EMPLOYMENT AGREEMENT
This employment agreement is dated as of February 1, 2001
(the "Agreement") between Questar Corporation, a Utah corporation
("Company"), and Xxxxx X. Xxxxxx ("Executive").
WHEREAS, the Company desires to employ Executive as its
President and Chief Operating Officer upon the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, the Company and Executive hereby agree as
follows:
ARTICLE 1
DEFINITIONS
The terms set forth below have the following meanings:
Agreement Date means the effective date of this Agreement.
Anniversary Date means any annual anniversary of the
Agreement Date.
Board means the Board of Directors of the Company
Cause means any of the following: (a) Executive's conviction
of a felony or of a misdemeanor involving fraud, dishonesty or moral
turpitude, or (b) Executive's willful or intentional material breach
of this Agreement that results in financial detriment that is
material to the Company and its Affiliates taken as a whole.
For purposes of clause (b) of the preceding sentence, Cause
shall not include any one or more of the following: (i) bad
judgment, (ii) negligence, (iii) any act or omission that Executive
believed in good faith to have been in or not opposed to the
interest of the Company (without intent of Executive to gain,
directly or indirectly, a profit to which he was not legally
entitled), or (iv) Any act or omission of which any member of the
Board who is not a party to such act or omission has had actual
knowledge for at least 12 months.
Change in Control means the following: A Change in Control of
the Company shall be deemed to have occurred if (a) any "Acquiring
Person" (as such term is defined in the Rights Agreement dated as of
February 13, 1996, between the Company and ChaseMellon Shareholder
Services L.L.C. ("Rights Agreement")) is or becomes the beneficial
owner (as such term is sued in Rule 13d-3 under the Securities
Exchange Act of 1934) of securities of the Company representing 25
percent or more of the combined voting power of the Company; or (b)
the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who,
as of May 19, 1998, constitute the Company's Board of Directors
("Board") and any new director (other than a director whose initial
assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent
solicitation, relating to the election of directors of the Company)
whose appointment or election by the Board or nomination for
election by the Company's stockholders was approved or recommended
by a vote of at least two-thirds of the directors then still in
office who either were directors on May 19, 1998, or whose
appointment, election or nomination for election was previously so
approved or recommended; or (c) the Company's stockholders approve a
merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other than a
merger or consolidation that would result in the voting securities
of the Company outstanding immediately prior to such merger or
consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) at least 60 percent of the
combined voting power of the securities of the Company or such
surviving entity or its parent outstanding immediately after such
merger or consolidation, or a merger or consolidation effected to
implement a recapitalization of the Company for similar transaction)
in which no person is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing 25 percent or
more of the combined voting power of the Company's then outstanding
securities; or (d) the Company's stockholders approve a plan of
complete liquidation or dissolution of the Company or there is
consummated an agreement for the sale or disposition by the Company
of all or substantially all of the Company's assets, other than a
sale or disposition by the Company of all or substantially all of
the Company's assets to an entity, at least 60 percent of the
combined voting power of the voting securities of which are owned by
stockholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale. A
Change in Control, however, shall not be considered to have
occurred until all conditions precedent to the transaction,
including but not limited to, all required regulatory approvals,
have been obtained.
Committee means the Management Performance Committee of the
Board.
Common Stock means the common stock of the Company.
Company means Questar Corporation.
Date of Termination means the effective date of a Termination
of Employment for any reason, including death or Disability, whether
initiated by the Company or by Executive.
Disability means a mental or physical condition that, in the
opinion of the Board, renders Executive unable or incompetent to
carry out the material job responsibilities that such Executive held
or the material duties to which Executive was assigned at the time
the disability was incurred, which has existed for at least three
months and which in the opinion of a physician mutually agreed upon
by the Company and Executive (provided that neither party shall
unreasonably withhold his agreement) is expected to be permanent or
to last for an indefinite duration or a duration in excess of six
months.
Employment Period means that subject to termination
provisions, the term of Executive's employment under this Agreement
(the "Employment Period") shall begin on the Agreement Date and end
on the Anniversary Date that is three years after such date.
Good Reason means the occurrence of any one or more of the
following events unless Executive specifically agrees in writing
that such event shall not be Good Reason: (a) any material breach of
this Agreement by the Company, including: any material adverse
change in the status, responsibilities or perquisites of Executive;
any failure to nominate or elect Executive as Chief Executive
Officer of the Company or as member of the Board; assignment of
duties materially inconsistent with his position and duties; (b)
the failure of the Company to assign this Agreement to a successor
to the Company or failure of a successor to the Company to
explicitly assume and agree to be bound by this Agreement. Any
reasonable determination by Executive that any of the specified
events has occurred and constitutes Good Reason shall be conclusive
and binding for all purposes.
Subsidiary means any entity of which the Company, directly or
indirectly, owns at least 50 percent of the outstanding shares of
capital stock entitled to vote for the election of directors.
Termination For Good Reason means a Termination of Employment
by Executive for a Good Reason.
Termination of Employment means a termination by the Company
or by Executive of Executive's employment by the Company.
Termination Without Cause means a Termination of Employment
by the Company for any reason other than Cause or Executive's death
or Disability.
ARTICLE 2
DUTIES
Chief Operating Officer Duties. The Company shall employ
Executive during the Employment Period as its President and Chief
Operating Officer, reporting to R. D. Cash, the Company's Chairman
and Chief Executive Officer. At its discretion, the Board may
appoint Executive to serve in other capacities with the Company's
Subsidiaries. During the first two years of Employment Period, the
Board shall determine whether the Executive has the leadership
qualities and business acumen to serve as the Company's Chief
Executive Officer. Executive, during the Employment Period, shall
devote substantially all of his business time, attention, and effort
to the affairs of the Company and shall use his reasonable efforts
to promote the best interests of the Company.
Director Duties. Effective February 1, 2001, the Board shall
appoint Executive to serve as a Director of the Company for the
remainder of a three-year term that will expire in May of 2003. As
long as the Executive serves as an employee or officer, the Board
shall continue to nominate Executive for election as a Director of
the Company. At its discretion, the Board of Directors of any
Subsidiary may appoint Executive to serve as a director of such
Subsidiary for the remainder of a one-year term that expires in May
of 2001.
ARTICLE 3
EMPLOYMENT PERIOD
Employment Period. Subject to termination provisions, the
term of Executive's employment under this Agreement (the "Employment
Period") shall begin on the Agreement Date and end on the
Anniversary Date that is three years after such date. The
employment of Executive during the Employment Period shall not be
terminated other than in accordance with Article 7.
ARTICLE 4
COMPENSATION
Salary. The Company shall pay Executive an annual base
salary of $400,000, payable in semi-monthly installments ("Base
Salary"). The Committee shall review the Executive's Base Salary
when it reviews the base salaries paid to the Company's other
executive officers in February of each year and can only increase,
not reduce, the Executive's Base Salary. The Committee shall also
determine how to allocate the Executive's Base Salary among the
Company and its principal Subsidiaries.
Annual Bonus. The Executive shall be nominated to
participate in the Company's Annual Management Incentive Plan
("AMIP") for each year of the Employment Period and shall have a
Target Bonus equal to 50 percent of his base salary at the time the
target bonus is set ("Target Bonus"). (A copy of the Company's AMIP
is attached as Exhibit A.) The annual minimum, target, and maximum
performance goals for the Company and its principal Subsidiaries
shall be approved by the Committee each year within 90 days after
the beginning of such year.
ARTICLE 5
STOCK OPTIONS, RESTRICTED
STOCK AND STOCK OWNERSHIP
Option Grants. The Company shall grant to Executive, as of
the Agreement Date, an option to purchase 100,000 shares of the
Company's common stock at a per share price equal to the closing
price of the Company's common stock as reported in the Wall Street
Journal on the Agreement Date. The option shall be granted pursuant
to the terms of the Company's Long-Term Stock Incentive Plan ("Stock
Plan"); shall vest in four equal, annual installments, with the
first installment vesting six months after being granted; and shall
have a term of 10 years. To the extent permitted under applicable
tax laws, the initial option granted to the Executive shall be an
incentive stock option. The agreements for the initial option and
all subsequent options granted to the Executive shall contain a
special provision that permits the Executive to have 30 days after
Termination of Employment (for reasons other than death, Disability,
approved retirement, or a Change in Control) to exercise the vested
portion of any options granted to him. (If the Executive's
employment is terminated for one of the specified reasons, he shall
have longer periods of time in which to exercise his options.) A
copy of the Stock Plan and a copy of the form of Executive's Option
Agreement are attached to this Agreement as Exhibits B and C,
respectively.
The Company shall also grant to Executive, in February of
2001, another stock option to purchase at least 100,000 shares of
the Company's common stock, as part of the annual round of options
granted to the Company's officers and key employees. As long as
Executive serves as an executive officer of the Company, the Company
shall grant a stock option to Executive when it takes action to
grant stock options to other officers and employees.
Restricted Stock. As of the March 1, 2001, the Company shall
grant 21,000 restricted shares of the Company's common stock to the
Executive. One-third of the grant (7,000 shares) shall vest and
become nonforfeitable upon each anniversary of the Agreement Date
during the Employment Period, except that all of the restricted
shares shall immediately vest and become nonforfeitable in the event
of a Change in Control and that a pro rata portion of the remaining
restricted shares shall immediately vest and become nonforfeitable
in the event of the Executive's Termination of Employment for a
reason other than Cause. A copy of the form of Restricted Stock
Grant is attached to this Agreement as Exhibit D.
Any shares of restricted stock granted as partial payment of
bonuses earned by Executive under the AMIP shall vest in accordance
with the provisions set forth in it.
The Executive shall choose between recognizing ordinary
income equal to the value of the shares of restricted stock at time
of grant or recognizing ordinary income equal to the value of the
shares of restricted stock as they vest and become nonforfeitable.
The Executive shall pay all withholding taxes attributable to the
recognition of income and may elect to use a portion of the shares
that would otherwise be distributed to satisfy such withholding
obligations.
The shares of restricted stock granted to Executive in 2001
are included within the shares reserved under the terms of the Stock
Plan and are covered by a registration statement filed with the
Securities and Exchange Commission. The Company intends to register
any shares of restricted stock that may be issued under any
successor to the Stock Plan.
The grant of restricted stock is being made pursuant to the
Stock Plan as amended and restated effective March 1, 2001.
Consequently, the stock grant is being made subject to shareholder
approval of the amendments, which is expected in May of 2001.
Stock Ownership. The Company requires all officers to own
shares of the Company's common stock. Executive shall be given the
duration of the initial Employment Period to own shares of the
Company's common stock (including phantom stock units) having a
value equal to one times his annual compensation.
ARTICLE 6
OTHER BENEFITS
Qualified Retirement Plans. During the Employment Period,
the Executive shall be entitled to participate in the qualified
plans (including defined benefit and 401(k) savings) sponsored by
the Company in accordance with the general rules applicable to other
employees participating in such plans.
Welfare Benefit Plans. During the Employment Period, the
Executive shall be eligible to participate in the welfare benefit
plans and programs (including health, life insurance, catastrophe
accident, cafeteria, disability, approved personal leave) sponsored
by the Company in accordance with the general rules applicable to
such plans.
Vacation. During the Employment Period, the Executive shall
be entitled to paid vacation time in accordance with the Company's
general rules, except that the Executive shall have the right to
four weeks of paid vacation in each anniversary year. After the
Executive has five anniversary years, he shall be entitled to five
weeks of paid vacation in each anniversary year.
Nonqualified Benefit Plans. During the Employment Period,
the Executive shall be eligible to participate in the Company's
optional nonqualified plans such as the Deferred Share Make-up Plan,
the Deferred Compensation Plan, and the Deferred Share Plan
(Collectively referred to as the "Deferred Compensation Plans") and
shall be covered by the Company's nonqualified plan the Supplemental
Executive Retirement Plan (the "SERP") to make-up the difference
between what can be earned by and paid to the Executive under the
Company's qualified deferred benefit plan and what could be earned
by and paid to the Executive under such plan in the absence of
federal tax law limitations applicable to it. A copy of such
Deferred Compensation Plan and the SERP are attached to the
Agreement as Exhibits E, F, G, and H respectively.
Change in Control/Indemnification. The Executive shall be
nominated to participate in the Company's Executive Severance
Compensation Plan ("Change in Control Plan") and shall also be given
an Indemnification Agreement. A copy of the Change in Control Plan,
the form of Change in Control Agreement, and the form of
Indemnification Agreement are attached as Exhibits I, J, and K.
Relocation Expenses. The Company shall pay the Executive a
one-time relocation allowance of $50,000 for him and his family to
move from Houston, Texas, to Salt Lake City, Utah. The Company
shall also reimburse Executive for any normal and customary moving
expenses, which include airfare and expenses for the Executive and
his spouse to make up to three house-hunting trips. During the
first year of the Employment Period, the Company shall also pay for
up to five round trips for the Executive to travel between Salt Lake
City and Houston.
Other Benefits. During the Employment Period, the Executive
shall be entitled to participate in the Company's special tax
preparation and financial planning reimbursement program available
to the Company's officers. The Executive shall also be entitled to
participate in any special programs adopted for the Company's
executive officers.
Office and Support Staff. During the Employment Period,
Executive shall be entitled to an office and secretarial assistance
appropriate to his position.
Expenses. During the Employment Period, Executive shall be
entitled to receive prompt reimbursement for all reasonable
employment-related expenses incurred by him and approved in
accordance with the Company's standard policies.
ARTICLE 7
TERMINATION OF EMPLOYMENT
Termination for Cause. If the Company terminates Executive's
employment for Cause, the Company shall only be required to pay
Executive any earned but unpaid base salary and vacation benefits.
The Company may not terminate Executive's employment for
Cause unless it has: (a) officially given the Executive written
notice at least 30 days prior to the Date of Termination of its
intent to terminate Executive's employment, that contain a detailed
description of the specific reasons that form the basis for such
action; (b) provided the Executive an opportunity to appear before
the Board prior to the Date of Termination to present arguments on
his own behalf; and (c) received the affirmative vote of at least
two-thirds of the members of the Board that it is proper to
terminate the Executive's employment for Cause. Pending the final
resolution of any disputes concerning the Executive's termination of
employment for Cause, the Board may suspend Executive with pay.
Termination for Death or Disability. If Executive's
employment terminates during the Employment Period due to his death
or Disability, the Company shall pay to the Executive's
beneficiaries (in the event of his death) or to the Executive (in
the event of his Disability), a lump-sum amount equal to the
Executive's Base Salary for the remainder of the Employment Period.
The Company, in accordance with the AMIP, shall also pay a pro rata
portion of the annual bonus that would have been paid to the
Executive but for his death or Disability; this bonus amount shall
be paid in cash and shall be paid in February of the year following
the performance period and shall be prorated based on the portion of
the performance period that Executive was performing his duties (in
the event of his death) or receiving short-term disability benefits
(in the event of Disability). The Company shall also distribute a
pro rata portion of the one-time award of shares of stock previously
granted to the Executive on the Agreement Date and all shares of
stock previously granted as partial payment of the annual bonuses
earned under the AMIP.
Termination Without Cause. If the Company terminates
Executive's employment during the Employment Period for some reason
other than Cause, the Company shall pay Executive a lump-sum amount
equal to the Executive's Base Salary for the remainder of the
Employment Period and the Target Bonus amount for the year in which
his termination occurs. The Company shall also distribute a pro
rata portion of the one-time award of shares of stock previously
granted to the Executive on the Agreement Date and all shares of
stock previously granted as partial payment of the annual bonuses
earned under the AMIP. The calculation of any cash severance
benefit shall be based on the Executive's Base Salary at the time of
termination.
Termination by Executive. The Executive can terminate his
employment for any reason, provided that he gives the Board written
notice at least 30 days' prior to his Date of Termination. If the
Executive terminates his employment for other than Good Reason, he
shall only be paid his earned but unpaid Base Salary and accrued
vacation benefits (up to time of termination).
If the Executive terminates his employment for Good Reason,
the Company shall pay Executive a lump sum amount equal to his Base
Salary for the remainder of the Employment Period and the Target
Bonus for the year in which the termination occurs. The Company
shall also distribute a portion of the one-time award of shares of
stock previously granted to the Executive on the Agreement Date and
all shares of stock previously granted as partial payment of the
annual bonuses earned under the AMIP. The calculation of any cash
severance benefit shall be based on the Executive's Base Salary at
the time of termination.
ARTICLE 8
RESTRICTIVE COVENANTS
Non-Solicitation of Employees. During the remainder of any
Employment Period for which the Executive is receiving compensation
as a result of a Termination of Employment and during the one-year
period immediately following a Termination of Employment for Cause
or Termination by Executive for other than Good Reason, the
Executive shall not directly or indirectly employ or seek to employ
any employees of the Company or its Subsidiaries and shall not
entice or otherwise encourage any such employee to leave such
employment.
Confidentiality. During the Employment Period, the Executive
shall maintain the confidential nature of information concerning the
Company's financial results and business strategies and shall not
disclose such information to any person whose interests are or may
be adverse to the Company's interests or any person that may use
such information to obtain personal financial gain.
After a Termination of Employment for any reason, the
Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process,
communicate or divulge any confidential information other than the
Company and its designees.
Injunction. Executive acknowledges that monetary damages
will not be an adequate remedy for the Company in the event he
breaches the provisions of this Article. Consequently, Executive
agrees that the Company is entitled to an injunction to prevent
Executive from any breach of the provisions of this Article in
addition to other rights that the Company may have.
ARTICLE 9
MISCELLANEOUS
Beneficiary. If Executive dies prior to receiving all of the
amounts payable to him in accordance with the terms of this
Agreement, such amounts shall be paid to one or more beneficiaries
designated by Executive in writing to the Company during his
lifetime, or if no such beneficiary is designated, to Executive's
estate. Such payments shall be made in a lump sum to the extent so
payable and, to the extent not payable in a lump sum, in accordance
with the terms of this Agreement. Executive, without the consent of
any prior beneficiary, may change his designation of beneficiary or
beneficiaries at any time or from time to time by submitting to the
Company a new designation in writing.
Assignment: Successors. The Company may not assign its
rights and obligations under this Agreement without the prior
written consent of Executive except to a successor of the Company's
business that expressly assumes the Company's obligations in
writing. This Agreement shall be binding upon and inure to the
benefit of Executive, his estate and Beneficiaries, the Company and
the successors and permitted assigns of the Company.
Nonalienation. Benefits payable under this Agreement shall
not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment,
execution of levy of any kind, either voluntary or involuntary,
prior to actually being received by Executive or a beneficiary, as
applicable, and any such attempt to dispose of any right to benefits
payable hereunder shall be void.
Severability. If one or more parts of this Agreement are
declared by any court or governmental authority to be unlawful or
invalid, such unlawfulness or invalidity shall not invalidate any
part of this Agreement not declared to be unlawful or invalid. Any
part so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such
part to the fullest extent possible while remaining lawful and valid.
Amendment: Waiver. This Agreement shall not be amended or
modified except by written instrument executed by the Company and
Executive. A waiver of any term, covenant or condition contained in
this Agreement shall not be deemed a waiver of any other term,
covenant or condition, and any waiver of any default in any such
term, covenant or condition shall not be deemed a waiver of any
later default thereof.
Notices. All notices hereunder shall be in writing and
delivered by hand, by nationally-recognized delivery service that
guarantees overnight delivery, or by first-class, registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
If to the Company, to Questar Corporation
000 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: R. D. Cash
with a copy to: Questar's General Counsel
000 Xxxx 000 Xxxxx
Xxxx Xxxx Xxxx, Xxxx 00000
If to Executive, to: Xxxxx X. Xxxxxx
[Home Address]
Either party may from time to time designate a new address by notice
given in accordance with this Section. Notice shall be effective
when actually received by the addressee.
Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but
all of which together will constitute one and the same instrument.
Entire Agreement. This Agreement forms the entire agreement
between the parties with respect to the subject matter addressed in
this Agreement. It supersedes all prior agreements, promises and
representations regarding employment, compensation, severance or
other payments contingent upon termination of employment.
Applicable Law. This Agreement shall be interpreted and
construed in accordance with the laws of the state of Utah, without
regard to its choice of law principles.
Survival of Executive's Rights and Obligations. All of
Executive's rights and obligations shall survive the termination of
Executive's employment and/or the termination of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
on the date first above written.
QUESTAR CORPORATION
By /s/R. D. Cash
R. D. Cash
Chairman of the Board
EXECUTIVE
/s/Xxxxx X. Xxxxxx
K. O. Xxxxxx
