<PAGE>
THE PROVIDENCE ENERGY CORPORATION
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
-----------------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ______________________ to _______________________
Commission file number 1-10032
---------------------------------------------------------
PROVIDENCE ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Rhode Island 05-0389170
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
100 Weybosset Street, Providence, Rhode Island 02903
----------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
401-272-5040
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed since last
report).
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___.
---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Common stock, $1.00 par value, 6,141,488 shares outstanding at January 31, 2000.
- --------------------------------------------------------------------------------
<PAGE>
PROVIDENCE ENERGY CORPORATION
FORM 10-Q
DECEMBER 31, 1999
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I: FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Statements of Income for the
three and twelve months ended
December 31, 1999 and 1998 I-1
Consolidated Balance Sheets as of
December 31, 1999, December 31, 1998 and
September 30, 1999 I-2
Consolidated Statements of Cash Flows for the
three months ended December 31, 1999 and 1998 I-3
Consolidated Statements of Capitalization as of
December 31, 1999, December 31, 1998 and
September 30, 1999 I-4
Notes to Consolidated Financial Statements I-5
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations I-11
PART II: OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K II-1
Signature II-2
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
- ------ ---------------------
ITEM 1. FINANCIAL STATEMENTS
- ------ --------------------
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
FOR THE PERIODS ENDED DECEMBER 31
---------------------------------
(Unaudited)
-----------
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
-------------------- --------------------
1999 1998 1999 1998
-------------------- --------------------
(thousands, except per share amounts)
<S> <C> <C> <C> <C>
Energy revenues $ 70,781 $ 64,722 $231,088 $218,892
Cost of energy 40,611 35,010 124,644 118,062
-------- -------- -------- --------
Operating margin 30,170 29,712 106,444 100,830
-------- -------- -------- --------
Operating expenses:
Operation and maintenance 13,208 13,500 52,755 53,436
Depreciation and amortization 4,741 4,355 17,882 15,261
Taxes:
State gross earnings 1,682 1,681 5,674 5,519
Local property and other 2,229 2,055 9,054 8,451
-------- -------- -------- --------
Total operating expenses 21,860 21,591 85,365 82,667
-------- -------- -------- --------
Operating income 8,310 8,121 21,079 18,163
Other income (loss):
Merger related expenses (1,084) (1,084) - -
Other 332 1,104 351 (111)
-------- -------- -------- --------
Total other income (loss) (752) 20 351 (111)
-------- -------- -------- --------
Interest expense:
Long-term debt 1,768 1,552 7,043 6,453
Other 830 516 2,576 1,917
Interest capitalized (59) (76) (372) (249)
-------- -------- -------- --------
2,539 1,992 9,247 8,121
-------- -------- -------- --------
Income before Federal income taxes 5,019 6,149 12,183 9,931
Provision for Federal income taxes 1,735 2,078 4,197 3,473
-------- -------- -------- --------
Income before preferred dividends of
subsidiary 3,284 4,071 7,986 6,458
Preferred dividends of subsidiary 70 104 314 452
-------- -------- -------- --------
Net income $ 3,214 $ 3,967 $ 7,672 $ 6,006
======== ======== ======== ========
Net income per
common share - basic $ .53 $ .66 $ 1.27 $ 1.01
======== ======== ======== ========
Net income per
common share - diluted $ .52 $ .66 $ 1.26 $ 1.01
======== ======== ======== ========
Weighted average number of
shares outstanding:
Basic 6,118.8 5,974.0 6,051.9 5,946.1
======== ======== ======== ========
Diluted 6,176.1 5,985.0 6,081.9 5,956.6
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
I-1
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
(thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------
December 31, December 31, September 30,
1999 1998 1999
---------------------------------------------
<S> <C> <C> <C>
ASSETS
- ------
Current assets:
Cash and temporary cash investments $ 3,468 $ 2,580 $ 2,804
Accounts receivable, less allowance of
$4,293 at 12/31/99, $3,076 at
12/31/98 and $2,883 at 9/30/99 31,518 28,794 13,684
Unbilled revenues 16,244 11,345 2,821
Inventories, at average cost -
Fuel oil and underground gas
storage 503 517 558
Materials and supplies 1,245 1,246 1,283
Prepaid and refundable taxes 2,521 2,817 4,215
Prepayments 1,991 1,874 2,214
-------- -------- --------
57,490 49,173 27,579
-------- -------- --------
Gas plant, at original cost 344,894 332,181 345,671
Less - Accumulated depreciation
and plant acquisition adjustments 125,728 129,723 127,481
-------- -------- --------
219,166 202,458 218,190
-------- -------- --------
Other property, net 2,769 2,610 2,628
Investments 12,883 3,143 11,186
Deferred environmental costs 11,088 5,593 9,719
Deferred charges and other assets 28,824 18,771 28,731
-------- -------- --------
55,564 30,117 52,264
-------- -------- --------
Total assets $332,220 $281,748 $298,033
======== ======== ========
CAPITALIZATION AND LIABILITIES
- ------------------------------
Capitalization
(See accompanying statement) $187,610 $174,066 $187,628
-------- -------- --------
Current liabilities:
Notes payable 51,845 27,159 38,250
Current portion of long-term debt 3,369 3,337 3,515
Accounts payable 31,732 27,568 12,199
Accrued compensation 1,417 1,075 1,634
Accrued environmental costs 5,719 3,400 6,145
Accrued interest 1,507 1,321 1,647
Accrued taxes 5,749 3,463 3,557
Accrued vacation 1,832 1,687 1,807
Accrued workers compensation 679 577 595
Customer deposits 2,962 3,022 2,973
Deferred revenue 200 - 315
Energy conservation liability 1,241 721 1,261
Other 2,434 2,928 2,776
-------- -------- --------
110,686 76,258 76,674
-------- -------- --------
Deferred credits and reserves:
Accumulated deferred Federal
income taxes 24,295 22,836 24,151
Unamortized investment tax credits 2,020 2,178 2,059
Accrued pension 7,087 5,880 6,982
Other 522 530 539
-------- -------- --------
33,924 31,424 33,731
-------- -------- --------
Commitments and contingencies
Total capitalization and liabilities $332,220 $281,748 $298,033
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
I-2
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE THREE MONTHS ENDED DECEMBER 31
--------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
-----------
1999 1998
--------- ---------
(thousands)
<S> <C> <C>
Cash provided by Operating Activities:
Income after interest expense $ 3,284 $ 4,071
Items not requiring cash:
Depreciation and amortization 4,741 4,355
Gain on sale of financial instruments (20) (216)
Deferred Federal income taxes 140 539
Amortization of investment tax credits (39) (39)
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable (17,811) (14,727)
Unbilled revenues (13,423) (9,680)
Inventories 100 326
Prepaid and refundable taxes 1,694 2,560
Prepayments 223 (21)
Accounts payable 19,436 17,543
Accrued compensation (217) (262)
Accrued interest (140) (175)
Accrued taxes 2,174 754
Accrued vacation, accrued workers
compensation, customer deposits
and other (418) (1,152)
Accrued pension 105 68
Deferred charges and other (62) 2,058
-------- --------
Net cash provided by (used for) operating
activities (233) 6,002
-------- --------
Investing Activities:
Expenditures for property, plant
and equipment, net (7,318) (8,532)
Expenditures for business acquisitions (300) -
Investment in joint venture (1,668) (947)
Proceeds from sale of financial
instruments, net 27 162
-------- --------
Net cash used in investing activities (9,259) (9,317)
-------- --------
Financing Activities:
Proceeds from exercise of stock options 29 14
Payments on long-term debt (2,091) (1,842)
Increase in notes payable, net 13,595 7,080
Cash dividends on preferred shares (70) (104)
Cash dividends on common shares (1,307) (1,259)
-------- --------
Net cash provided by financing activities 10,156 3,889
-------- --------
Increase in cash and temporary cash investments 664 574
Cash and temporary cash investments at beginning
of period 2,804 2,006
-------- --------
Cash and temporary cash investments at end
of period $ 3,468 $ 2,580
======== ========
Supplemental disclosure of cash flow information:
Cash paid during period for-
Interest (net of amount capitalized) $ 2,552 $ 2,115
Income taxes (net of refunds) $ 28 $ 19
Schedule of non-cash investing activities
Capital lease obligations for equipment $ - 115
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
I-3
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
----------------------------------------------
CONSOLIDATED STATEMENTS OF CAPITALIZATION
-----------------------------------------
(thousands)
<TABLE>
<CAPTION>
(Unaudited)
-----------
December 31, December 31, September 30,
1999 1998 1999
---------------------------------------------
<S> <C> <C> <C>
Common stockholders' investment:
Common stock, $1 par
Authorized - 20,000 shares
Outstanding - 6,142 at 12/31/99,
5,983 at 12/31/98
and 6,102 at
9/30/99 $ 6,142 $ 5,983 $ 6,102
Amount paid in excess of par 62,992 59,498 61,966
Retained earnings 26,568 25,423 25,000
------------ ----------- -----------
Total Common equity 95,702 90,904 93,068
------------ ----------- -----------
Accumulated other comprehensive earnings:
Unrealized gain on financial
instruments 23 38 39
------------ ----------- -----------
Total common equity 95,725 90,942 93,107
------------ ----------- -----------
Cumulative preferred stock of subsidiary:
Redeemable 8.7% Series, $100 par
Authorized - 80 shares
Outstanding - 32 shares as of
12/31/99 and 9/30/99 and 48
shares as of 12/31/98 3,200 4,800 3,200
------------ ----------- -----------
Long-term debt:
First Mortgage Bonds 88,219 75,728 89,819
Other long-term debt 3,511 4,750 4,461
Capital leases 324 1,183 556
------------ ----------- -----------
Total long-term debt 92,054 81,661 94,836
Less current portion 3,369 3,337 3,515
------------ ----------- -----------
Long-term debt, net 88,685 78,324 91,321
------------ ----------- -----------
Total capitalization $ 187,610 $ 174,066 $ 187,628
============ =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
I-4
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. Accounting Policies
-------------------
It is the Registrant's opinion that the financial information contained in
this report reflects all normal, recurring adjustments necessary to a fair
statement of the results for the periods reported; however, such results are not
necessarily indicative of results to be expected for the year, due to the
seasonal nature of the Registrant's operations. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted in
this Form 10-Q pursuant to the rules and regulations of the Securities and
Exchange Commission. However, the disclosures herein when read with the annual
report for 1999 filed on Form 10-K are adequate to make the information
presented not misleading.
2. Reclassifications
-----------------
Certain prior period amounts have been reclassified for consistent
presentation with the current period.
3. Rates and Regulation
--------------------
The Providence Gas Company (ProvGas), a wholly owned subsidiary of the
Registrant, is subject to the regulatory jurisdiction of the Rhode Island Public
Utilities Commission (RIPUC) with respect to rates and charges, standards of
service, accounting and other matters. In August 1997, the RIPUC approved the
Price Stabilization Plan Settlement Agreement (Energize RI or the Plan) among
ProvGas, the Rhode Island Division of Public Utilities and Carriers (Division),
the Energy Council of Rhode Island, and The George Wiley Center. Effective
October 1, 1997 through September 30, 2000, Energize RI provides firm customers
with a price decrease of approximately 4.0 percent in addition to a three-year
price freeze. Under Energize RI, the Gas Charge Clause (GCC) mechanism has been
suspended for the entire term. Also, in connection with the Plan, ProvGas wrote
off approximately $1.5 million of previously deferred gas costs in October 1997.
Energize RI also provides for ProvGas to make significant capital investments to
improve its distribution system and support economic development. Specific
capital improvement projects funded under Energize RI are estimated to total
approximately $26 million over its three-year term. In addition, under Energize
RI, ProvGas provides funding for the Low-Income Assistance Program at an annual
level of $1.0 million, the Demand Side Management Rebate Program at an annual
level of $.5 million, and the Low-Income Weatherization Program at an annual
level of $.2 million. Energize RI also continues the process of unbundling by
allowing ProvGas to provide unbundled service offerings for up to 10 percent per
year of firm deliveries.
As part of Energize RI, ProvGas has reclassified and is amortizing
approximately $4.0 million of prior environmental costs. These costs and all
environmental costs incurred during the term of the Plan will be amortized over
a 10-year period, in accordance with the levels authorized in Energize RI.
Under Energize RI, ProvGas may earn up to 10.9 percent, but not less than
7.0 percent, annually on its average common equity, which is capped at $81.0
million, $86.2 million, and $92.0 million in fiscal 1998, 1999, and 2000,
respectively. In the event that ProvGas earns in excess of 10.9 percent or less
than 7.0 percent, ProvGas will defer revenues or costs through a deferred
revenue account over the term of the Plan. Any balance in the deferred revenue
account at the end of the Plan will be refunded to or recovered from customers
in a manner to be determined by all parties to the Plan and approved by the
RIPUC.
I-5
<PAGE>
As part of Energize RI, ProvGas is permitted to file annually with the
Division for the recovery of exogenous changes which may occur during the three-
year term of the Plan. Exogenous changes are defined as "...significant
increases or decreases in ProvGas' costs or revenues which are beyond ProvGas'
reasonable control." Any disputes between ProvGas and the Division regarding
either the nature or quantification of the exogenous changes are to be resolved
by the RIPUC. The impact of any such exogenous changes will be debited or
credited to a regulatory asset or liability account throughout the term of
Energize RI and will be recovered or refunded at the expiration of the Plan
through a method to be determined.
In fiscal 1998, ProvGas did not earn its allowed rate of return primarily
as a result of the extremely warm winter weather and the loss of non-firm
margin. ProvGas believed the causes of these two events were beyond its
reasonable control and thus deemed them to be exogenous changes. In March 1999,
ProvGas reached an agreement with the Division, which allowed it to recover
$2.45 million in revenue losses attributable to exogenous changes experienced by
ProvGas in fiscal 1998. The RIPUC reviewed the exogenous changes agreement to
ensure consistency with the terms of Energize RI and affirmed the agreement at
its May 28, 1999 open meeting.
During fiscal 1999, ProvGas recognized into revenue $2.45 million for the
exogenous changes recovery, and has deferred approximately $.5 million of
revenue under the provisions of the earnings cap of Energize RI.
ProvGas intends to file for recovery of exogenous changes experienced in
1999 which resulted from factors similar to 1998. Absent further exogenous
recovery and/or other factors such as colder than normal weather, ProvGas'
ability to earn a 10.9 percent return on average common equity this year, the
final year of Energize RI, is substantially impaired.
As Energize RI is due to expire on September 30, 2000, several alternatives
are available to ProvGas to address the expiration of this program including the
possible extension or replication of Energize RI or filing a rate case. On
January 31, 2000, ProvGas filed for a two-month extension of Energize RI to
allow time for the Registrant to discuss its options with the appropriate
parties.
4. Gas Supply
----------
As part of the Price Stabilization Plan Settlement Agreement described
above in Rates and Regulations, ProvGas entered into a full requirements gas
---------------------
supply contract with Duke Energy Trading and Marketing, L.L.C. (DETM), a joint
venture of Duke Energy Corporation and Mobil Corporation, for a term of three
years commencing October 1, 1997. Under the contract, DETM guarantees to meet
ProvGas' supply requirements; however, ProvGas must purchase all of its gas
supply exclusively from DETM. In addition, under the contract, ProvGas
transferred responsibility for its pipeline capacity resources, storage
contracts, and liquified natural gas (LNG) capacity to DETM. As a result,
ProvGas' gas inventories of approximately $18 million at September 30, 1997 were
sold at book value to DETM on October 1, 1997.
In addition to providing supply for firm customers at a fixed price, DETM
will provide gas at market prices to cover ProvGas' non-firm sales customers'
needs and to make up the supply imbalances of transportation customers. DETM
will also provide various other services to ProvGas' transportation service
customers including enhanced balancing, standby, and the storage and peaking
services available under ProvGas' approved Firm Transportation (FT-2) storage
service effective December 1, 1997. DETM will receive the supply-related
revenues from these services in exchange for providing the supply management
inherent in these services.
Included in the DETM contract are a number of other important features.
ProvGas has retained the right to continue to make gas supply portfolio changes
to reduce supply costs. To the extent ProvGas makes such changes, ProvGas must
keep DETM whole for the value lost over the remainder of the contract period.
The outsourcing of day-to-day supply management relieves ProvGas of the need to
perform certain upstream supply management functions. This will make it possible
for ProvGas to take on the additional supply management workload required by the
further unbundling of firm sales customers without major staffing additions.
I-6
<PAGE>
ProvGas has entered into an agreement replacing its existing LNG service
contract with Algonquin Gas Transmission Company (Algonquin), a subsidiary of
Duke Energy Corporation. Algonquin is the owner and operator of a LNG tank
located in Providence, Rhode Island. ProvGas relies upon this service to provide
gas supply into its distribution system during the winter period. The service
provided for in the agreement began November 10, 1999. Under the terms of the
agreement, Algonquin replaced and expanded the vaporization capability at the
tank. ProvGas has received approximately $2.6 million from Algonquin. Of the
$2.6 million, approximately $.9 million represents reimbursement received by
ProvGas in 1999 for costs incurred related to the project including labor,
engineering, and legal expenses. The remaining portion of the payment, or
approximately $1.7 million was received in January 2000, and serves as
reimbursement for the additional costs that DETM will incur as a result of the
release of the Algonquin storage capacity to DETM as provided for in the gas
supply asset management contract described above.
In June 1999, the Federal Energy Regulatory Commission (FERC) issued an
order in Docket Number CP99-113 approving Algonquin's project described above.
In that order FERC also approved the new 10-year contract between Algonquin and
ProvGas for service from the tank and ProvGas' parallel filing, PR99-8,
requesting regulatory authorization to charge Algonquin for displacement of gas
for other Algonquin customers.
As a result of FERC Order 636 and other related orders, pipeline
transportation companies have incurred significant costs, collectively known as
transition costs. The majority of these costs will be reimbursed by the
pipeline's customers, including ProvGas. ProvGas estimates its transition costs
to be approximately $21.7 million, of which $16.2 million has been included in
the GCC and collected from customers through September 30, 1997. As part of the
above supply contract, DETM assumed liability for these transition costs during
the contract's three-year term. At the end of the three-year term of the
contract, ProvGas will assume any remaining liability, which is not expected to
be material.
5. Environmental Matters
---------------------
Federal, state, and local laws and regulations establishing standards and
requirements for the protection of the environment have increased in number and
in scope within recent years. The Registrant cannot predict the future impact of
such standards and requirements, which are subject to change and can take effect
retroactively. The Registrant continues to monitor the status of these laws and
regulations. Such monitoring involves the review of past activities and current
operations, and may include expending funds to investigate or clean up certain
sites. To the best of its knowledge, subject to the following, the Registrant
believes it is in substantial compliance with such laws and regulations.
At December 31, 1999, the Registrant was aware of five sites at which
future costs may be incurred.
Plympton Sites (2)
- ------------------
The Registrant has been designated as a potentially responsible party (PRP)
under the Comprehensive Environmental Response Compensation and Liability Act of
1980 at two C. M. Brackett sites in Plympton, Massachusetts. Disposal
contractors employed in the past, either directly or indirectly by the
Registrant and other PRPs, allegedly deposited waste materials at the C. M.
Brackett sites. With respect to one of the sites, the Registrant has joined with
other PRPs in entering into an Administrative Consent Order with the
Massachusetts Department of Environmental Protection. The same group is
currently negotiating a similar agreement for the second site. The costs to be
borne by the Registrant in connection with both Plympton sites are not
anticipated to be material to the financial condition of the Registrant.
I-7
<PAGE>
Providence Site
- ---------------
During 1995, the Registrant began a study at its primary gas distribution
facility located at 642 Allens Avenue in Providence, Rhode Island. This site
formerly contained a manufactured gas plant operated by the Registrant. As of
December 31, 1999, approximately $3.0 million had been spent primarily on
studies and the formulation of remediation work plans under Rhode Island
Department of Environmental Management (DEM) supervision.
The Registrant has completed the initial investigation to determine the
extent of environmental contamination for the most contaminated portions of the
property. The Registrant has compiled a preliminary range of costs, based on
removal and off-site disposal of the most contaminated soil, ranging from $7.0
million to in excess of $9.0 million. As of December 31, 1999, approximately
$2.7 million had been spent on the remediation of this soil. The remediation of
the most contaminated portions of the property is scheduled to be completed in
August 2000.
An investigation of the remaining property was begun in December 1999. The
Registrant anticipates this investigation to be completed in March 2000 at a
cost of approximately $1.5 million. In addition, as of December 31, 1999 the
Registrant has not begun its groundwater investigation at this site.
Because of the uncertainties associated with the pending investigations,
the Registrant can not offer any conclusions as to the total future cost of
remediation of the property at this time. Based on the proposals for remediation
work, the Registrant has an accrual balance of $5.7 million at December 31, 1999
for anticipated future remediation and investigation costs at this site.
Westerly Site
- -------------
The Registrant acquired the Westerly, Rhode Island operations center in
1990 from another company. In 1996 an environmental investigation revealed the
existence of coal tar waste on the site. The Registrant never operated a
manufactured gas plant at this location, but the previous owner did. The former
manufactured gas plant is allegedly the source of the coal tar waste. In
February 1999, DEM issued the Registrant and the previous owner a letter of
responsibility for the site. As of December 31, 1999, the Registrant had removed
an underground oil storage tank and regulators containing mercury from the site,
as well as some localized contamination. The costs associated with the
investigation and removal of localized contamination were shared equally with
the former owner of the property.
The Registrant is currently engaged in negotiations to transfer the
property back to the previous owner, who would continue to remediate the site at
no cost to the Registrant. The purchase and sale agreement is anticipated to be
signed during the current fiscal year, at which time the previous owner will
assume responsibility for removal of coal tar waste. The Registrant has
completed the required cleanup related to any mercury-containing regulators and
remains responsible for cleanup of any mercury released into adjacent water.
Costs incurred by the Registrant to remediate this site were approximately $.1
million.
Allens Avenue Site
- ------------------
In November 1998, the Registrant received a letter of responsibility from
DEM relating to possible contamination on previously-owned property at 170
Allens Avenue in Providence. The current operator of the property has also
received a letter of responsibility. A work plan has been created and approved
by DEM. An investigation has begun to determine the extent of contamination as
well as the extent of the Registrant's responsibility. The Registrant has
entered into a cost-sharing agreement with the current operator of the property,
under which the Registrant is responsible for approximately 20 percent of the
costs related to the investigation. Costs of testing at this site as of December
31, 1999 were approximately $.2 million. Until the results of the investigation
are known, the Registrant cannot offer any conclusions as to its responsibility.
I-8
<PAGE>
General
- -------
In prior rate cases filed with the RIPUC, ProvGas requested that
environmental investigation and remediation costs be recovered by inclusion in
its depreciation factors consistent with the rate recovery treatment for all
types of cost of removal. Due to the magnitude of ProvGas' environmental
investigation and remediation expenditures, ProvGas sought current recovery for
these amounts. As a result, in accordance with the Price Stabilization Plan
Settlement Agreement described in Rates and Regulations, effective October 1,
1997, all environmental investigation and remediation costs incurred through
September 30, 1997, as well as all costs incurred during the three-year term of
the Plan, will be amortized over a 10-year period, in accordance with the levels
authorized in Energize RI. Additionally, it is ProvGas' practice to consult with
the RIPUC on a periodic basis when, in management's opinion, significant amounts
might be expended for environmental-related costs. As of December 31, 1999,
ProvGas has incurred environmental assessment and remediation costs of $6.7
million and has an accrual balance of $5.7 million for future costs.
Management has begun discussions with other parties who may assist ProvGas
in paying the costs associated with the remediation of the above sites.
Management believes that its program for managing environmental issues, combined
with rate recovery and financial contributions from others, will likely avoid
any material adverse effect on its results of operations or its financial
condition as a result of the ultimate resolution of the above sites.
6. Net Income per Common Share
---------------------------
A reconciliation of the weighted average number of shares outstanding used
in the computation of the basic and diluted earnings per share for each of the
periods ended December 31 is as follows:
Three Months Twelve Months
1999 1998 1999 1998
---- ---- ---- ----
Weighted average
shares 6,118.8 5,974.0 6,051.9 5,946.1
Effect of dilutive
stock options 57.3 11.0 30.0 10.5
------- ------- ------- -------
Weighted average
shares diluted 6,176.1 5,985.0 6,081.9 5,956.6
======= ======= ======= =======
The net income used in the calculation for basic and diluted earnings per
share agrees with the net income appearing in the consolidated financial
statements.
7. Comprehensive Income
--------------------
Effective October 1, 1998, the Registrant adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income", which requires that an enterprise (a) classify items of
other comprehensive income by their nature in a financial statement and (b)
display the accumulated balance of other comprehensive income separately from
retained earnings and additional paid-in capital in the equity section of a
statement of financial position.
I-9
<PAGE>
The following is a summary of the reclassification adjustments and the
income tax effects for the components of other comprehensive loss for the three
months ended December 31:
Unrealized Holding Reclassification
Losses on Adjustments for
Investments Gains Other
Arising During Included in Comprehensive
(thousands of dollars) the Period Net Income Loss
- ---------------------- ---------- ---------- ----
2000
Pretax income $ (10) $ (14) $ (24)
Income tax expense (3) (5) (8)
--------- --------- ---------
Net change $ (7) $ (9) $ (16)
========= ========= =========
8. Commitments and Contingencies
-----------------------------
The Registrant has employment agreements with 11 officers which become
operative upon a change in control of the Registrant and continue in effect for
a range of two to three years. Potential salary severance expense under the
agreements could total approximately $5.0 million.
I-10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
- ------- -------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Providence Energy Corporation (the Registrant) and its subsidiaries and their
representatives may from time to time make written or oral statements, including
statements contained in the Registrant's filings with the Securities and
Exchange Commission (SEC) and in its reports to shareholders, which constitute
or contain "forward-looking" statements as that term is defined in the Private
Securities Litigation Reform Act of 1995 or by the SEC in its rules,
regulations, and releases.
All statements other than statements of historical facts included in this 10-Q
including without limitation statements regarding the Registrant's financial
position, strategic initiatives, the effect of its proposed merger with Southern
Union Company (Southern Union), and statements addressing industry developments
are forward-looking statements. Where, in any forward-looking statement, the
Registrant or its management expresses an expectation or belief as to future
results, such expectation or belief is expressed in good faith and believed to
have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will result or be achieved or accomplished. The following
are some of the factors which could cause actual results to differ materially
from those anticipated: general economic, financial, and business conditions;
changes in government regulations, the actions taken or decisions rendered by
any regulatory body, and the impact such changes, actions, or decisions might
have on the Registrant, including the regulatory approvals or the timeliness of
such approvals of the Registrant's proposed merger with Southern Union;
competition in the energy services sector; regional weather conditions; the
availability and cost of natural gas and oil; development and operating costs;
the success and costs of advertising and promotional efforts; the availability
and terms of capital; unanticipated environmental liabilities; the Registrant's
ability to grow its business through acquisitions and/or significant customer
growth; the costs and effects of unanticipated legal proceedings; the impacts
of unusual items resulting from ongoing evaluations of business strategies and
asset valuations; and changes in business strategy.
RESULTS OF OPERATIONS
The Registrant's energy revenues, operating margin, and net income for the
three and twelve months ended December 31, 1999 and for comparable periods ended
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
(thousands)
Three Months Twelve Months
Ended December 31 Ended December 31
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
Energy revenues $70,781 $64,722 $231,088 $218,892
======= ======= ======== ========
Operating margin $30,170 $29,712 $106,444 $100,830
======= ======= ======== ========
Net income $ 3,214 $ 3,967 $ 7,672 $ 6,006
======= ======= ======== ========
</TABLE>
Operating Margin
- ----------------
Operating margin increased approximately $.5 million or 1.5 percent compared
to the same quarter last year and approximately $5.6 million or 5.6 percent for
the twelve months ended December 31, 1999 versus the same period last year.
I-11
<PAGE>
During the latest quarter, the Registrant experienced weather that was .7
percent warmer than the same quarter last year. This warmer weather resulted in
a margin decrease of approximately $.3 million.
Non-regulated operating margin for the current quarter increased approximately
$.4 million when compared to the same period last year. The increase was
primarily due to the acquisition of oil companies in July 1999 and increased
commercial sales.
The Registrant experienced weather that was 7.1 percent colder for the twelve
months ended December 31, 1999 versus the same period last year. The colder
temperatures resulted in increased margin of approximately $1.8 million compared
to last year. Also contributing to the increase was $1.9 million related to the
1998 exogenous change recovery, $.5 million in non-firm margin and $.5 million
in customer growth.
For the current twelve-month period, non-regulated operating margin increased
approximately $2.3 million. As in the quarter increase, this increase was
primarily attributable to the acquisition of oil companies and increased
commercial sales.
Operating and Maintenance Expenses
- ----------------------------------
Overall, operating and maintenance expenses decreased approximately $.3
million or 2.2 percent from the same quarter last year and approximately $.7
million or 1.3 percent for the twelve months ended December 31, 1999 when
compared to the same twelve month period last year. The twelve-month decrease is
primarily attributable to a one-time reimbursement of approximately $.9 million
for costs incurred under a FERC-approved contract with Algonquin Gas
Transmission Company. Offsetting the reimbursement was an increase of
approximately $.6 million in non-regulated operating and maintenance expenses
which was partially attributable to the Registrant's acquisition of oil
companies. The remaining decrease is attributable to cost control measures which
were implemented in response to warmer weather.
The Registrant continually reviews its operating expenses in order to keep
expenses as low as possible; however, expenses can vary from year to year.
Depreciation and Amortization Expenses
- --------------------------------------
Depreciation and amortization expense increased approximately $.4 million or
8.9 percent compared to the same quarter last year and approximately $2.6
million or 17.2 percent for the twelve months ended December 31, 1999 versus the
same period last year. This increase is the result of increased capital spending
for Energize RI commitments; technology projects; Year 2000 costs, which were
capitalized as authorized under the provisions of Energize RI; and the
amortization of environmental costs. Effective October 1, 1997, the Registrant
began amortizing environmental and Year 2000 costs over 10-year and 5-year
periods, respectively, in accordance with the levels authorized in Energize RI.
The Registrant will have increased environmental amortization expense in future
years as its planned environmental remediation program continues. Also,
amortization expense for Year 2000 costs will increase in the future as higher
levels of costs have been incurred from those originally anticipated.
Taxes
- -----
Taxes for the current quarter versus last year increased approximately $.2
million or 4.7 percent and approximately $.8 million or 5.4 percent for the
current twelve-month period versus last year. The increases are primarily due to
increases in local property taxes as a result of capital spending.
I-12
<PAGE>
Other Income (Loss)
- -------------------
Other income (loss) decreased approximately $.8 million in the current quarter
versus the same quarter last year. The decrease is primarily the result of a
$1.1 million fee paid in the current quarter for investment banking services
related to the Registrant's proposed merger with Southern Union. Additional
investment banking fees and other expenses relating to the proposed merger will
be incurred during the balance of the year. As part of the agreement with the
investment banker, the remainder of the fee is payable in two installments of
$1.1 million each upon the occurrence of the following two events: (a) upon the
Registrant's shareholder approval of the proposed merger and (b) at the closing
of the proposed merger. Partially offsetting the fee was approximately $.2
million in investment interest income.
Other income (loss) increased approximately $.5 million for the twelve months
ended December 31, 1999. Other income decreased $1.1 million for the investment
banking fee. In 1998, the Registrant established a reserve for a refund under an
order which was subsequently vacated in 1999, at which time the original reserve
was reversed, contributing approximately $.5 million to the twelve-month
increase. Also increasing other income was approximately $.5 million in
investment interest income.
Interest Expense
- ----------------
Interest expense increased approximately $.5 million or 27.5 percent during
the latest quarter compared to the same quarter last year and approximately $1.1
million or 13.9 percent during the latest twelve months compared to the same
twelve months last year. Long-term interest expense increased as a result of
ProvGas' Series T First Mortgage Bond issuance in February 1999, which
refinanced short-term borrowings. The Series T issuance enabled the Company to
secure a favorable long-term financing rate. However, this increase was
partially offset by the Series S First Mortgage Bond issuance in April 1998,
which refinanced higher cost long-term debt. Additionally, short-term interest
expense has increased as a result of increased notes payable, which was used
primarily as bridge financing for the Registrant's investment in the Providence
Place Mall.
FUTURE OUTLOOK
Regulatory
Under the Price Stabilization Plan Settlement Agreement (Energize RI or the
Plan), ProvGas may earn up to 10.9 percent, but not less than 7.0 percent,
annually on its average common equity, which is capped at $81.0 million, $86.2
million, and $92.0 million in fiscal 1998, 1999, and 2000, respectively. In the
event that ProvGas earns in excess of 10.9 percent or less than 7.0 percent,
ProvGas will defer revenues or costs through a deferred revenue account over the
term of the Plan. Any balance in the deferred revenue account at the end of the
Plan will be refunded to or recovered from customers in a manner to be
determined by all parties to the Plan and approved by the RIPUC.
As part of Energize RI, ProvGas is permitted to file annually with the Rhode
Island Division of Public Utilities and Carriers (Division) for the recovery of
exogenous changes which may occur during the three-year term of the Plan.
Exogenous changes are defined as "...significant increases or decreases in
ProvGas' costs or revenues which are beyond ProvGas' reasonable control." Any
disputes between ProvGas and the Division regarding either the nature or
quantification of the exogenous changes are to be resolved by the Rhode Island
Public Utilities Commission (RIPUC). The impact of any such exogenous changes
will be debited or credited to a regulatory asset or liability account
throughout the term of Energize RI and will be recovered or refunded at the
expiration of the Plan through a method to be determined.
In fiscal 1998, ProvGas did not earn its allowed rate of return primarily as a
result of the extremely warm winter weather and the loss of non-firm margin.
ProvGas believed the causes of these two events were beyond its reasonable
control and thus deemed them to be exogenous changes. In March 1999, ProvGas
reached an agreement with the Division, which allowed it to recover $2.45
million in revenue losses attributable to exogenous changes experienced by
ProvGas in fiscal 1998. The RIPUC reviewed the exogenous changes agreement to
ensure consistency with the terms of Energize RI and affirmed the agreement at
its May 28, 1999 open meeting.
I-13
<PAGE>
During fiscal 1999, ProvGas recognized into revenue $2.45 million for the
exogenous changes recovery, and has deferred approximately $.5 million of
revenue under the provisions of the earnings cap of Energize RI.
ProvGas intends to file for recovery of exogenous changes experienced in 1999
which resulted from factors similar to 1998. Absent further exogenous recovery
and/or other factors such as colder than normal weather, ProvGas' ability to
earn a 10.9 percent return on average common equity this year, the final year of
Energize RI, is substantially impaired.
As Energize RI is due to expire on September 30, 2000, several alternatives
are available to ProvGas to address the expiration of this program including the
possible extension or replication of Energize RI or filing a rate case. On
January 31, 2000, ProvGas filed for a two-month extension of Energize RI to
allow time for the Registrant to discuss its options with the appropriate
parties.
On August 31, 1999, ProvGas' settlement agreement for enhancements to its
Business Choice program was approved by the RIPUC in Docket 2902 and became
effective September 1, 1999. Specifically, there will now be rolling enrollment
for transportation service, which will allow customers to execute transportation
agreements throughout the year, rather than during limited enrollment periods.
The program now has approximately 1,700 firm transportation customers with
annual deliveries of over 5 billion cubic feet per year, which is approximately
25 percent of ProvGas' total annual firm deliveries. There are 14 marketers
serving ProvGas' customers and transporting on the system. Additional
enhancements to the Business Choice program were filed with the RIPUC under a
supplemental settlement agreement in Docket 2902 on October 8, 1999 and were
approved on October 27, 1999. These enhancements do not generate additional
revenue.
Business Opportunities
The Registrant's non-regulated operation continues to increase its
contribution to operating margin by adding customers and sales volume, although
it continues to generate a net loss consistent with the expansion of our oil
businesses. The Registrant intends to continue to grow its residential oil
customer base through future customer acquisitions to build the operational
scale needed to compete effectively in the marketplace. On January 19, 2000,
the Registrant acquired the full service oil business assets of the Woonsocket
Consumers Coal Company (Consumers). Consumers is a full service oil company in
Northern Rhode Island and has approximately 5,000 residential oil customers.
The acquisition is a significant step in the Registrant's strategic plan to
expand its retail oil distribution business and strengthen its position as a
leader in the New England energy industry. Furthermore, the New England gas
utilities continue to unbundle the sale of the gas commodity from the
distribution of that gas, which will also enable future growth.
The Registrant's joint venture to provide electricity, HVAC, and related
services for most of the Providence Place Mall (the Mall) began with the Mall's
August 1999 opening.
Energize RI provides opportunities for ProvGas to expand sales. For example,
high pressure service to Quonset/Davisville Industrial Port & Commerce Park, a
key area for State economic development, provides opportunities for sales growth
as commercial and industrial businesses locate within the park. In addition,
Demand Side Management, an equipment rebate program, provides opportunities to
expand sales to non-traditional applications, such as air conditioning and fuel
cells. ProvGas has redirected its sales and marketing efforts to leverage
Energize RI, as well as other opportunities to promote sales growth within its
service territory.
LIQUIDITY AND CAPITAL RESOURCES
During the current year, the Registrant's cash flow from operating activities
decreased approximately $6.2 million for the quarter ended December 31, 1999
compared to the same period last year. On a comparative basis, the current year
cash flow decreased as a result of an increase in unbilled revenues due to the
time period covered in cycle billing.
I-14
<PAGE>
Capital expenditures for the quarter ended December 31, 1999 of $7.3 million
decreased $1.2 million or 14.2 percent when compared to $8.5 million for the
same period last year. This spending decrease was due primarily to technology
projects, which were completed during fiscal 1999. Capital expenditures for the
remainder of fiscal year 2000 and fiscal year 2001 are expected to be
approximately $49.0 million in total.
During the current quarter, the Registrant's cash flow from financing
activities increased $6.3 million due primarily to a temporary increase in
short-term borrowings, which was used primarily as bridge financing for the
Registrant's investment in the Mall. The Registrant has reached an agreement
with an institutional lender for permanent financing (the Mall Financing) to
replace its bridge financing for the Mall, which is expected to close during the
second quarter of fiscal 2000. The Mall Financing loan provides for a 15-year
non-recourse project financing, secured by the equipment assets of the 6.6
megawatt generating plant located at the Mall. Upon execution of the Mall
Financing agreement, ProvEnergy will receive 50 percent of the loan proceeds
(estimated to be between $11.0 million and $12.5 million) at which time, the
Registrant's equity investment in the Mall project will be approximately $3.0 to
$3.5 million.
YEAR 2000 UPDATE
Year 2000 (Y2K) readiness was a top priority for the Registrant. The
Registrant's company-wide Y2K Project was completed on schedule and all mission
critical systems and devices essential to providing safe, reliable service to
its customers were Y2K ready. The Registrant's operations were not in any way
disrupted by the rollover to January 1, 2000.
The Registrant has capitalized Year 2000 costs for ProvGas and is amortizing
those costs over a five-year amortization period consistent with the regulatory
levels authorized by the RIPUC under the Energize RI program. As of December
31, 1999, the Registrant deferred total Year 2000 costs of approximately $7.7
million and has amortized approximately $.5 million of these costs. In
addition, approximately $.1 million of additional costs, which were expensed in
fiscal 1999, had been incurred by the non-regulated operation.
I-15
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
----------------------------------------------
PART II. OTHER INFORMATION
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
- ------------------------------------------------------------
The annual meeting of shareholders was held on January 20, 2000 and the
following nominees to the Registrant's Board of Directors were elected as
Directors for terms expiring at the time of the 2003 annual meeting by the
following vote:
Mr. James H. Dodge 4,837,975 FOR 77,756 WITHHELD
Mr. Kenneth W. Washburn 4,835,171 FOR 80,560 WITHHELD
Item 6 (a). Exhibits
- --------------------
10a. Employment Agreement dated October 1, 1999 between Gerald A.
Yurkevicz, Vice President, Business Development and Marketing and the
Registrant.
10b. Employment Agreement dated October 1, 1999 between James A. Grasso,
Vice President, Public and Government Affairs and Assistant Secretary and the
Registrant.
10c. Employment Agreement dated October 1, 1999 between James DeMetro,
Executive Vice President and the Registrant.
10d. Employment Agreement dated October 1, 1999 between James H. Dodge,
Chairman, President and Chief Executive Officer and the Registrant.
10e. Employment Agreement dated October 1, 1999 between James M. Stephens,
President and Providence Energy Services, Inc.
10f. Employment Agreement dated October 1, 1999 between Kenneth W. Hogan,
Vice President, Chief Financial Officer, and Treasurer and the Registrant.
10g. Employment Agreement dated October 1, 1999 between Royalynne
Hourihan, Vice President, Human Resources and the Registrant.
10h. Employment Agreement dated October 1, 1999 between Susann G. Mark,
Vice President, General Counsel, and Secretary and the Registrant.
10i. Employment Agreement dated October 1, 1999 between Peter J. Gill,
Vice President, Information Technology and ProvGas. (Filed as exhibit 10a. to
the report of The Providence Gas Company on Form 10-Q for the period ended
December 31, 1999, incorporated herein by this reference.)
10j. Employment Agreement dated October 1, 1999 between Robert W. Owens,
Senior Vice President, Gas Distribution and ProvGas. (Filed as exhibit 10b. to
the report of The Providence Gas Company on Form 10-Q for the period ended
December 31, 1999, incorporated herein by this reference.)
10k. Employment Agreement dated October 1, 1999 between Timothy S. Lyons,
Vice President, Marketing and Regulatory Affairs and ProvGas. (Filed as exhibit
10c. to the report of The Providence Gas Company on Form 10-Q for the period
ended December 31, 1999, incorporated herein by this reference.)
Item 6 (b). Reports on Form 8-K
- -------------------------------
On November 15, 1999, the Registrant filed a report on Form 8-K regarding
the Registrant's Agreement and Plan of Merger with Southern Union Company.
II-1
<PAGE>
PROVIDENCE ENERGY CORPORATION AND SUBSIDIARIES
It is the opinion of management that the financial information contained in this
report reflects all adjustments necessary for a fair statement of results for
the periods reported, but such results are not necessarily indicative of results
to be expected for the year due to the seasonal nature of the Registrant's
operations. All accounting policies and practices have been applied in a manner
consistent with prior periods.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Providence Energy Corporation
(Registrant)
BY: /s/ KENNETH W. HOGAN
-------------------------------------
KENNETH W. HOGAN
Vice President, Chief Financial
Officer, and Treasurer
Dated: February 10, 2000
-----------------
II-2
<PAGE>
Exhibit 10a.
CONTENTS
--------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Term of Employment............................................. 1
Section 2. Position and Responsibilities.................................. 2
Section 3. Standard of Care............................................... 2
Section 4. Compensation................................................... 2
Section 5. Expenses....................................................... 4
Section 6. Employment Terminations other than during the Change in
Control Period................................................. 4
Section 7. Change in Control.............................................. 8
Section 8. Confidentiality................................................ 12
Section 9. Indemnification................................................ 12
Section 10. Outplacement Assistance........................................ 12
Section 11. Assignment..................................................... 12
Section 12. Dispute Resolution and Notice.................................. 13
Section 13. Miscellaneous.................................................. 13
Section 14. Governing Law.................................................. 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and Gerald A. Yurkevicz (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Vice President, Business Development and Marketing of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive
<PAGE>
has a vested right to at that time including, but not limited to, the retirement
benefits described in Paragraph 4.4 herein. However, regardless of the above, if
at any time during the initial period of employment or any successive term, a
Change in Control of the Company (as defined in Section 7 herein) occurs, then
the term of this Agreement shall automatically become the longer of: (a) three
(3) years beyond the month in which the effective date of such Change in Control
occurs; or (b) until all obligations of the Company hereunder have been
fulfilled including without limitation provision of all benefits to be provided
hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Vice
President, Business Development and Marketing of the Company. In his capacity
as Vice President, Business Development and Marketing the Executive shall
maintain the level of duties and responsibilities as in effect as of the
Effective Date, or such higher level of duties and responsibilities as he may be
assigned during the term of this Agreement. The Executive shall have the same
status, privileges, and responsibilities normally inherent in such capacities in
corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $156,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other
<PAGE>
perquisites which are suitable to the character of Executive's position with the
Company and adequate for the performance of his duties hereunder.
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, 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 benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board shall deliver written notice to the Executive of
the Company's intent to
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an
officer of the Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or responsibilities from
those in effect during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is
at least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same
shall be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program
remains substantially consistent with the average level of participation
of other executives who have positions commensurate with the Executive's
position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 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" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of his duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail 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.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make
or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
Gerald A. Yurkevicz
ATTEST PROVIDENCE ENERGY CORPORATION
By:________________ By:___________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10b.
CONTENTS
--------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Term of Employment............................................. 1
Section 2. Position and Responsibilities.................................. 2
Section 3. Standard of Care............................................... 2
Section 4. Compensation................................................... 2
Section 5. Expenses....................................................... 4
Section 6. Employment Terminations other than during the Change in
Control Period................................................. 4
Section 7. Change in Control.............................................. 8
Section 8. Confidentiality................................................ 12
Section 9. Indemnification................................................ 12
Section 10. Outplacement Assistance........................................ 12
Section 11. Assignment..................................................... 12
Section 12. Dispute Resolution and Notice.................................. 13
Section 13. Miscellaneous.................................................. 13
Section 14. Governing Law.................................................. 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1ST day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and James A. Grasso (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Vice President, Public and Government Affairs and Assistant Secretary of the
Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of
<PAGE>
the Company. The Company also shall provide to Executive all benefits to which
the Executive has a vested right to at that time including, but not limited to,
the retirement benefits described in Paragraph 4.4 herein. However, regardless
of the above, if at any time during the initial period of employment or any
successive term, a Change in Control of the Company (as defined in Section 7
herein) occurs, then the term of this Agreement shall automatically become the
longer of: (a) three (3) years beyond the month in which the effective date of
such Change in Control occurs; or (b) until all obligations of the Company
hereunder have been fulfilled including without limitation provision of all
benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Vice
President, Public and Government Affairs and Assistant Secretary of the Company.
In his capacity as Vice President, Public and Government Affairs and Assistant
Secretary, the Executive shall maintain the level of duties and responsibilities
as in effect as of the Effective Date, or such higher level of duties and
responsibilities as he may be assigned during the term of this Agreement. The
Executive shall have the same status, privileges, and responsibilities normally
inherent in such capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $145,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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
<PAGE>
increased, the Base Salary as stated above shall, likewise, be increased for all
purposes of this Agreement.
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
<PAGE>
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, 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 benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have
<PAGE>
the right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of
<PAGE>
the Executive contained in Section 8 (which shall survive such termination), the
Company and the Executive thereafter shall have no further obligations under
this Agreement.
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the
<PAGE>
material breach by the Executive of the terms of this Agreement which is not
cured within thirty (30) days after notice to him of such default.
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer of
the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect during
the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is at
least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall
be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program remains
substantially consistent with the average level of participation of other
executives who have positions commensurate with the Executive's position;
or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
herein.
<PAGE>
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a transaction described in Section 7.2 or within twenty-
four months following the effective date of a Change of Control (the "Change of
Control Period"), then in lieu of all other benefits provided to the Executive
under the provisions of this Agreement, the Company shall pay to the Executive
the following lump sum payments and provide him with the following severance
benefits (hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
<PAGE>
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2 herein), or Retirement (as such
term is then defined in the Company's tax qualified defined benefit
retirement plan; provided that a termination which qualifies as a
Retirement and which would otherwise qualify as a termination for Good
Reason under Section 6.7 herein will be deemed to be a Qualifying
Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
<PAGE>
7.4 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 a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 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" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of his duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail 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.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make
or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
James A. Grasso
ATTEST PROVIDENCE ENERGY CORPORATION
By:_______________________ By:____________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10c.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Term of Employment.............................................. 1
Section 2. Position and Responsibilities................................... 2
Section 3. Standard of Care................................................ 2
Section 4. Compensation.................................................... 2
Section 5. Expenses........................................................ 4
Section 6. Employment Terminations other than
during the Change in Control Period................................... 4
Section 7. Change in Control............................................... 8
Section 8. Confidentiality................................................. 12
Section 9. Indemnification................................................. 12
Section 10. Outplacement Assistance......................................... 12
Section 11. Assignment...................................................... 12
Section 12. Dispute Resolution and Notice................................... 13
Section 13. Miscellaneous................................................... 13
Section 14. Governing Law................................................... 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and James DeMetro (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Executive Vice President of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive has
a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>
Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Executive
Vice President of the Company. In his capacity as Executive Vice President the
Executive shall maintain the level of duties and responsibilities as in effect
as of the Effective Date, or such higher level of duties and responsibilities as
he may be assigned during the term of this Agreement. The Executive shall have
the same status, privileges, and responsibilities normally inherent in such
capacities in corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary shall
not be less than $205,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the Executive
with the opportunity to earn an annual cash incentive compensation payment, at a
level which is in accordance with the provisions of the Performance and Equity
Incentive Plan or any such successor plan, and which is commensurate with the
opportunity typically offered to executives having the same or similar duties
and responsibilities as the Executive at companies similar in size and character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
<PAGE>
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, 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 benefits to which the Executive had a vested right pursuant to this
Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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.
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by the
Company to submit to medical examination at any time during the period of his
employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement 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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an
officer of the Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or responsibilities from
those in effect during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is
at least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same
shall be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program
remains substantially consistent with the average level of participation
of other executives who have positions commensurate with the Executive's
position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount 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) An amount equal to three (3) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for three (3) full years
after the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such
three (3) year period to the extent that during such three (3) year
period, the Executive has available substantially similar benefits from a
subsequent employer, as determined by the Company's Board of Directors or
the Board's designee, in which event the Welfare Benefits provided by the
Company shall be made secondary to those provided by such subsequent
employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive becomes
entitled to Severance Benefits or any other payment or benefit under this
Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service adjusts
the computation of the Company under Section 7.4 herein so that the Executive
did not receive the greatest net benefit, the Company shall reimburse the
Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall pay
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 the benefits under this Section 7 to which the Executive becomes
entitled 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 (including conflicts related to the calculation of parachute
payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 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" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret discoveries,
invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants contained
in this Section 8 shall immediately and automatically relieve the Company of all
further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of his duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail 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.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make or
change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
James DeMetro
ATTEST PROVIDENCE ENERGY CORPORATION
By:_____________________ By:___________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10d.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. Term of Employment............................................ 1
Section 2. Position and Responsibilities................................. 2
Section 3. Standard of Care.............................................. 2
Section 4. Compensation.................................................. 2
Section 5. Expenses...................................................... 4
Section 6. Employment Terminations other than
during the Change in Control Period.................................. 4
Section 7. Change in Control............................................. 8
Section 8. Confidentiality............................................... 12
Section 9. Indemnification............................................... 12
Section 10. Outplacement Assistance....................................... 12
Section 11. Assignment.................................................... 12
Section 12. Dispute Resolution and Notice................................. 13
Section 13. Miscellaneous................................................. 13
Section 14. Governing Law................................................. 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and James H. Dodge (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Chairman, President and Chief Executive Officer of the Company.
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive has
a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>
Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Chairman,
President and Chief Executive Officer of the Company. In his capacity as
Chairman, President and Chief Executive Officer, the Executive shall maintain
the level of duties and responsibilities as in effect as of the Effective Date,
or such higher level of duties and responsibilities as he may be assigned during
the term of this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such capacities in
corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of conduct
in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $335,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
<PAGE>
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, 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 benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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.
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
two times the Executive's annual Base Salary then in effect, and shall continue
to provide the Executive with Welfare Benefits (as defined in Section 7.1(e))
for the twenty-four (24) month period following the effective date of
termination (the "Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period, then the Company shall pay and provide to the
Executive the amounts and the benefits set forth in Section 7 herein; otherwise,
the Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer
of the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is at
least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall
be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program remains
substantially consistent with the average level of participation of other
executives who have positions commensurate with the Executive's position;
or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount 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) An amount equal to three (3) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for three (3) full years
after the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such
three (3) year period to the extent that during such three (3) year
period, the Executive has available substantially similar benefits from a
subsequent employer, as determined by the Company's Board of Directors or
the Board's designee, in which event the Welfare Benefits provided by the
Company shall be made secondary to those provided by such subsequent
employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Exhibit 10e.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Term of Employment............................................ 1
Section 2. Position and Responsibilities................................. 2
Section 3. Standard of Care.............................................. 2
Section 4. Compensation.................................................. 2
Section 5. Expenses...................................................... 4
Section 6. Employment Terminations other than during the Change in
Control Period................................................ 4
Section 7. Change in Control............................................. 8
Section 8. Confidentiality............................................... 12
Section 9. Indemnification............................................... 12
Section 10. Outplacement Assistance....................................... 12
Section 11. Assignment.................................................... 12
Section 12. Dispute Resolution and Notice................................. 13
Section 13. Miscellaneous................................................. 13
Section 14. Governing Law................................................. 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and James M. Stephens (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
President, of Providence Energy Services, Inc., a wholly-owned subsidiary of the
Company ("PES");
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive has
a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>
Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as President of
PES. In his capacity as President, the Executive shall maintain the level of
duties and responsibilities as in effect as of the Effective Date, or such
higher level of duties and responsibilities as he may be assigned during the
term of this Agreement. The Executive shall have the same status, privileges,
and responsibilities normally inherent in such capacities in corporations of
similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of conduct
in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $123,600 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive established annually by the Human Resources and Planning Committee
of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive established
annually by the Human Resources and Planning Committee of the Board of Directors
of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
<PAGE>
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, 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 benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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.
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer
of the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is at
least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall
be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program remains
substantially consistent with the average level of participation of other
executives who have positions commensurate with the Executive's position;
or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide him with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company
shall be deemed to have occurred as of the first day any one or more of the
following conditions shall have been satisfied:
(a) Any individual, corporation (other than PES or the Company), partnership,
trust, association, pool, syndicate, or any other entity or any group of
persons acting in concert becomes the beneficial owner, as that concept is
defined in Rule 13d-3 promulgated by the Securities and Exchange
Commission under the Securities Exchange Act of 1934, of securities of the
Company possessing twenty percent (20%) or more of the voting power for
the election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving PES or the Company or the securities of PES or the
Company in which holders of voting securities of PES immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of PES or the Company (or, if PES or the Company does
not survive such transaction, voting securities of the corporation
surviving such transaction) having less than sixty percent (60%) of the
total voting power in an election of directors of PES or the Company (or
such other surviving corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of PES or the Company (on a consolidated
basis) to a party which is not controlled by or under common control with
PES or the Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive
becomes entitled to Severance Benefits or any other payment or benefit under
this Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 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" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of his duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail 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.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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.
13.7 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 Board or the Board's designee. The Executive may make
or change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
James M. Stephens
ATTEST PROVIDENCE ENERGY CORPORATION
By:___________________ By:___________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10f.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. Term of Employment...................................... 1
Section 2. Position and Responsibilities........................... 2
Section 3. Standard of Care........................................ 2
Section 4. Compensation............................................ 2
Section 5. Expenses................................................ 4
Section 6. Employment Terminations other than
during the Change in Control Period..................... 4
Section 7. Change in Control....................................... 8
Section 8. Confidentiality......................................... 12
Section 9. Indemnification......................................... 12
Section 10. Outplacement Assistance................................ 12
Section 11. Assignment............................................. 12
Section 12. Dispute Resolution and Notice.......................... 13
Section 13. Miscellaneous.......................................... 13
Section 14. Governing Law.......................................... 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and Kenneth W. Hogan (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Vice President, Chief Financial Officer, and Treasurer of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of his Base Salary (at the rate then in
<PAGE>
effect, as provided in Paragraph 4.1 herein) for a period of twelve (12) months,
paid in equal monthly installments in accordance with the normal payroll
practices of the Company. The Company also shall provide to Executive all
benefits to which the Executive has a vested right to at that time including,
but not limited to, the retirement benefits described in Paragraph 4.4 herein.
However, regardless of the above, if at any time during the initial period of
employment or any successive term, a Change in Control of the Company (as
defined in Section 7 herein) occurs, then the term of this Agreement shall
automatically become the longer of: (a) three (3) years beyond the month in
which the effective date of such Change in Control occurs; or (b) until all
obligations of the Company hereunder have been fulfilled including without
limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Vice
President, Chief Financial Officer, and Treasurer of the Company. In his
capacity as Vice President, Chief Financial Officer, and Treasurer the Executive
shall maintain the level of duties and responsibilities as in effect as of the
Effective Date, or such higher level of duties and responsibilities as he may be
assigned during the term of this Agreement. The Executive shall have the same
status, privileges, and responsibilities normally inherent in such capacities in
corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
his full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that he shall:
(a) Devote his full and best efforts to the fulfillment of his employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of conduct
in the performance of his duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require his services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $169,000 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 Company.
<PAGE>
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
<PAGE>
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of his
duties hereunder.
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which he would be entitled during the year in which he
retires, and shall receive all rights and benefits that he is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 6.3 herein, the Company
shall pay to the Executive's
<PAGE>
surviving spouse, or other beneficiary as so designated by the Executive during
his lifetime, or to the Executive's estate, as appropriate, all benefits to
which the Executive had a vested right pursuant to this Agreement.
6.3 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 ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
he would be entitled during the year in which disability occurs and shall
receive all rights and benefits that he is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
his employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that his
Disability will exist for more than such a period of time, shall not constitute
a failure by him to perform his duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
<PAGE>
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote of the entire membership of the Board at a meeting of such Board duly
called and held for that
<PAGE>
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 6.6 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 to which the Executive has a vested right at that time.
Except for the foregoing obligations of the Company and the Executive's
covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of his duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to him of such default.
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer
of the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is at
least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall
be increased from time to time;
(d) 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 7.1), policies,
practices, or
<PAGE>
arrangements in which the Executive participates as of the Effective Date;
provided, however, that reductions in the levels of participation in any
such plans shall not be deemed to be "Good Reason" if the Executive's
reduced level of participation in each such program remains substantially
consistent with the average level of participation of other executives who
have positions commensurate with the Executive's position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a transaction described in Section 7.2 or within twenty-
four months following the effective date of a Change of Control (the "Change of
Control Period"), then in lieu of all other benefits provided to the Executive
under the provisions of this Agreement, the Company shall pay to the Executive
the following lump sum payments and provide him with the following severance
benefits (hereinafter referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
<PAGE>
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2 herein), or Retirement (as such
term is then defined in the Company's tax qualified defined benefit
retirement plan; provided that a termination which qualifies as a
Retirement and which would otherwise qualify as a termination for Good
Reason under Section 6.7 herein will be deemed to be a Qualifying
Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more of the following
conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
<PAGE>
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive becomes
entitled to Severance Benefits or any other payment or benefit under this
Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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 a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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;
<PAGE>
(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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
Section 8. Confidentiality
8.1 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" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
<PAGE>
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of his duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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)
<PAGE>
arbitrators sitting in a location selected by the Executive within fifty (50)
miles from 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail 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.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make or
change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
<PAGE>
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
Kenneth W. Hogan
ATTEST PROVIDENCE ENERGY CORPORATION
By:________________ By:___________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10g.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. Term of Employment...................................... 1
Section 2. Position and Responsibilities........................... 2
Section 3. Standard of Care........................................ 2
Section 4. Compensation............................................ 2
Section 5. Expenses................................................ 4
Section 6. Employment Terminations other than
during the Change in Control Period........................... 4
Section 7. Change in Control....................................... 8
Section 8. Confidentiality......................................... 12
Section 9. Indemnification......................................... 12
Section 10. Outplacement Assistance................................ 12
Section 11. Assignment............................................. 12
Section 12. Dispute Resolution and Notice.......................... 13
Section 13. Miscellaneous.......................................... 13
Section 14. Governing Law.......................................... 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and Royalynne Hourihan (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Vice President, Human Resources of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of her Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company. The
Company also shall provide to Executive all benefits to which the Executive has
a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>
Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Vice
President, Human Resources of the Company. In her capacity as Vice President,
Human Resources the Executive shall maintain the level of duties and
responsibilities as in effect as of the Effective Date, or such higher level of
duties and responsibilities as she may be assigned during the term of this
Agreement. The Executive shall have the same status, privileges, and
responsibilities normally inherent in such capacities in corporations of similar
size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
her full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that she shall:
(a) Devote her full and best efforts to the fulfillment of her employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of her duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require her services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $120,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of her
duties hereunder.
<PAGE>
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing her 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which she would be entitled during the year in which
she retires, and shall receive all rights and benefits that she is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 she is receiving compensation pursuant to Section 6.3 herein, the Company
shall pay to the Executive's surviving spouse, or other beneficiary as so
designated by the Executive during her lifetime, or to the Executive's estate,
as appropriate, all benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 Termination Due to Disability. In the event that the Executive becomes
Disabled during the term of this Agreement and is, therefore, unable to perform
her duties herein for a period of more than ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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.
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
she would be entitled during the year in which disability occurs and shall
receive all rights and benefits that she is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
her employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that her
Disability will exist for more than such a period of time, shall not constitute
a failure by her to perform her duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of her
position 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 her full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 her 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of her duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to her of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an
officer of the Company, or a reduction or alteration in the nature or
status of the Executive's authorities, duties, or responsibilities from
those in effect during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is
at least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same
shall be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program
remains substantially consistent with the average level of participation
of other executives who have positions commensurate with the Executive's
position; or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good
Reason herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide her with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more of the following
conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive becomes
entitled to Severance Benefits or any other payment or benefit under this
Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service
adjusts the computation of the Company under Section 7.4 herein so that the
Executive did not receive the greatest net benefit, the Company shall reimburse
the Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 Confidentiality. During the term of this Agreement and thereafter in
perpetuity, the Executive will not directly or indirectly divulge or appropriate
to her own use, or to the use of any third party, any "trade secrets" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of her duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from the location of her 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address she has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make or
change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
Royalynne Hourihan
ATTEST PROVIDENCE ENERGY CORPORATION
By:________________ By:____________________________________
Corporate Secretary Chairman, President and CEO
<PAGE>
Exhibit 10h.
CONTENTS
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 1. Term of Employment................................ 1
Section 2. Position and Responsibilities..................... 2
Section 3. Standard of Care.................................. 2
Section 4. Compensation...................................... 2
Section 5. Expenses.......................................... 4
Section 6. Employment Terminations other than during the
Change in Control Period.......................... 4
Section 7. Change in Control................................. 8
Section 8. Confidentiality................................... 12
Section 9. Indemnification................................... 12
Section 10. Outplacement Assistance........................... 12
Section 11. Assignment........................................ 12
Section 12. Dispute Resolution and Notice..................... 13
Section 13. Miscellaneous..................................... 13
Section 14. Governing Law..................................... 14
</TABLE>
<PAGE>
Providence Energy Corporation
Amended and Restated Employment Agreement
This AMENDED AND RESTATED EMPLOYMENT AGREEMENT is made, entered into, and is
effective as of this 1/ST/ day of October, 1999 (hereinafter referred to as the
"Effective Date"), by and between Providence Energy Corporation, together with
its subsidiaries and affiliates (hereinafter referred to as the "Company"), a
Rhode Island corporation having its principal offices at Providence Rhode Island
and Susann G. Mark (hereinafter referred to as the "Executive").
WHEREAS, the Executive is presently employed by the Company in the capacity of
Vice President, General Counsel, and Secretary of the Company;
WHEREAS, the Executive possesses considerable experience and an intimate
knowledge of the business and affairs of the Company, 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; and
WHEREAS, the Company is desirous of assuring the continued employment of the
Executive in the above stated capacity, 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. Term of Employment
The Company hereby agrees to employ the Executive, and the Executive hereby
agrees to continue to serve the Company, in accordance with the terms and
conditions set forth herein, for an initial period of three (3) years,
commencing as of the Effective Date of this Agreement, as indicated above;
subject, however, to earlier termination as expressly provided in Section 6
herein.
The initial three (3) year period of employment automatically shall be extended
for additional successive one-year terms thereafter. However, either party may
terminate this Agreement, effective at the end of any term, by giving the other
party written notice of intent not to renew, delivered at least ninety (90)
calendar days prior to the end of such initial period or successive term.
In the event such notice of intent not to renew is properly delivered by the
Company, this Agreement, along with all corresponding rights, duties, and
covenants, shall automatically expire at the end of the initial period or
successive term then in progress, with the exception of the provisions contained
in Section 8 herein (which shall survive such expiration). However, upon
involuntary termination of the Executive by the Company without Cause following
the effective date of the expiration, the Company shall provide to the Executive
a continuation of her Base Salary (at the rate then in effect, as provided in
Paragraph 4.1 herein) for a period of twelve (12) months, paid in equal monthly
installments in accordance with the normal payroll practices of the Company.
The Company also shall provide to Executive all benefits to which the Executive
has a vested right to at that time including, but not limited to, the retirement
benefits described in
<PAGE>
Paragraph 4.4 herein. However, regardless of the above, if at any time during
the initial period of employment or any successive term, a Change in Control of
the Company (as defined in Section 7 herein) occurs, then the term of this
Agreement shall automatically become the longer of: (a) three (3) years beyond
the month in which the effective date of such Change in Control occurs; or (b)
until all obligations of the Company hereunder have been fulfilled including
without limitation provision of all benefits to be provided hereunder.
Section 2. Position and Responsibilities
During the term of this Agreement, the Executive agrees to serve as Vice
President, General Counsel, and Secretary of the Company. In her capacity as
Vice President, General Counsel, and Secretary the Executive shall maintain the
level of duties and responsibilities as in effect as of the Effective Date, or
such higher level of duties and responsibilities as she may be assigned during
the term of this Agreement. The Executive shall have the same status,
privileges, and responsibilities normally inherent in such capacities in
corporations of similar size and character.
Section 3. Standard of Care
During the term of this Agreement, the Executive agrees to devote substantially
her full time, attention, and energies to the Company's business 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. However, subject to
Section 8 herein, the Executive may serve as a director of other companies so
long as such service is not injurious to the Company. The Executive covenants,
warrants, and represents that she shall:
(a) Devote her full and best efforts to the fulfillment of her employment
obligations; and
(b) Exercise the highest degree of loyalty and the highest standards of
conduct in the performance of her duties.
This Section 3 shall not be construed as preventing the Executive from investing
assets in such form or manner as will not require her services in the daily
operations of the affairs of the companies in which such investments are made.
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. 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 or the Board's designee provided, however, that such Base Salary
shall not be less than $140,000 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 Company.
The annual Base Salary shall be reviewed at least annually following the
Effective Date of this Agreement, while this Agreement is in force, 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.
<PAGE>
4.2 Annual Cash Incentive Compensation. The Company shall provide the
Executive with the opportunity to earn an annual cash incentive compensation
payment, at a level which is in accordance with the provisions of the
Performance and Equity Incentive Plan or any such successor plan, and which is
commensurate with the opportunity typically offered to executives having the
same or similar duties and responsibilities as the Executive at companies
similar in size and character to the Company, based upon goals and measures for
the Executive and the Company established annually by the Human Resources and
Planning Committee of the Board of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan
so long as such changes are similarly applicable to all executives generally.
4.3 Long-Term Incentives. The Company shall provide the Executive the
opportunity to earn a long-term incentive award, at a level which is in
accordance with the provisions of the Performance and Equity Incentive Plan or
any such successor plan, and which is commensurate with the opportunity
typically offered to executives having the same or similar duties and
responsibilities as the Executive at companies similar in size and in character
to the Company, based upon goals and measures for the Executive and the Company
established annually by the Human Resources and Planning Committee of the Board
of Directors of the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the Performance and Equity Incentive Plan,
so long as such changes are similarly applicable to all executives generally.
4.4 Retirement Benefits. The Company shall provide to the Executive
participation in all Company qualified defined benefit and defined contribution
retirement plans, subject to the eligibility and participation requirements of
such plans. In addition, the Company shall provide to the Executive
participation in the Supplemental Retirement Plan and all other nonqualified
retirement programs typically offered to executives having the same or similar
duties and responsibilities at the Company.
Nothing in this paragraph shall be construed as obligating the Company to
refrain from changing and/or amending the nonqualified retirement programs, so
long as such changes are similarly applicable to all executives generally.
4.5 Employee Benefits. During the term of this Agreement, and as otherwise
provided within the provisions of each of the respective plans, the Company
shall provide to the Executive all benefits which other executives and employees
of the Company are entitled to receive, as commensurate with the Executive's
position. Such benefits shall include, but not be limited to, group term life
insurance, whole life insurance, comprehensive health and major medical
insurance, dental insurance, vision insurance, and short-term and long-term
disability.
The Executive shall be entitled to paid vacation in accordance with the standard
written policy of the Company with regard to vacations of employees. The
Executive shall likewise participate in any additional benefit as may be
established during the term of this Agreement, by standard written policy of the
Company.
4.6 Perquisites. The Company shall provide to the Executive, at the Company's
cost, all perquisites to which other executives of the Company are entitled to
receive and such other perquisites which are suitable to the character of
Executive's position with the Company and adequate for the performance of her
duties hereunder.
<PAGE>
4.7 Right to Change Plans. By reason of Sections 4.5, and 4.6 herein, the
Company shall not be obligated to institute, maintain, or refrain from changing,
amending, or discontinuing any benefit plan, program, or perquisite, so long as
such changes are similarly applicable to executive employees generally.
4.8 Deferrals. The Company may permit the Executive to defer the Executive's
receipt of the payment of up to one hundred (100%) percent of the cash component
of the Executive's Annual Incentive Compensation. If any such deferral election
is permitted, the Company shall, in its sole discretion, establish rules and
procedures for such payment deferrals.
Section 5. Expenses
The Company shall pay, or reimburse the Executive, for all ordinary and
necessary expenses, in a reasonable amount, which the Executive incurs in
performing her 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 of which the Executive's participation is in
the best interest of the Company.
Section 6. Employment Terminations Other than During the Change of Control
Period
6.1 Termination Due to Retirement. In the event the Executive's employment is
terminated, while this Agreement is in force, by reason of Retirement (as
defined under the then established rules of the Company's tax-qualified
retirement plan), the Executive's benefits shall be determined in accordance
with the Company's retirement, survivor's benefits, insurance, and other
applicable programs of the Company then in effect.
Upon the effective date of such termination, the Company's obligation to pay and
provide to the Executive Base Salary, Annual Cash Incentive Compensation and
Long-Term Incentives (as provided in Sections 4.1, 4.2, and 4.3 , respectively),
shall immediately expire. However, the Executive shall receive a pro rata
portion of the total annual incentive compensation (both cash and long-term),
calculated at target, to which she would be entitled during the year in which
she retires, and shall receive all rights and benefits that she is vested in,
pursuant to other plans and programs of the Company including, but not limited
to, the retirement benefits as described in Section 4.4 herein.
6.2 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 she is receiving compensation pursuant to Section 6.3 herein, the Company
shall pay to the Executive's surviving spouse, or other beneficiary as so
designated by the Executive during her lifetime, or to the Executive's estate,
as appropriate, all benefits to which the Executive had a vested right pursuant
to this Agreement.
6.3 Termination Due to Disability. In the event that the Executive becomes
Disabled during the term of this Agreement and is, therefore, unable to perform
her duties herein for a period of more than ninety (90) calendar days in the
aggregate, during any period of twelve (12) consecutive months, or in the event
of the Board's reasonable expectation that the Executive's Disability will exist
for more than a period of ninety (90) calendar days, the Company shall have the
right to terminate the Executive's active employment as provided in this
Agreement. However, the Board 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.
<PAGE>
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 Base Salary, Annual Incentive Compensation (as
provided in Sections 4.1, 4.2, and 4.3, respectively), shall immediately expire.
However, the Executive shall receive a pro rata portion of the total annual
incentive compensation (both cash and long-term), calculated at target, to which
she would be entitled during the year in which disability occurs and shall
receive all rights and benefits that she is vested in, pursuant to other plans
and programs of the Company, including, but not limited to, short- and long-term
disability benefits, and retirement benefits as described in Section 4.4.
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 Board of Directors of the Company upon
receipt and in reliance on competent medical advice from one or more
individuals, selected by the Board, 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 medical doctors, one of which shall
be selected by the Executive, one of which shall be selected by the Company, and
one of which shall be selected by the two 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. The Executive may be required by
the Company to submit to medical examination at any time during the period of
her employment hereunder, but not more often than quarter-annually, to determine
whether a Disability exists for the purposes of this Agreement.
It is expressly understood that the Disability of the Executive for a period of
ninety (90) calendar days or less in the aggregate during any period of twelve
(12) consecutive months, in the absence of any reasonable expectation that her
Disability will exist for more than such a period of time, shall not constitute
a failure by her to perform her duties hereunder and shall not be deemed a
breach or default and the Executive shall receive full compensation for any such
period of Disability or for any other temporary illness or incapacity during the
term of this Agreement.
6.4 Voluntary Termination by the Executive. The Executive may terminate this
Agreement at any time by giving the Board of Directors 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 automatically
shall become effective upon the expiration of the thirty (30) day notice period.
Such notice shall also constitute the resignation by the Executive of his/her
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 her full Base Salary, at the rate then in effect as provided in
Section 4.1 herein, through the effective date of termination, and shall provide
the Executive with all other benefits to which the Executive has a vested right
at the time in accordance with the provisions of the governing policy, plan or
program. With the exception of the foregoing obligations of the Company and the
covenants of the Executive contained in Section 8 (which shall survive such
termination), the Company and the Executive thereafter shall have no further
obligations under this Agreement.
<PAGE>
6.5 Involuntary Termination by the Company Without Cause. Subject to Section 7
hereof, the Board of Directors may terminate the Executive's employment, as
provided under this Agreement, at any time, for reasons other than death,
Disability, Retirement, or for Cause, 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 gave notice.
Following the effective date of such termination, the Company shall pay to the
Executive the greater of (i) severance benefits payable in accordance with any
severance pay policy of the Company then in effect, or (ii) an amount equal to
the Executive's annual Base Salary then in effect, and shall continue to provide
the Executive with Welfare Benefits (as defined in Section 7.1(e)) for the
twelve (12) month period following the effective date of termination (the
"Severance Period").
Further, the Company shall provide the Executive with all other benefits to
which the Executive has a vested right 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 8 herein (which shall survive such termination), the Company and the
Executive thereafter shall have no further obligations under this Agreement.
Notwithstanding the foregoing, if (i) the Executive's employment is terminated
without Cause (as defined in Section 6.6) or (ii) the Company gives notice of
its intention not to renew this Agreement, in either case during the Change of
Control Period (as defined in Section 7.1) then in lieu of the foregoing
payments and benefits, the Executive shall be entitled to receive (1) the
greater of severance benefits payable in accordance with any severance pay
policy then in effect or the payment provided for in Section 7.1 (a) and (2) the
other payments and benefits provided in Section 7 (which obligations shall
survive expiration or termination of this Agreement).
6.6 Termination For Cause. Nothing in this Agreement shall be construed to
prevent the Board from terminating 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 unanimous
vote 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 6.6 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 her 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 to which the Executive has a vested right at
that time. Except for the foregoing obligations of the Company and the
Executive's covenants under Section 8 (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.
"Cause" shall be determined by the Board in the exercise of good faith and
reasonable judgment; and shall mean the willful misconduct, fraud, conviction of
a felony, consistent gross neglect of duties, or wanton negligence by the
Executive in the performance of her duties hereunder, or the material breach by
the Executive of the terms of this Agreement which is not cured within thirty
(30) days after notice to her of such default.
<PAGE>
6.7 Termination for Good Reason. The Executive may terminate this Agreement
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 such notice of termination for Good Reason is given during the
Change of Control Period then the Company shall pay and provide to the Executive
the amounts and the benefits set forth in Section 7 herein; otherwise, the
Company shall pay and provide to the Executive the amounts and benefits set
forth in Section 6.5 hereof.
Good Reason shall mean, without the Executive's express written consent, the
occurrence of any one or more of the following:
(a) The assignment of the Executive to duties materially inconsistent with the
Executive's authorities, duties, responsibilities, and status as an officer
of the Company, or a reduction or alteration in the nature or status of the
Executive's authorities, duties, or responsibilities from those in effect
during the immediately preceding fiscal year;
(b) The Company's requiring the Executive to be based at a location which is at
least fifty (50) miles further from the Executive's current primary
residence than is such residence from the Company's current headquarters,
except for required travel on the Company's business to an extent
substantially consistent with the Executive's business obligations as of
the Effective Date;
(c) A reduction by the Company in the Executive's Base Salary as in effect on
the Effective Date, as provided in Section 4.1 herein, or as the same shall
be increased from time to time;
(d) 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 7.1), policies,
practices, or arrangements in which the Executive participates as of the
Effective Date; provided, however, that reductions in the levels of
participation in any such plans shall not be deemed to be "Good Reason" if
the Executive's reduced level of participation in each such program remains
substantially consistent with the average level of participation of other
executives who have positions commensurate with the Executive's position;
or
(e) The failure of the Company to obtain a satisfactory agreement from any
successor to the Company to assume and agree to perform this Agreement, as
contemplated in Section 11.1 herein, or the failure by any successor to
renew this Agreement or to offer the Executive a new employment agreement
comparable to this Agreement containing substantially the same terms and
conditions.
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.
The Executive's continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstance constituting Good Reason
herein.
Section 7. Change in Control
7.1 Employment Terminations in Connection with a Change in Control. In the
event of a Qualifying Termination (as defined below) following execution of an
agreement relating to a
<PAGE>
transaction described in Section 7.2 or within twenty-four months following the
effective date of a Change of Control (the "Change of Control Period"), then in
lieu of all other benefits provided to the Executive under the provisions of
this Agreement, the Company shall pay to the Executive the following lump sum
payments and provide her with the following severance benefits (hereinafter
referred to as the "Severance Benefits"):
(a) An amount equal to two (2) 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) An amount equal to two (2) times the Executive's target incentive award
(both cash, restricted stock and long-term) established for the fiscal
year in which the Executive's effective date of termination occurs; in
addition, any restricted stock outstanding on the effective date of
termination shall be deemed fully vested and exercisable, and shall be
redeemed by the Company for an amount equal to the fair market value
(determined without regard to any restrictions) of such restricted stock;
(c) An amount equal to the Executive's unpaid Base Salary and accrued vacation
pay through the effective date of termination;
(d) An amount equal to the Executive's unpaid targeted annual bonus,
established for the plan year in which the Executive's effective date of
termination occurs, 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);
(e) A continuation of the welfare benefits then in effect, including without
limitation medical insurance, dental insurance, and group term life and
disability insurance (the "Welfare Benefits") for two (2) full years after
the effective date of termination; 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 Welfare 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. However, in the event the premium cost and/or level of
coverage shall change for all executive employees of the Company, the cost
and/or coverage level, likewise, shall change for the Executive in a
corresponding manner.
The continuation of the Welfare Benefits shall be modified during such two
(2) year period to the extent that during such two (2) year period, the
Executive has available substantially similar benefits from a subsequent
employer, as determined by the Company's Board of Directors or the Board's
designee, in which event the Welfare Benefits provided by the Company
shall be made secondary to those provided by such subsequent employer.
(f) A lump-sum cash payment of the actuarial present value equivalent of the
aggregate benefits accrued by the Executive as of the effective date of
termination under the terms of any and all supplemental retirement plans
in which the Executive participates. For purposes of determining "final
average pay" under such programs, the Executive's total annual
compensation as of the effective date of termination shall be used.
For purposes of this Section 7, a Qualifying Termination shall mean any
termination of the Executive's employment other than: (1) by the Company
for Cause (as provided in Section 6.6 herein); (2) by reason of death,
Disability (as provided in Section 6.2
<PAGE>
herein), or Retirement (as such term is then defined in the Company's tax
qualified defined benefit retirement plan; provided that a termination
which qualifies as a Retirement and which would otherwise qualify as a
termination for Good Reason under Section 6.7 herein will be deemed to be
a Qualifying Termination).
7.2 Definition of "Change in Control." A Change in Control of the Company shall
be deemed to have occurred as of the first day any one or more of the following
conditions shall have been satisfied:
(a) Any individual, corporation (other than the Company), partnership, trust,
association, pool, syndicate, or any other entity or any group of persons
acting in concert becomes the beneficial owner, as that concept is defined
in Rule 13d-3 promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, of securities of the Company
possessing twenty percent (20%) or more of the voting power for the
election of directors of the Company;
(b) There shall be consummated any consolidation, merger, or other business
combination involving the Company or the securities of the Company in
which holders of voting securities of the Company immediately prior to
such consummation own, as a group, immediately after such consummation,
voting securities of the Company (or, if the Company does not survive such
transaction, voting securities of the corporation surviving such
transaction) having less than sixty percent (60%) of the total voting
power in an election of directors of the Company (or such other surviving
corporation);
(c) During any period of two (2) consecutive years, individuals who at the
beginning of such period constitute the directors of the Company cease for
any reason to constitute at least a majority thereof unless the election,
or the nomination for election by the Company's shareholders, of each new
director of the Company was approved by a vote of at least two-thirds
(2/3) of the directors of the Company then still in office who were
directors of the Company at the beginning of any such period; or
(d) There shall be consummated any sale, lease, exchange, or other transfer
(in one transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company (on a consolidated basis)
to a party which is not controlled by or under common control with the
Company.
7.3 Excise Tax Equalization Payment. In the event that the Executive becomes
entitled to Severance Benefits or any other payment or benefit under this
Agreement, or under any other agreement with or plan of the Company (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 upon
the Gross-Up Payment provided for by this Section 7.3 (including FICA and FUTA),
shall be equal to the Total Payments. Such payment shall be made by the Company
to the Executive as soon as practical following the effective date of
termination, but in no event beyond thirty (30) days from such date.
7.4 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:
<PAGE>
(a) Any other payments or benefits received or to be received by the Executive
in connection with a Change in Control of the Company or 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 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) whose actions result in a Change in Control of the Company
or any person 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 as supported by the Company's independent
auditors and acceptable to the Executive, 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 total 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.
7.5 Subsequent Recalculation. In the event the Internal Revenue Service adjusts
the computation of the Company under Section 7.4 herein so that the Executive
did not receive the greatest net benefit, the Company shall reimburse the
Executive for the full amount necessary to make the Executive whole, plus a
market rate of interest, as determined by the Human Resources and Planning
Committee.
7.6 Payment of Legal Fees. To the extent permitted by law, the Company shall
pay 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 the benefits under this Section 7 to which the Executive
becomes entitled 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 (including conflicts related to the calculation of
parachute payments) between the parties pertaining to this Agreement.
<PAGE>
Section 8. Confidentiality
8.1 Confidentiality. During the term of this Agreement and thereafter in
perpetuity, the Executive will not directly or indirectly divulge or appropriate
to her own use, or to the use of any third party, any "trade secrets" (as
defined in Section 8.2), other secret or confidential information, knowledge or
financial information 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.
8.2 Trade Secrets. "Trade Secrets" as used herein means all secret
discoveries, invention, 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.
8.3 Breach by Executive. The breach by the Executive of the covenants
contained in this Section 8 shall immediately and automatically relieve the
Company of all further obligations under Section 6 or Section 7.
Section 9. Indemnification
The Company hereby covenants and agrees 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
good faith performance of her duties and obligations under the terms of this
Agreement.
Section 10. Outplacement Assistance
Following a termination of the Executive's employment as described in Sections
6.5, 6.7, or 7.1 herein, the Executive shall be reimbursed by the Company for
the costs of all outplacement services obtained by the Executive within one (1)
year following a termination pursuant to Section 6.5 and two (2) years following
a termination pursuant to Section 6.7 or 7.1; 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 11. Assignment
11.1 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 of the Company. 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
<PAGE>
would be entitled in the event of a termination for Good Reason by the
Executive, as provided in Section 6.7 herein.
Except as herein provided, this Agreement may not otherwise be assigned by the
Company.
11.2 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 12. Dispute Resolution and Notice
12.1 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 from the location of her 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 by the Company.
12.2 Notice. Any notices, requests, demands, or other communications provided
for by this Agreement shall be sufficient if in writing and if sent by
registered or certified mail to the Executive at the last address she has filed
in writing with the Company or, in the case of the Company, at its principal
offices.
Section 13. Miscellaneous
13.1 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.
13.2 Entire Agreement. This Agreement supersedes any prior agreements or
understandings, oral or written, between the parties hereto or between the
Executive and the Company, with respect to the subject matter hereof and
constitutes the entire Agreement of the parties with respect thereto.
13.3 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.
13.4 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.
13.5 Counterparts. This Agreement may be executed in one 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.
<PAGE>
13.6 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 govern-mental regulation or ruling.
13.7 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 Board or the Board's designee. The Executive may make or
change such designation at any time.
Section 14. Governing Law
To the extent not preempted by federal law, the provisions of this Agreement
shall be construed and enforced in accordance with the substantive laws of the
state of Rhode Island.
IN WITNESS WHEREOF, the Executive and the Company (pursuant to a resolution
adopted at a duly constituted meeting of its Board of Directors) have executed
this Agreement, as of the day and year first above written.
EXECUTIVE:
______________________________________
Susann G. Mark
ATTEST PROVIDENCE ENERGY CORPORATION
By:___________________ By:____________________________________
Corporate Secretary Chairman, President and CEO
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