice of
intent to terminate, delivered at least thirty (30) calendar days
prior to the effective date of such termination. The termination shall
become effective automatically upon the expiration of the thirty (30)
day notice period. Such notice shall also constitute the resignation
by the Executive of his positions as an officer or director of the
Company and its subsidiaries and affiliates.
Upon the effective date of such termination, the Company shall pay to
the Executive his accrued but unpaid (i) Base Salary (at the rate then
in effect as provided in Section 4.1 herein), (ii) annual bonus for
any prior Fiscal Year, and (iii) vacation through the effective date
of termination, and shall provide the Executive with all other
benefits in which the Executive has a vested interest at the time
pursuant to this Agreement and in accordance with the provisions of
the governing policy, plan or program, including, but not limited to,
the retirement benefits described in Section 4.5, as well as
reimbursement for any unreimbursed business expenses properly incurred
by Executive in accordance with Company policy prior to the date of
Executive's termination. With the exception of the foregoing
obligations of the Company and the covenants of the Executive
contained in Section 7 (which shall survive such termination), the
Company and the Executive thereafter shall have no further obligations
under this Agreement.
6.4 Involuntary Termination by the Company Without Cause. Subject to
Section 7 herein, the Company may terminate the Executive's
employment, as provided under this Agreement, at any time, for reasons
other than death, Disability, or for Cause (as defined in Section
6.5), by notifying the Executive in writing of the Company's intent to
terminate, effective thirty (30) calendar days following the date on
which the Company delivers such notice to the Executive.
Except as otherwise provided in Section 6.4(f), within five (5)
business days following the effective date of such termination, the
Company shall pay to the Executive:
(a) A lump sum cash payment equal to three (3) times the highest rate
of the Executive's annualized Base Salary rate in effect at any
time up to and including the effective date of termination;
(b) A lump sum cash payment equal to (i) three (3) times the
Executive's target incentive award (both cash and long-term)
established for the fiscal year in which the Executive's
effective date of termination occurs, or (ii) to the extent that,
as of the effective date of termination, target incentive awards
have not been established for such fiscal year, three (3) times
the Executive's target incentive award (cash and long-term)
established for the immediately preceding fiscal year, provided,
however, that in no event shall any target award be less than
that required by Section 4.3 hereof;
(c) A lump sum cash payment equal to the Executive's unpaid Base
Salary and accrued vacation pay through the effective date of
termination;
(d) A lump sum cash payment equal to the Executive's unpaid Special
Bonus;
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(e) A lump sum cash payment equal to (i) Executive's unpaid targeted
annual bonus, established for the fiscal year in which the
Executive's effective date of termination occurs or (ii) if
annual bonus targets have not been established for such fiscal
year, Executive's annual bonus paid for the immediately preceding
fiscal year, in either case multiplied by a fraction, the
numerator of which is the number of completed days in the
then-existing fiscal year through the effective date of
termination, and the denominator of which is three hundred sixty
five (365), and provided that in no event shall any target award
be less than that required by Section 4.3 hereof;
(f) A continuation of the Welfare Benefits then in effect for the
Executive, including, without limitation, medical, dental and
disability benefits, and group term life insurance, for a period
ending on the latest of the following to occur: (i) the
Executive's 65th birthday and (ii) the date three (3) full years
after the effective date of termination ("Benefit Continuation
Period"); and thereafter, Executive (and his spouse or surviving
spouse) shall be entitled to all post retirement benefits as set
forth in Section 4.6. To the extent any Welfare Benefits or
post-retirement benefits cannot be provided pursuant to a Company
plan, the Company shall provide such Welfare Benefits or
post-retirement benefits outside such plan. The Welfare Benefits
and post-retirement benefits shall be provided to the Executive
at the same premium cost and at the same coverage level as in
effect as of the Executive's effective date of termination.
The continuation of the Welfare Benefits shall be modified during
the Benefit Continuation Period to the extent that during such
Benefit Continuation Period the Executive is receiving
substantially similar benefits from a subsequent employer, in
which event the Welfare Benefits provided by the Company shall be
made secondary to those provided by such subsequent employer;
(g) All retirement benefits to which Executive is entitled pursuant
to Section 4.5 hereof; and
(h) Reimbursement for all outstanding expenses properly incurred in
accordance with Company policy prior to the Executive's effective
date of termination.
Further, the Company shall provide the Executive with all other
benefits in which the Executive has a vested interest at the time, in
accordance with the provisions of the governing policy, plan or
program. With the exceptions of the foregoing obligations of the
Company and the Executive's covenants contained in Section 7 herein
(which shall survive such termination), the Company and the Executive
hereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is
terminated without Cause or (ii) prior to the Executive's attainment
of age 62, the Company gives notice of its intention not to renew this
Agreement, then, upon the Executive's termination of employment, the
Executive shall be entitled to receive the greater of (1) the
foregoing payments and benefits or (2) any severance benefits payable
in accordance with any severance pay policy then in effect.
6.5 Termination For Cause. The Company may terminate the Executive's
employment under this Agreement for "Cause." Notwithstanding the
foregoing, the Executive shall not be deemed to have been terminated
for Cause unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the vote of
three-quarters (3/4) of the entire membership of the Board at a
meeting of such Board duly called and held for that purpose (after
reasonable notice to the Executive and an opportunity for the
Executive, together with the Executive's counsel, to be heard by the
Board) finding that in the good faith opinion of the Board, the
Executive was guilty of conduct constituting "Cause" as set forth in
the second paragraph of this Section 6.5 and specifying the
particulars thereof in detail. In the event the Board determines that
Cause exists, the Board shall deliver written notice to the Executive
of termination, setting forth the facts and circumstances leading to
the Board's determination. The Company shall pay the Executive his
full Base Salary and accrued vacation time through the date notice of
a for Cause termination is delivered to the Executive, and will
provide the Executive with all other benefits in which the Executive
has a vested interest at that time, including, without limitation, any
earned but unpaid Special Bonus (in accordance with Section 4.2),
accrued but unpaid annual bonus for a prior fiscal year, and
reimbursement for all outstanding expenses properly incurred in
accordance with Company policy prior to the Executive's effective date
of termination. Except for the foregoing obligations of the Company
and the Executive's covenants under Section 7 (which shall survive
such termination), upon delivery to the Executive of written notice of
termination, the Company and the Executive thereafter shall have no
further obligations under this Agreement.
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"Cause" shall mean willful misconduct, fraud, or gross negligence by
the Executive in the performance of his duties hereunder resulting in
substantial damage to the Company or conviction of a felony.
6.6 Termination for Good Reason. The Executive may terminate his
employment for Good Reason (as defined below) by giving the Board of
Directors of the Company written notice of termination, stating in
reasonable detail the facts and circumstances claimed to provide a
basis for such termination, effective upon receipt of such notice. In
the event notice of termination for Good Reason is given, the Company
shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.4 hereof.
Good Reason shall mean, without the Executive's express written
consent, the occurrence of any one or more of the following:
i. The assignment of the Executive to duties materially inconsistent
with the Executive's authorities, duties, responsibilities, and
status as a senior executive of the Company and President of its
New England Business Unit, or a reduction or alteration in the
nature or status of the Executive's authorities, duties, or
responsibilities from those in effect immediately subsequent to
the Effective Time;
ii. The Company's requiring the Executive to be based at a location
which is at least fifty (50) miles from PVY's current
headquarters;
iii. A reduction by the Company in the Executive's Base Salary as in
effect at the Effective Time, as provided in Section 4.1 herein,
or as the same shall be increased from time to time, or the
failure of the Company to pay or cause to be paid Executive's
Base Salary, Special Bonus, or annual or long term incentive
payments when due and payable hereunder;
iv. A material reduction in the Executive's level of participation in
any of the Company's incentive compensation plans, or employee
benefit or retirement plans, Welfare Benefits (as defined in
Section 4.6), policies, practices, or arrangements from the
levels required in Sections 4.3, 4.4, 4.5 and 4.6;
v. The failure of the Company to obtain a satisfactory agreement
from any successor to the Company with respect the ownership of
substantially all the stock or assets of the New England Business
Unit to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein;
vi. Prior to the time that the Executive has attained age sixty
two (62), the giving by the Company to the Executive of
notice of its intention not to renew this Agreement; or
vii. The failure of the Executive to have been elected or reelected as
a member of the Board.
Notwithstanding the foregoing, none of the events described in clauses
(a) through (g) of this Section 6.6 shall constitute Good Reason
unless Executive shall have notified the Company in writing describing
the events which constitute Good Reason and then only if the Company
shall have failed to cure such event within thirty (30) days after the
Company's receipt of such written notice.
The Executive's right to terminate employment for Good Reason shall
not be affected by the Executive's incapacity due to physical or
mental illness. However, the Executive's failure to assert Good Reason
within one (1) year from the time he had knowledge of the circumstance
constituting Good Reason shall constitute a waiver of rights to
terminate employment for Good Reason with respect to such event.
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6.7 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to any payment or benefit under this Agreement, or
under any other agreement with or plan of the Company or any
subsidiary or affiliate thereof (in the aggregate, the "Total
Payments"), if any of the Total Payments will be subject to the tax
(the "Excise Tax") imposed by Section 4999 of the Code (or any similar
tax that may hereafter be imposed), the Company shall pay to the
Executive in cash an additional amount (the "Gross-Up Payment") such
that the net amount retained by the Executive after deduction of any
Excise Tax upon the Total Payments and any Federal, state and local
income tax and Excise Tax, as well as interest and penalties upon the
Gross-Up Payment provided for by this Section 6.7 (including FICA and
FUTA), shall be equal to the Total Payments. Such payment shall be
made by the Company to the Executive when the relevant tax payments
are paid by the Executive to the Internal Revenue Service.
6.8 Tax Computation. For purposes of determining whether any of the
Total Payments will be subject to the Excise Tax and the
amounts of such Excise Tax:
(a) Any other payments or benefits received or to be received by the
Executive in connection with the Executive's termination of
employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement, or agreement with the Company or any
subsidiary or affiliate thereof, or with any person (which shall
have the meaning set forth in Section 3(a)(9) of the Securities
Exchange Act of 1934, including a "group" as defined in Section
13(d) therein) affiliated with the Company or such persons) shall
be treated as "parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless, in the opinion of tax counsel
(reasonably agreed to in advance by the Executive) as supported
by the Company's independent auditors, such other payments or
benefits (in whole or in part) do not constitute parachute
payments, or such excess parachute payments (in whole or in part)
represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code in excess of
the base amount within the meaning of Section 280G(b)(3) of the
Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Total Payments which shall be treated as
subject to the Excise Tax shall be equal to the lesser of: (i)
the amount of the Total Payments or (ii) the amount of excess
parachute payments within the meaning of Section 280G(b)(1)
(after applying clause (a) above); and
(c) The value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors
in accordance with the principles of Sections 280G(d)(3) and (4)
of the Code.
For purposes of determining the amount of the Gross-Up Payment, the
Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which
the Gross-Up Payment is to be made, and state and local income taxes
at the highest marginal rate of taxation in the state and locality of
the Executive's residence on the effective date of termination, net of
the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes.
6.9 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 6.8 herein so
that the Executive did not receive the benefit described in Section
6.7, the Company shall reimburse the Executive for the full amount
necessary to make the Executive whole, plus, to the extent the
Executive paid such amount to the taxing authorities prior to
reimbursement by the Company, the prime rate of interest of The Chase
Manhattan Bank, Inc. In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time the Gross-up Payment is made, the Executive shall repay to
the Company at the time that the amount of such reduction in Excise
Tax is finally determined (but, if previously paid to the taxing
authorities, not prior to the time the amount of such reduction is
refunded to the Executive or otherwise realized as a benefit by the
Executive) the portion of the Gross-up Payment that would not have
been paid if such reduction in the Excise Tax had been applied in
initially calculating the Gross-up Payment.
6.10 Payment of Legal Fees. The Company shall pay, as incurred, all legal
fees, costs of litigation, prejudgment interest, and other expenses
incurred in good faith by the Executive as a result of the Company's
refusal to provide any payments or benefits under this Agreement, or
as a result of the Company's contesting the validity, enforceability,
or interpretation of this Agreement, or as a result of any conflict
between the parties pertaining to this Agreement (including conflicts
related to the calculation of parachute payments). If the Executive
does not prevail on at least one substantive claim in such litigation
(excluding conflicts related to the calculation of parachute payments,
for which the Company shall be fully responsible for payment of all
legal fees, costs of litigation, prejudgment interest and other
expenses), the Executive shall, upon the rendition of a final judgment
in such matter, reimburse the Company for the fees and expenses of the
Executive's counsel previously paid by the Company.
<PAGE>
6.11 Payments Conditioned on Waiver. Notwithstanding any other provision of
this Agreement, where a payment is due to Executive under Section
6.4(a) and/or (b) hereunder, including by application of Section 6.6,
no such payments shall be made unless and until Executive (or his
Estate) shall have executed a copy of a waiver and release in the form
annexed hereto as Exhibit "A"; provided, however, that any such waiver
and release shall expressly protect all rights and benefits of
Executive under this Agreement, including without limitation, the
rights under Sections 6.4(a) and (b) and Section 6.6.
Section 7. Confidentiality
7.1 Confidentiality. During the Term of this Agreement and thereafter in
perpetuity, the Executive will not directly or indirectly divulge or
appropriate to his own use, or to the use of any third party, any
"trade secrets" or "confidential information" (as defined in Section
7.2) of the Company or any of the Company's subsidiaries or affiliates
(hereinafter, the Company and its subsidiaries and affiliates shall be
collectively referred to as the "Company Group"), except as may be in
the public domain other than by violation of this Agreement or as may
be required by law.
7.2 Trade Secrets and Confidential Information. "Trade Secrets" as used
herein means all secret discoveries, inventions, formulae, designs,
methods, processes, techniques of production and know-how relating to
the Company Group's business. "Confidential Information" as used
herein means the Company Group's internal policies and procedures,
suppliers, customers, financial information and marketing practices,
as well as secret discoveries, inventions, formulae, designs,
techniques of production, know-how and other information relating to
the Company Group's business not rising to the level of a trade secret
under applicable law.
Section 8. Indemnification
The Company hereby covenants and agrees, to the fullest extent permitted by law,
to indemnify and hold harmless the Executive fully, completely, and absolutely
against and in respect to any and all actions, suits, proceedings, claims,
demands, judgments, costs, expenses (including attorney's fees), losses, and
damages resulting from the Executive's performance of his duties and obligations
under the terms of this Agreement.
Section 9. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.4 or 6.6 herein, the Executive shall be reimbursed by the Company for the
costs of all outplacement services obtained by the Executive within three (3)
years following such termination; provided, however, that the total
reimbursement shall be limited to an amount equal to fifteen percent (15%) of
the Executive's Base Salary as of the effective date of termination.
Section 10. Assignment
10.1 Assignment by Company. This Agreement may be assigned or transferred
to, and shall be binding upon and shall inure to the benefit of, any
successor of the Company, and any such successor shall be deemed
substituted for all purposes of the "Company" under the terms of this
Agreement. As used in this Agreement, the term "successor" shall mean
any person, firm, corporation, or business entity which at any time,
whether by merger, purchase, or otherwise, acquires all or
substantially all of the assets (i) of the Company or (ii) pertaining
to the division or subsidiary of the Company for which Executive
performs the majority of his services. Notwithstanding such
assignment, the Company shall remain, with such successor, jointly and
severally liable for all its obligations hereunder.
Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this
Agreement and shall immediately entitle the Executive to compensation
from the Company in the same amount and on the same terms as the
Executive would be entitled in the event of a termination for Good
Reason by the Executive, as provided in Section 6.6 herein.
Except as herein provided, this Agreement may not otherwise be
assigned by the Company.
<PAGE>
10.2 Assignment by Executive. This Agreement shall inure to the benefit of
and be enforceable by the Executive's personal or legal
representatives, executors, and administrators, successors, heirs,
distributees, devisees, and legatees. If the Executive should die
while any amounts payable to the Executive hereunder remain
outstanding, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, in the absence of
such designee, to the Executive's estate.
Section 11. Dispute Resolution and Notice
11.1 Arbitration. Any dispute or controversy arising under or in connection
with this Agreement shall be settled by arbitration, conducted before
a panel of three (3) arbitrators sitting in a location selected by the
Executive within fifty (50) miles of the location of his employment
with the Company, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
award of the arbitrator in any court having proper jurisdiction. All
expenses of such arbitration, including the fees and expenses of the
counsel for the Executive, shall be borne, as incurred, by the
Company. However, if the Executive does not prevail on at least one
substantive claim in such arbitration, the Executive shall, upon the
rendition of a final judgment confirming such arbitration, reimburse
the Company for the fees and expenses of the Executive's counsel
previously paid by the Company.
11.2 Notice. For the purpose of this Agreement, any notices, requests,
demands, or other communications provided for by this Agreement shall
be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered or certified mail,
return receipt requested, postage prepaid, or by recognized overnight
delivery service (such as, but not limited to, Federal Express), to
the Executive at the last address he has filed in writing with the
Company or, in the case of the Company, at its principal offices, to
the attention of the President of the Company.
Section 12. Miscellaneous
12.1 Gender and Number. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the
plural shall include the singular, and the singular shall include the
plural.
12.2 Modification. This Agreement shall not be varied, altered, modified,
canceled, changed, or in any way amended except by mutual agreement of
the parties in a written instrument executed by the parties hereto or
their legal representatives.
12.3 Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect.
12.4 Counterparts. This Agreement may be executed in one (1) or more
counterparts, each of which shall be deemed to be an original, but all
of which together will constitute one and the same Agreement.
12.5 Tax Withholding. The Company may withhold from any benefits payable
under this Agreement all federal, state, city, or other taxes as may
be required pursuant to any law or governmental regulation or ruling.
12.6 Beneficiaries. The Executive may designate one or more persons or
entities as the primary and/or contingent beneficiaries of any amounts
to be received under this Agreement. Such designation must be in the
form of a signed writing acceptable to the President of the Company.
The Executive may make or change such designation at any time.
Section 13. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the laws of the state of
Rhode Island, without regard to conflicts of laws principles.
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IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement,
as of the day and year first above written.
Executive:
JAMES H. DODGE
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James H. Dodge
ATTEST Southern Union Company:
By: PETER H. KELLEY
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