EMPLOYMENT AGREEMENT
EXHIBIT 10(i)
AGREEMENT,
dated as of the 28th day of August, 2008, between Southern Union Company, a
Delaware corporation (the “Company”), and Xxxxxx X.
Xxxxxxxx (the “Executive”).
WHEREAS,
the Executive is willing to serve the Company, and the Company is willing to
employ the Executive, on the terms and conditions set forth below;
NOW,
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Employment
Period. The Company hereby agrees to employ the Executive, and
the Executive hereby agrees to work in the employ of the Company, subject to the
terms and conditions of this Agreement, for the period commencing on the date
hereof (the “Effective
Date”) and ending on the third anniversary of the Effective Date (the
“Employment
Period”). Commencing on the second anniversary of the
Effective Date and on each anniversary thereafter, the Employment Period shall
be automatically extended for one year terms unless either the Company or the
Executive shall give the other party not less than ninety (90) days’ prior
written notice of the intention to not extend this Agreement (a “Non-Renewal
Notice”).
2. Terms
of Employment.
(a) Position
and Duties.
(i) During
the Employment Period, the Executive shall serve as Senior Vice President and
General Counsel of the Company with the appropriate authority, duties and
responsibilities attendant to such position and any other duties that may be
assigned by the Company’s Board of Directors (the “Board”).
(ii) During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote substantially
all of his business attention and time to the business and affairs of the
Company and to use the Executive’s reasonable best efforts to perform such
responsibilities. During the Employment Period it shall not be a
violation of this Agreement for the Executive to (A) serve on civic or
charitable boards or committees, (B) serve, with the prior approval of the
Board, on corporate boards or committees, (C) deliver lectures, fulfill
speaking engagements and (D) manage personal investments, so long as such
activities do not interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this
Agreement, provided that the Executive may continue to maintain and participate
in any business venture approved by the Board prior to the date
hereof.
(b) Compensation.
(i) Annual Base
Salary. During the Employment Period, the Executive shall
receive an annual base salary (“Annual Base Salary”) of at
least $450,000.00. Annual Base Salary shall not be reduced at any
time (including after any such increase), and the term Annual Base Salary as
utilized in this Agreement shall refer to Annual Base Salary as so
increased.
(ii) Annual
Bonus. During the Employment Period, the Executive shall be
eligible to receive an annual cash bonus (“Annual Bonus”) with a target
level of not less than 50 percent of Annual Base Salary, or such greater amount
as determined by the Compensation Committee of the Board (the “Compensation Committee”)
payable in accordance with the procedures specified by the Compensation
Committee.
(iii) Equity
Compensation. During the Employment Period, the Executive
shall receive Company equity compensation awards that are at least commensurate
with the Executive’s 2007 equity compensation awards (provided that the amount
of awards may be decreased as long as the percentage decrease is consistent with
the decrease for other officers of the Company and the type and terms of awards
may be changed as long as the change is consistent with the change for other
officers of the Company).
(c) Benefits. During
the Employment Period, except as otherwise expressly provided herein, the
Executive shall be entitled to participate in all employee benefit and other
plans, practices, policies and programs and fringe benefits on a basis no less
favorable than that provided to other similarly situated senior officers of the
Company.
3. Termination
of Employment.
(a) Death
or Disability. The
Executive’s employment shall terminate automatically upon the Executive’s death
during the Employment Period. If the Company determines in good faith
that the Disability of the Executive has occurred during the Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 10(b) of its intention
to terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate effective on the
30th day after receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall
not have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “Disability” shall have the
meaning ascribed under the Company’s long term disability plan.
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(b) Cause.
The
Company may terminate the Executive’s employment during the Employment Period
with or without Cause. For purposes of this Agreement, “Cause” shall
mean:
(i) the
willful and continued failure of the Executive to perform substantially his
duties with the Company (other than any such failure resulting from the
Executive’s incapacity due to physical or mental illness or any such failure
subsequent to the Executive being delivered a notice of termination without
Cause by the Company or delivering a notice of termination for Good Reason to
the Company) after a written demand for substantial performance is delivered to
the Executive by or on behalf of the Board which specifically identifies the
manner in which the Board believes that the Executive has not substantially
performed his duties;
(ii) the
willful engaging by the Executive in illegal conduct or gross misconduct which
is demonstrably and materially injurious to the Company or its affiliates;
or
(iii) the
conviction of a felony by the Executive.
For
purposes of this provision, no act or failure to act by the Executive shall be
considered “willful” unless done or omitted to be done by the Executive in bad
faith and without reasonable belief that the Executive’s action or omission was
in the best interests of the Company or its affiliates. Any act, or
failure to act, in accordance with authority duly given by the Board, based upon
the advice of counsel for the Company (including counsel employed by the
Company) shall be conclusively presumed to be done, or omitted to be done, by
the Executive in good faith and in the best interests of the
Company. Cause shall not exist unless and until the Company has
delivered to the Executive a copy of a resolution duly adopted by three-quarters
of the entire Board (excluding the Executive from both the numerator and
denominator if the Executive is a Board member) at a meeting of the Board called
and held for such purpose (after reasonable notice to the Executive and an
opportunity for the Executive, together with counsel, to be heard before the
Board), that an event set forth in clause (i), (ii) or (iii) has occurred
and specifying the particulars thereof in detail. If the Company does
not deliver to the Executive a Notice of Termination (as defined in Section
3(d)) within ninety (90) days after the Chairman of the Board (or, if the
Executive is the Chairman, the head of the Compensation Committee) has knowledge
that an event constituting Cause has occurred, the event will no longer
constitute Cause.
(c) Good
Reason. The
Executive’s employment may be terminated by the Executive with or without Good
Reason. For purposes of this Agreement, “Good Reason” means the
occurrence of one or more of the following circumstances, without the
Executive’s express written consent, and which circumstance(s) are not remedied
by the Company within thirty (30) days of receipt of a written notice from the
Executive describing in reasonable detail the Good Reason event that has
occurred (which notice must be provided within ninety (90) days of the
Executive’s obtaining knowledge of the event), provided that the Executive must
terminate employment within the two (2) years following the Executive’s
obtaining knowledge of the event:
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(i) any
material change in the duties, responsibilities or authority (including
reporting responsibilities) of the Executive that is inconsistent in any
material and adverse respect with the Executive’s position(s), duties,
responsibilities or status with the Company on the date hereof or as may be
increased from time to time in connection with promotions (including any
material and adverse diminution of such duties or
responsibilities);
(ii) any
material and adverse change in the Executive’s titles or offices (including, if
applicable, membership on the Board) with the Company;
(iii) a more
than 10% reduction by the Company in the Executive’s Annual Base
Salary;
(iv) a more
than 10% reduction by the Company in the Executive’s Annual Bonus opportunity
(including any material and adverse change in the formula for such
bonus);
(v) any
requirement of the Company that the Executive (A) be based anywhere more than
fifty (50) miles from the office where the Executive is located on the date
hereof or (B) travel on Company business to an extent substantially greater than
the travel obligations of the Executive on the date hereof;
(vi) the
failure of the Company to obtain the assumption of the Company’s obligations
hereunder from any successor as contemplated in Section 8(c);
or
(vii) any
material breach by the Company of any other material term of this
Agreement.
The
Executive’s right to terminate employment for Good Reason shall not be affected
by the Executive’s incapacities due to mental or physical illness and the
Executive’s continued employment shall not constitute consent to, or a waiver of
rights with respect to, any event or condition constituting Good Reason (except
as provided in the lead in to the definition of Good Reason).
(d) Notice
of Termination. Any
termination by the Company or by the Executive shall be communicated by Notice
of Termination to the other party hereto given in accordance with
Section 10(b). For purposes of this Agreement, a “Notice of Termination” means
a written notice which (i) indicates the specific termination provision in
this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date
of receipt of such notice, specifies the Date of Termination.
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(e) Date
of Termination. “Date of Termination” means
(i) if the Executive’s employment is terminated by the Company other than
for Disability, the date of receipt of the Notice of Termination or any later
date specified therein within thirty (30) days of such notice, (ii) if the
Executive’s employment is terminated by the Executive, thirty (30) days after
receipt of the Notice of Termination (provided, that, the Company may accelerate
the Date of Termination to an earlier date by providing the Executive with
notice of such action, or, alternatively, the Company may place the Executive on
paid leave during such period) and (iii) if the Executive’s employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.
4. Obligations
of the Company upon Termination.
(a) Other
than for Cause; For Good Reason. If,
during the Employment Period, the Company shall terminate the Executive’s
employment other than for Cause or Disability, or the Executive shall terminate
employment for Good Reason, the Company shall have no further obligations to the
Executive other than to provide the Executive:
(i) a
lump-sum cash payment equal to the result of multiplying (i) the sum of
(A) the Executive’s Annual Base Salary, plus (B) the higher of (i)
Executive’s target Annual Bonus for the year in which the Date of Termination
occurs or (ii) the average Annual Bonus paid to the Executive by the Company (or
its affiliates), including any portion of the annual bonus deferred into a
deferred compensation plan, during the last three (3) completed fiscal years of
the Company (or such shorter period of time during which the Executive was
employed by the Company) immediately preceding the Date of Termination
(annualized in the event that the Executive was not employed by the Company (or
its affiliates) for the whole of any such fiscal year) by (ii) two
(2);
(ii) a
lump-sum cash payment equal to the Executive’s Annual Base Salary through the
Date of Termination and the Executive’s Annual Bonus amounts for completed
fiscal years, to the extent not theretofore paid or deferred;
(iii) a
lump-sum cash payment equal to the Executive’s Annual Bonus for the full fiscal
year in which the Date of Termination occurs based on the Company’s actual
performance in such year, as determined by the Committee, (except that in the
event such termination occurs following a Change in Control, the Executive’s
target Annual Bonus for the fiscal year in which the Date of Termination occurs
shall be used instead) multiplied by a fraction the numerator of which shall be
the number of days the Executive was employed by the Company during the fiscal
year in which the Date of Termination occurred and the denominator of which is
365;
(iv) a
lump-sum cash payment equal to the after-tax value (based on the highest Federal
and State tax rates) of the Company-provided annual health care for the
Executive and/or the Executive’s family at the Date of Termination, multiplied
by two (2);
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(v) for a
period of one (1) year following the Date of Termination, the Company shall
make coaching and/or outplacement services available to the Executive, provided
that the total cost of such coaching and/or outplacement services for the
Executive shall not exceed $20,000; and
(vi) to the
extent not theretofore paid or provided, any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or other contract or agreement of the Company
and its affiliated companies through the Date of Termination (such other amounts
and benefits shall be hereinafter referred to as the “Other
Benefits”).
(b) Death;
Disability. If, during the
Employment Period, the Executive’s employment shall terminate on account of
death or Disability, the Company shall have no further obligations to the
Executive other than to provide the Executive (or his estate) (i) the
Annual Base Salary through the Date of Termination and the Executive’s Annual
Bonus amounts for completed fiscal years, to the extent theretofore unpaid and
(ii) the Other Benefits. Notwithstanding the preceding sentence,
the death of the Executive after Notice of Termination for Good Reason or
without Cause has been validly provided shall be treated as a termination under
Section 4(a) and not under this Section 4(b).
(c) For
Cause; Other than For Good Reason. If,
during the Employment Period, the Company shall terminate the Executive’s
employment for Cause or the Executive terminates his employment without Good
Reason, the Company shall have no further obligations to the Executive other
than the obligation to pay to the Executive (i) the Annual Base Salary
through the Date of Termination to the extent theretofore unpaid and
(ii) the Other Benefits.
(d) Other
than for Cause or for Good Reason following a Change in Control. If,
during the Employment Period, the Company shall terminate the Executive’s
employment other than for Cause or Disability or the Executive shall terminate
employment for Good Reason and, in either case, such termination occurs
(i) within 24 months after a Change in
Control of the Company (as defined below) or (ii) prior to and in
anticipation of a Change in Control at the request of a third party who had
indicated an intention to consummate a Change in Control and such Change in
Control does occur, in addition to the benefits and payments specified in
Section 4(a), the Company shall provide the Executive with full vesting of
all the Executive’s outstanding equity-based compensation awards (including
stock options, restricted stock, stock appreciation rights and cash restricted
units) granted under the Company’s stock and incentive plans, as in effect from
time to time (for the avoidance of doubt, the vesting provided in this Section
4(d) shall be in addition to, and not in lieu of, the change in control vesting
provided under the Company’s stock and incentive plans or award agreements
issued thereunder). “Change in Control” means the
occurrence of any one of the following events:
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(i) individuals
who, on the effective date of the Agreement, constitute the Board (the “Incumbent Directors”) cease
for any reason to constitute at least a majority of the Board, provided that any
person becoming a director subsequent to the effective date of the Agreement
whose election or nomination for election was approved by a vote of at least
two-thirds of the Incumbent Directors then on the Board (either by a specific
vote or by approval of the proxy statement of the Company in which such person
is named as a nominee for director, without written objection to such
nomination) shall be an Incumbent Director; provided, however, that no
individual initially elected or nominated as a director of the Company as a
result of an actual or threatened election contest with respect to directors or
as a result of any other actual or threatened solicitation of proxies or
consents by or on behalf of any person other than the Board shall be deemed to
be an Incumbent Director;
(ii) any
“person” (as such term is defined in Section 3(a)(9) of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) and as used in
Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote generally in the election of directors (the “Company Voting Securities”);
provided, however, that the event described in this paragraph (ii) shall
not be deemed to be a Change in Control by virtue of any of the following
acquisitions: (A) by the Company or any Subsidiary, (B) by
any employee benefit plan (or related trust) sponsored or maintained by the
Company or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a
Non-Qualifying Transaction (as defined in paragraph (iii)),
(E) pursuant to any acquisition by the Executive or any group of persons
including the Executive (or any entity controlled by the Executive or any group
of persons including the Executive) or (F) by Xxxxxx X. Xxxxxxxxx, his spouse,
descendants and trusts for their benefit and any person that is and remains a
controlled affiliate of Xxxxxx X. Xxxxxxxxx or his spouse (individually and
collectively, the “Xxxxxxxxx
Family”);
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(iii) the
consummation of a merger, consolidation, statutory share exchange,
reorganization, sale of all or substantially all the Company’s assets or similar
form of corporate transaction involving the Company or any of its Subsidiaries
that requires the approval of the Company’s stockholders, whether for such
transaction or the issuance of securities in the transaction (a “Business Combination”),
unless immediately following such Business Combination: (A) over
50% of the total voting power of (x) the corporation resulting from such
Business Combination (the “Surviving Corporation”), or
(y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of at least 95% of the voting securities
eligible to elect directors of the Surviving Corporation (the “Parent Corporation”), is
represented by Company Voting Securities that were outstanding immediately prior
to such Business Combination (or, if applicable, is represented by shares into
which such Company Voting Securities were converted pursuant to such Business
Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan (or
related trust) sponsored or maintained by the Surviving Corporation or the
Parent Corporation or the Xxxxxxxxx Family), is or becomes the beneficial owner,
directly or indirectly, of 20% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving Corporation)
and (C) at least a majority of the members of the board of directors of the
Parent Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) following the consummation of the Business Combination were
Incumbent Directors at the time of the Board’s approval of the execution of the
initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (A), (B) and (C)
above shall be deemed to be a “Non-Qualifying Transaction”
and any Business Combination which does not satisfy all of the criteria
specified in (A), (B) and (C) shall be deemed a “Qualifying Transaction”);
or
(iv) the
stockholders of the Company approve a plan of complete liquidation or
dissolution of the Company.
Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
any person acquires beneficial ownership of more than 20% of the Company Voting
Securities as a result of the acquisition of Company Voting Securities by the
Company or its affiliates which reduces the number of Company Voting Securities
outstanding; provided, that if after the consummation of such acquisition by the
Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting
Securities beneficially owned by such person, a Change in Control of the Company
shall then occur. For purposes of this Change in Control definition,
“corporation” shall include any limited liability company, partnership,
association, business trust and similar organization, “board of directors” shall
refer to the ultimate governing body of such organization and “director” shall
refer to any member of such governing body.
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(e) Release
Condition. The
Company shall not be required to make the payments and provide the benefits
specified in Section 4(a) unless the Executive executes and delivers to the
Company an agreement releasing the Company, its affiliates and its officers,
directors and employees from all liability (other than the payments and benefits
under this Agreement) in the form attached hereto as Exhibit A (the “Release”). The
Release shall be provided to the Executive no later than two (2) days after the
Date of Termination, must be executed by the Executive and become effective and
not be revoked by the Executive by the 55th day
following the Date of Termination.
(f) Time of
Payment. Subject to the Release becoming effective as provided
in Section 4(e), the payments in Sections 4(a)(i) and (iv) shall be paid
within sixty (60) days of the Date of Termination and the payment in
Section 4(a)(iii) shall be paid by March 15 of the year after the year
in which the Date of Termination occurs. The payments and benefits in
Sections 4(a)(ii), 4(b)(i), 4(c)(i) and 4(d) shall be paid within twenty (20)
days of the Date of Termination, provided, however, that any Annual Bonus amount
for prior completed years shall be paid by March 15 of the year in which
the Date of Termination occurs.
5. Full
Settlement. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action which the Company may have against the
Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this Agreement
and such amounts shall not be reduced whether or not the Executive obtains other
employment.
6. Certain
Additional Payments by the Company.
(a) Gross-Up. Anything
in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment, award, benefit or distribution (or any acceleration
of any payment, award, benefit or distribution) by the Company (or any of its
affiliated entities) or any entity which effectuates a Change in Control (or any
of its affiliated entities) to or for the benefit of the Executive (whether
pursuant to the terms of this Agreement or otherwise, but determined without
regard to any additional payments required under this Section 6) (the “Payments”) would be subject
to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986,
as amended (the “Code”), or any interest or
penalties are incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are hereinafter
collectively referred to as the “Excise Tax”), then the
Company shall promptly pay to the Executive an additional payment (a “Reimbursement Payment”) in an
amount such that after payment by the Executive of all taxes (including any
Excise Tax) imposed upon the Reimbursement Payment, the Executive retains an
amount of the Reimbursement Payment equal to the Excise Tax imposed upon the
Payments. For purposes of determining the amount of the Reimbursement
Payment, the Executive shall be deemed to (i) pay federal income taxes at
the highest marginal rates of federal income taxation for the calendar year in
which the Reimbursement Payment is to be made and (ii) pay applicable state
and local income taxes at the highest marginal rate of taxation for the calendar
year in which the Reimbursement Payment is to be made, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such
state and local taxes.
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Notwithstanding
the foregoing, if it shall be determined that the Executive is entitled to a
Reimbursement Payment, but that the Payments would not be subject to the Excise
Tax if the Payments were reduced by an amount that is no more than 10% of the
portion of the Payments that would be treated as “parachute payments” under
Section 280G of the Code, then the amounts payable to the Executive under
this Agreement shall be reduced (but not below zero) to the maximum amount that
could be paid to the Executive without giving rise to the Excise Tax (the “Safe Harbor Cap”), and no
Reimbursement Payment shall be made to the Executive. The reduction
of the amounts payable hereunder, if applicable, shall be made by reducing first
the benefits under Section 4(a)(v), then reducing the cash payments under
Section 4(a)(i), 4(a)(ii), 4(a)(iii) and 4(a)(iv), and then reducing the
accelerated vesting under Section 4(d) (first by not vesting equity awards that
are not Section 409A “deferred compensation” and then by not vesting equity
awards that are Section 409A “deferred compensation”). For purposes
of reducing the Payments to the Safe Harbor Cap, only amounts payable under this
Agreement (and no other Payments) shall be reduced. If the reduction
of the amounts payable hereunder would not result in a reduction of the Payments
to the Safe Harbor Cap, no amounts payable under this Agreement shall be reduced
pursuant to this provision.
(b) Determination. Subject
to the provisions of Section 6(a), all determinations required to be made under
this Section 6, including whether and when a Reimbursement Payment is required,
the amount of such Reimbursement Payment, the amount of any Option
Redetermination (as defined below), the reduction of the Payments to the Safe
Harbor Cap and the assumptions to be utilized in arriving at such
determinations, shall be made by a public accounting firm that is retained by
the Company as of the date immediately prior to the Change in Control (the
“Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days of the receipt of notice from
the Company or the Executive that there has been a Payment, or such earlier time
as is requested by the Company (collectively, the “Determination”). For
the avoidance of doubt, the Accounting Firm may use the Option Redetermination
amount in determining the reduction of the Payments to the Safe Harbor
Cap. Notwithstanding the foregoing, in the event that the Board shall
determine prior to the Change in Control that (i) the Accounting Firm is
precluded from performing such services under applicable auditor independence
rules or (ii) the Audit Committee of the Board determines that it does not
want the Accounting Firm to perform such services because of auditor
independence concerns or (iii) the Accounting Firm is serving as accountant
or auditor for the person(s) effecting the Change in Control, the Board shall
appoint another nationally recognized public accounting firm to make the
determinations required hereunder (which accounting firm shall then be referred
to as the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company, and the Company shall
enter into any agreement reasonably requested by the Accounting Firm in
connection with the performance of the services hereunder. The
Reimbursement Payment under this Section 6 with respect to any Payments shall be
made no later than thirty (30) days following such Payment. If
the Accounting Firm determines that no Excise Tax is payable by a Executive, it
shall furnish the Executive with a written opinion to such effect, and to the
effect that failure to report the Excise Tax, if any, on the Executive’s
applicable federal income tax return will not result in the imposition of a
negligence or similar penalty. In the event that the Accounting Firm
determines that the Payments shall be reduced to the Safe Harbor Cap, it shall
furnish the Executive with a written opinion to such effect. The
Determination by the Accounting Firm shall be binding upon the Company and the
Executive.
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As a
result of the uncertainty in the application of Section 4999 of the Code at the
time of the Determination, it is possible that Reimbursement Payments which will
not have been made by the Company should have been made (“Underpayment”) or
Reimbursement Payments are made by the Company which should not have been made
(“Overpayment”),
consistent with the calculations required to be made hereunder. In
the event that the amount of the Reimbursement Payment is less than the amount
necessary to reimburse the Executive for the Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment (together with interest at the rate provided in Section
1274(b)(2)(B) of the Code) shall be promptly paid by the Company to or for the
benefit of the Executive. In the event that the amount of the
Reimbursement Payment exceeds the amount necessary to reimburse the Executive
for the Excise Tax, the Accounting Firm shall determine the amount of the
Overpayment that has been made and any such Overpayment (together with interest
at the rate provided in Section 1274(b)(2) of the Code) shall be promptly paid
by the Executive (to the extent the Executive has received a refund if the
applicable Excise Tax has been paid to the Internal Revenue Service) to or for
the benefit of the Company. The Executive shall cooperate, to the
extent his or her expenses are reimbursed by the Company, with any reasonable
requests by the Company in connection with any contests or disputes with the
Internal Revenue Service in connection with the Excise Tax. In the
event that the Company makes a Reimbursement Payment to the Executive and
subsequently the Company determines that the value of any accelerated vesting of
stock options held by the Executive shall be redetermined within the context of
Treasury Regulations Section 1.280G-1 Q/A 33 (the “Option Redetermination”), the
Executive shall file with the Internal Revenue Service an amended federal income
tax return that claims a refund of the overpayment of the Excise Tax
attributable to such Option Redetermination and (ii) promptly pay the
refunded Excise Tax to the Company; provided that the Company shall pay all
reasonable professional fees incurred in the preparation of the Executive’s
amended federal income tax return. If the Option Redetermination
occurs in the same year that the Reimbursement Payment is included in the
Executive’s taxable income, then in addition to returning the refund to the
Company, the Executive will also promptly return to the Company any tax benefit
realized by the return of such refund and the return of the additional tax
benefit payment (all determinations pursuant to this sentence shall be made by
the Accounting Firm). In the event that amounts payable to the
Executive under this Agreement were reduced pursuant to the second paragraph of
Section 6(a) and subsequently the Executive determines there has been an Option
Redetermination that reduces the value of the Payments attributable to such
options, the Company shall promptly pay to the Executive any amounts payable
under this Agreement that were not previously paid solely as a result of the
second paragraph of Section 6(a) up to the Safe Harbor Cap.
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7. Covenants
Not to Compete or Solicit Company Clients and Employees; Confidential
Information.
The
Company and the Executive acknowledge and agree that the restrictions in Section
7 are necessary and reasonable to protect the Company’s disclosure of its
Confidential Information to the Executive and are designed to enforce the
Company’s promise to disclose its Confidential Information to the Executive and
the Executive’s agreement not to disclose or use the Confidential Information
except in connection with the Executive’s employment with the Company and to
return the Company’s Confidential Information as provided for in this
Agreement.
(a) Non-Compete. During
the Executive’s employment with the Company, and, if the Date of Termination is
during the Employment Period and prior to a Change in Control, for a
one (1) year period after the date the Executive’s employment is terminated
by the Company or by the Executive for any reason, the
Executive shall not directly or indirectly (without the prior written consent of
the Company):
(i) hold a 5%
or greater equity (including stock options whether or not exercisable), voting
or profit participation interest in a Competitive Enterprise, or
(ii) associate
(including as a director, officer, employee, partner, consultant, agent or
advisor) with a Competitive Enterprise and in connection
with the Executive’s association engage, or directly or indirectly manage or
supervise personnel engaged, in any activity:
(A) that is
substantially related to any activity that the Executive was engaged in with the
Company or its affiliates during the 12 months prior to the Date of
Termination,
(B) that is
substantially related to any activity for which the Executive had direct or
indirect managerial or supervisory responsibility with the Company or its
affiliates during the 12 months prior to the Date of Termination,
or
(C) that
calls for the application of specialized knowledge or skills substantially
related to those used by the Executive in his activities with the Company or its
affiliates during the 12 months prior to the Date of Termination.
For
purposes of this Agreement, “Competitive Enterprise” means
any business enterprise that either (A) engages in any material activity
that directly competes within any material geographical location in which the
Company or its affiliates operates with any material activity that the Company
or its affiliates is then engaged in or (B) holds a 5% or greater equity,
voting or profit participation interest in any enterprise that engages in such a
competitive activity.
12
(b) Non-Solicit. During
the Executive’s employment with the Company, and (i) for a one (1) year
period after the Executive’s employment is terminated by the Company or the
Executive for any reason, the Executive shall not, in any manner, directly or
indirectly (without the prior written consent of the
Company): (a) Solicit any Client to transact business with a
Competitive Enterprise or to reduce or refrain from doing any business with the
Company, (b) transact business with any Client that would cause the
Executive to be a Competitive Enterprise or (c) interfere with or damage
any relationship between the Company and a Client and (ii) for a six (6) month
period after the Executive’s employment is terminated by the Company or the
Executive for any reason, the Executive shall not, in any manner, directly or
indirectly (without the prior written consent of the Company), Solicit anyone
who is then an employee of the Company (or who was an employee of the Company
within the prior 12 months, unless the employment of such person was terminated
by the Company with or without Cause or by the employee for reasons that would
have constituted Good Reason under this Agreement) to resign from the Company or
to apply for or accept employment with any other business or
enterprise.
For
purposes of this Agreement, a “Client” means any client or
prospective client of the Company or its affiliates to whom the Executive
provided services (directly or indirectly by managing or supervising personnel
who performed services to the client or prospective client), or for whom the
Executive transacted business (directly or indirectly by managing or supervising
personnel who performed services to the client or prospective
client). For purposes of this Agreement, “Solicit” means any direct or
indirect communication of any kind, regardless of who initiates it, that in any
way invites, advises, encourages or requests any person to take or refrain from
taking any action.
(c) Confidential
Information. The
Executive hereby acknowledges that, as an employee of the Company, the Company
will be providing Executive with and access to its Confidential Information, and
that Executive will be making use of, acquiring and adding to this Confidential
Information. For the purposes of this Agreement “Confidential
Information” means and includes, by way of illustration only, and not
limitation, information regarding: (i) marketing, advertising, public relations
and/or promotional strategies, programs, plans and methods; (ii) pricing
policies, methods and concepts, product and services strategies, training
programs, and methods of operation and other business methods; (iii) mailing
lists and lists of and information relating to current and prospective clients
and accounts of the Company; (iv) the specific needs and preferences of current,
former and/or prospective clients and accounts of the Company; (v) terms of
contracts between the Company and its clients, accounts, vendors and/or
suppliers; (vi) business plans, expansion plans, management policies and other
business policies and strategies; (vii) business and sales forecasts, market
analyses, costs, sales and revenue reports, budgets, other financial data which
relates to the management and operation of the Company and its products and
services, and other analyses not publicly disclosed; (viii) the Company’s
competitors; (ix) employment lists, and salary, compensation and other
information regarding employees, agents, independent contractors, consultants
and representatives of the Company; (x) internally developed computer programs
and software and specialized computer programs and source code; (xi) internal
procedures, programs, reports and forms of the Company; (xii) the Company’s and
its employees’ business relationships with current and prospective clients; and
(xiii) other confidential, trade secret and/or proprietary information that
allows the Company to compete successfully.
13
The
Executive further recognizes and acknowledges that all Confidential Information
is the exclusive property of the Company, is material and confidential, and is
critical to the successful conduct of the business of the
Company. Accordingly, the Executive hereby covenants and agrees that
he will use the Confidential Information for the benefit of the Company only and
shall not at any time, directly or indirectly, during the term of this Agreement
and thereafter divulge, reveal or communicate any Confidential Information to
any person, firm, corporation or entity whatsoever, or use any Confidential
Information for his own benefit or for the benefit of
others. Further, Executive agrees that he will return all of the
Company’s property, documents and information including, but without limitation,
the Confidential Information to the Company upon the earlier of (1) a request by
the Company or (2) at the time Executive’s employment with the Company
terminates regardless of the reason for such termination.
(d) Survival. Any
termination of the Executive’s employment during the Employment Period (or
breach of this Agreement by the Executive or the Company) shall have no effect
on the continuing operation of this Section 7; provided that if the Company
willfully breaches the payment obligations under Section 4(a) in bad faith and
where there is not a bona fide dispute as to the entitlement to payments under
Section 4(a), it shall be considered a material prior breach hereof and the
Executive shall not be obligated to comply with the non-compete restrictions in
Section 7(a).
(e) Validity. Executive
acknowledges and agrees that the restrictions in Section 7 are reasonable and
necessary to protect the Company’s legitimate business interests including,
without limitation, the Company’s Confidential Information and are reasonable,
necessary and specifically designed to enforce the Company’s promise to provide
Executive with and access to its Confidential Information and Executive’s
promise not to use or disclose the Confidential Information except as authorized
in this Agreement and to return the Confidential Information as provided for in
the Agreement. The Executive and the Company acknowledge and agree
that the terms and provisions of this Section 7 are intended to be separate
and divisible provisions and if, for any reason, any one or more of them is held
to be invalid or unenforceable, neither the validity nor the enforceability of
any other provision of this Agreement shall thereby be affected. The
parties hereto acknowledge that the potential restrictions on the Executive’s
future employment imposed by this Section 7 are reasonable in both duration
and geographic scope and in all other respects. If for any reason any
court of competent jurisdiction shall find any provisions of this Section 7
unreasonable in duration or geographic scope or otherwise, the Executive and the
Company agree that the restrictions and prohibitions contained herein shall be
effective to the fullest extent allowed under applicable law in such
jurisdiction.
(f) Consideration. The
parties acknowledge that this Agreement would not have been entered into and the
Company would not have agreed to provide Executive with and access to its
Confidential Information as well as the other benefits described in
Section 2, 4 or 6 in the absence of the Executive’s promises under this
Section 7.
14
(g) Cease
Payments. In
the event that the Executive materially breaches any of Section 7(a), 7(b)
or 7(c), the Company’s obligation to make or provide payments or benefits under
Section 4 or 6 shall cease; provided, however, this will not in any
way preclude the Company from seeking specific performance of this Agreement by
a temporary restraining order, injunctive relief or for any other damages at law
or in equity to which the Company may be entitled.
(h) Notice
to New Employers. Before
the Executive either applies for or accepts employment with any other person or
entity while any of Section 7(a), 7(b) or 7(c) is in effect, the Executive
will provide the prospective employer with written notice of the provisions of
this Section 7 and will deliver a copy of the notice to the
Company.
(i) Non-disparagement. During
the term of this Agreement and thereafter, (A) the Executive shall not, in any
manner, directly or indirectly make or publish any statement (orally or in
writing) that would libel, slander, disparage, denigrate or ridicule the
Company, any of its affiliates or any of their employees, officers or directors
and (B) the Company’s directors and officers shall not, in any manner, directly
or indirectly make or publish any statement (orally or in writing) that would
libel, slander, disparage, denigrate or ridicule the Executive.
8. Successors.
(a) This
Agreement is personal to the Executive and without the prior written consent of
the Company shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution. This Agreement shall inure to
the benefit of and be enforceable by the Executive’s personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amounts
would be payable to the Executive hereunder had the Executive continued to live,
all such amounts, unless otherwise provided herein, shall be paid in accordance
with the terms of this Agreement to such person or persons appointed in writing
by the Executive to receive such amounts or, if no person is so appointed, to
the Executive’s estate.
(b) This
Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns without any further consent of the
Executive.
(c) The
Company will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to assume expressly and agree to perform this
Agreement in the same manner and to the same extent that the Company would be
required to perform it if no such succession had taken place. As used
in this Agreement, “Company” shall mean the Company as hereinbefore defined and
any successor to its business and/or assets as aforesaid.
15
9. Disputes.
(a) Jurisdiction
and Choice of Forum. The
Executive and the Company irrevocably submit to the exclusive jurisdiction of
any state or federal court located in Houston, Texas (Xxxxxx County) over any
dispute or controversy involving this Agreement. Both the Executive
and the Company (i) acknowledge that the forum stated in this
Section 9(a) has a reasonable relation to this Agreement and to the
relationship between the Executive and the Company and that the submission to
the forum will apply even if the forum chooses to apply non-forum law,
(ii) waive, to the extent permitted by law, any objection to personal
jurisdiction or to the laying of venue of any action or proceeding covered by
this Section 9(a) in the forum stated in this Section 9(a),
(iii) agree not to commence any such action or proceeding in any forum
other than the forum stated in this Section 9(a) and (iv) agree that,
to the extent permitted by law, a final and non-appealable judgment in any such
action or proceeding in any such court will be conclusive and binding on the
Executive and the Company. However, nothing in this Agreement
precludes the Executive or the Company from bringing any action or proceeding in
any court for the purpose of enforcing the provisions of this
Section 9(a).
(b) Governing
Law. This
Agreement will be governed by and construed in accordance with the law of the
State of Texas applicable to contracts made and to be performed entirely within
that State.
(c) Costs
Pre-Change in Control. Prior
to a Change in Control, the Company shall reimburse any reasonable expenses,
including reasonable attorney’s fees, the Executive incurs as a result of any
controversy or claim between the Executive and the Company relating to this
Agreement in which the Executive substantially prevails on the merits of such
matter.
(d) Costs
Post-Change in Control. After
a Change in Control, the Company shall reimburse the Executive on a current
basis (as incurred) for all reasonable expenses, including reasonable attorney’s
fees, the Executive incurs as a result of any controversy or claim between the
Executive and the Company relating to this Agreement regardless of the result
thereof; provided, however, that the Executive shall be required to repay
immediately any such amounts to the Company to the extent that a court issues a
final and non-appealable order setting forth the determination that the position
taken by the Executive was frivolous or advanced by the Executive in bad
faith.
10. Miscellaneous.
(a) The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
16
(b) All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
If to the
Executive:
at the
Executive’s primary residential address
as shown
on the records of the Company
If to the
Company:
|
Southern
Union Company
|
|
Attention: Secretary
|
|
0000
Xxxxxxxxxx Xxxx
|
|
Xxxxxxx,
XX 00000-0000
|
or to
such other address as either party shall have furnished to the other in writing
in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
(d) The
Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to
any applicable law or regulation.
(e) The
Executive’s or the Company’s failure to insist upon strict compliance with any
provision of this Agreement or the failure to assert any right the Executive or
the Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to
Section 3(c) (subject to the limitation in the lead in of
Section 3(c)) or the Company’s right to terminate the Executive for Cause
pursuant to Section 3(b) (subject to the limitation in the last sentence of
Section 3(b)), shall not be deemed to be a waiver of such provision or right or
any other provision or right of this Agreement.
(f) It is the
parties’ intention that this Agreement not be construed more strictly with
regard to the Executive or the Company.
(g) From and
after the Effective Date, this Agreement shall supersede any other employment or
severance agreement or arrangements between the parties (and the Executive shall
not be eligible for severance benefits under any plan, program or policy of the
Company), provided, however, this Agreement shall not waive any other rights or
benefits provided by the Company to the Executive as of the date hereof
(including, without limitation, the change in control vesting provided under the
Company’s stock and incentive plans or award agreements issued
thereunder).
(h) Any
reference to a Section herein is a reference to a section of this Agreement
unless otherwise stated.
17
11. Section
409A.
(a) To extent
the Executive would otherwise be entitled to any payment that under this
Agreement, or any plan or arrangement of the Company or its affiliates,
constitutes “deferred compensation” subject to Section 409A of the Code (“Section 409A”) and that if
paid during the six months beginning on the Date of Termination would be subject
to the Section 409A additional tax because the Executive is a “specified
employee” (within the meaning of Section 409A and as determined by the Company),
the payment will be paid to the Executive on the earlier of the six-month
anniversary of the Date of Termination or the Executive’s
death. Similarly, to the extent the Executive would otherwise be
entitled to any benefit (other than a payment) during the six months beginning
on the Date of Termination that would be subject to the Section 409A additional
tax, the benefit will be delayed and will begin being provided on the earlier of
the six-month anniversary of the Date of Termination or the Executive’s
death. In addition, any payment or benefit due upon the Date of
Termination that represents a “deferral of compensation” within the meaning of
Section 409A shall be paid or provided to the Executive only upon a “separation
from service” as defined in Treas. Reg. § 1.409A-1(h). Each
severance payment made under this Agreement shall be deemed to be separate
payments, amounts payable under Section 4 of this Agreement shall be deemed not
to be a “deferral of compensation” subject to Section 409A to the extent
provided in the exceptions in Treasury Regulations Section 1.409A-1(b)(4)
(“short-term deferrals”) and (b)(9) (“separation pay plans,” including the
exception under subparagraph (iii)) and other applicable provisions of
Treasury Regulations Sections 1.409A-1 through A-6.
(b) Notwithstanding
anything to the contrary in this Agreement or elsewhere, any payment or benefit
under this Agreement or otherwise that is exempt from Section 409A pursuant to
Final Treasury Regulations Section 1.409A-1(b)(9)(v)(A) or (C) (certain
“reimbursements”) shall be paid or provided to the Executive only to the extent
that the expenses are not incurred, or the benefits are not provided, beyond the
last day of the Executive’s second taxable year following the Executive’s
taxable year in which the “separation from service” occurs; and provided further
that such expenses are reimbursed no later than the last day of the Executive’s
third taxable year following the taxable year in which the Executive’s
“separation from service” occurs. Except as otherwise expressly
provided herein, to the extent any expense reimbursement or the provision of any
in-kind benefit under this Agreement is determined to be subject to Section 409A
of the Code, the amount of any such expenses eligible for reimbursement, or the
provision of any in-kind benefit, in one calendar year shall not affect the
expenses eligible for reimbursement in any other taxable year (except for any
life-time or other aggregate limitation applicable to medical expenses), in no
event shall any expenses be reimbursed after the last day of the calendar year
following the calendar year in which the Executive incurred such expenses, and
in no event shall any right to reimbursement or the provision of any in-kind
benefit be subject to liquidation or exchange for another benefit.
NY12529:424937.1
18
IN
WITNESS WHEREOF, the Company has caused this Agreement to be executed by a duly
authorized officer of the Company and Executive has executed this Agreement as
of the day and year first above written.
Southern
Union Company
/s/
XXXX X. XXXXX
Name: Xxxx
X. Xxxxx
Title: Senior
Vice President,
Human
Resources & Administration
/s/
XXXXXX X. XXXXXXXX
Xxxxxx X.
Xxxxxxxx
NY12529:424937.1
19
EXHIBIT
A
[Form of Release]
NY12529:424937.1
