EXHIBIT 10.2
FORM OF CHANGE IN CONTROL AGREEMENT
THIS AGREEMENT (this "AGREEMENT") entered into as of the 1st day of July,
1998 between SOUTHWEST GAS CORPORATION, a California corporation (the
"COMPANY"), and ___________________ (the "EMPLOYEE").
1. DEFINITIONS
For the purposes of this Agreement:
(a) The term "COMPANY" shall include any corporate successor to the
business presently conducted by the Company.
(b) The term "SUBSIDIARY" shall mean any corporation, partnership, joint
venture or other entity in which the Company has a 50% or greater
equity interest.
(c) "PERMANENT DISABILITY" shall mean that because of physical or mental
illness or disability, the Employee shall have been continuously
unable to perform the essential functions of his job (as those
functions are described herein) with or without reasonable
accommodation for a consecutive period of at least six months.
(d) "CAUSE" shall mean (i) any material breach by the Employee of his
material duties and obligations as an employee of the Company (as
such duties and obligations may be assigned by the Board or by the
President and CEO of the Company) which is not cured within 60 days
after written notice of such breach by the Company to the Employee,
(ii) conviction of the Employee of a felony or crime involving moral
turpitude (meaning a crime that necessarily includes the commission
of an act of gross depravity, dishonesty or bad morals), or (iii)
any acts or wilful malfeasance or gross negligence in a matter of
material importance to the Company.
(e) "BOARD" shall mean the Board of Directors of the Company.
2. TERM OF AGREEMENT
The initial term of this Agreement shall be 24 months, commencing on the
date first written above. If a Change in Control (as hereinafter defined)
occurs, the term of this Agreement shall be extended for a period of 24 months
from the date of the Change in Control. Unless within 60 days prior to any
anniversary date of this Agreement (or, if a Change in Control has occurred,
the second anniversary of such Change in Control and any succeeding
anniversary thereof), the Company (or the Employee) gives written notice to
the Employee (or the Company) of the termination of this Agreement as of the
then applicable expiration date, then the term of this Agreement shall
automatically be extended for an additional 12 months.
3. CONFIDENTIALITY
The Employee acknowledges that during his employment by, and as a result
of his relationship with, the Company he will obtain knowledge of and gain
access to information regarding the Company's business, operations, products,
proposed products, production methods, processes, customer lists, advertising,
marketing and promotional plans and materials, price lists, pricing policies,
financial information and other trade secrets, confidential information and
material proprietary to the Company or designated as being confidential by the
Company which is not generally known to non-Company personnel, including
information and material originated, discovered or developed in whole or in
part by the Employee (collectively referred to herein as "CONFIDENTIAL
INFORMATION"). The Employee agrees that during the term of this Agreement and,
to the fullest extent permitted by law thereafter, he will, in a fiduciary
capacity for the benefit of the Company, hold all Confidential Information
strictly in confidence and will not directly or indirectly reveal, report,
disclose, publish or transfer any of such Confidential Information to any
person, firm or other entity, or utilize any of the Confidential Information
for any purpose, except in furtherance of his employment by the Company.
The Employee agrees that upon the expiration of this Agreement or any
earlier termination of his employment, he will immediately surrender and
return to the Company all lists, books, records and other Confidential
Information of the Company, or obtained in connection with the Company's
business, it being expressly acknowledged by the Employee that all such items
are the exclusive property of the Company, and all other property belonging to
the Company then in the possession of the Employee, and the Employee shall not
make or retain any copies thereof.
4. CHANGE IN CONTROL OF THE COMPANY
The Board recognizes that the continuing possibility of a change in
control of the Company is unsettling to the Employee and other officers of the
Company. Therefore, the arrangements set forth below are being made to help
assure a continuing dedication by the Employee to his duties to the Company,
notwithstanding the occurrence or potential occurrence of a change in control.
In particular, the Board believes it important, should the Company receive
proposals from third parties with respect to its future, to enable the
Employee, without being influenced by the uncertainties of his own situation,
to assess and advise the Board whether such proposals would be in the best
interests of the Company and its shareholders and to take such other action
regarding such proposals as the Board might determine to be appropriate. The
Board also wishes to demonstrate to officers of the Company that the Company
is concerned with the welfare of its officers and intends to see that loyal
officers are treated fairly.
In view of the foregoing and in further consideration of the Employee's
continued employment with the Company, the Company agrees as follows:
(a) Limited Right to Receive a Severance Benefit. The Employee shall be
entitled to the severance benefits provided in Section 4(c) if,
within 24 months after a Change in Control: (i) the Employee
terminates his employment with the Company for Good Reason, provided
he terminates his employment within 120 days following the
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occurrence of any of the events specified in Section 4(b)(ii); or
(ii) the Employee's employment is terminated by the Company for any
reason other than (A) the Employee's death, (B) the Employee's
Permanent Disability, or (C) Cause.
Following a Change in Control, any termination by the Employee for
Good Reason or any termination by the Company for Permanent
Disability or for Cause shall be accompanied or preceded by a notice
to the other party hereto which shall set forth in reasonable detail
the facts and circumstances claimed as a basis for such termination.
(b) Certain Additional Definitions. For purposes of this Agreement:
(i) Change in Control. The term "CHANGE IN CONTROL" shall mean any
of the following:
(A) Approval by the shareholders of the Company of the
dissolution or liquidation of the Company;
(B) Approval by the shareholders of the Company of an
agreement to merge or consolidate, or otherwise
reorganize, with or into one or more entities that are not
Subsidiaries, as a result of which less than 50% of the
outstanding voting securities of the surviving or
resulting entity immediately after the reorganization are,
or will be, owned, directly or indirectly, by shareholders
of the Company immediately before such reorganization
(assuming for purposes of such determination that there is
no change in the record ownership of the Company's
securities from the record date for such approval until
such reorganization and that such record owners hold no
securities of the other parties to such reorganization,
but including in such determination any securities of the
other parties to such reorganization held by affiliates of
the Company);
(C) Approval by the shareholders of the Company of the sale of
substantially all of the Company's business and/or assets
to a person or entity which is not a Subsidiary;
(D) Any "person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), but excluding any person described
in and satisfying the conditions of Rule 13d-1(b)(1)
thereunder), becomes the beneficial owner (as defined in
Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more
than 20% of the combined voting power of the Company's
then outstanding securities entitled to then vote
generally in the election of directors of the Company; or
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(E) During any period not longer than two consecutive years,
individuals who at the beginning of such period
constituted the Board cease to constitute at least a
majority thereof, unless the election, or the nomination
for election by the Company's shareholders, of each new
Board member was approved by a vote of at least three-
fourths of the Board members then still in office who were
Board members at the beginning of such period (including
for these purposes, new members whose election was so
approved).
(ii) Good Reason. For purposes of this Agreement, "GOOD REASON"
shall mean:
(A) Without the Employee's express written consent, the
assignment to him of any duties inconsistent with his
positions, duties, authority, responsibilities and status
with the Company immediately prior to the Change in
Control; or a demotion or a change in the Employee's
titles or offices as in effect immediately prior to the
Change in Control; or any removal of the Employee from or
any failure to re-elect him to any of such positions;
except in connection with the termination of the
Employee's employment for Cause, Permanent Disability or
retirement or as a result of his death or by him other
than for Good Reason;
(B) A reduction by the Company in the Employee's base salary
as in effect on the date of the Change in Control;
(C) The failure by the Company to continue at levels in
existence immediately prior to the Change in Control any
thrift, incentive or compensation plan, or any pension,
life insurance, health and accident or disability plan in
which the Employee participated immediately prior to the
Change in Control, provided that the Company may adopt
substantially similar plans that provide benefits at
levels no less than those in existence immediately prior
to the Change in Control; or the taking of any action by
the Company which would adversely affect the Employee's
participation in or materially reduce his aggregate
benefits under all of such plans, when taken together, or
deprive him of any material fringe benefit enjoyed by him
at the time of the Change in Control (except for the
acceleration of the termination dates of options, awards
and rights as contemplated by this Agreement).
(D) The assignment of the Employee without his consent to a
new work location which would require a round-trip commute
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to work from the Employee's residence immediately prior to
the Change in Control of more than 40 miles per day.
(c) Effect of Termination. If the Employee is entitled to receive a
severance benefit pursuant to Section 4(a), the Company will provide
the Employee with only the following severance benefits:
(i) Any restricted stock awards, stock options or stock
appreciation rights to purchase or relating to Common Stock of
the Company held by the Employee on the date the Company or the
Employee terminates the Employee's employment or gives notice
of such termination, whichever first occurs (the "TERMINATION
DATE"), which are not then currently vested or exercisable
shall on such date automatically become vested or exercisable
and shall remain exercisable for 90 days thereafter (subject to
any fixed term of such award, option or right set forth in the
document evidencing such award, option or right);
(ii) A lump sum severance payment equal to: (A) 24 months of the
Employee's base salary in effect as of the Termination Date
(or, if greater, in effect on the date of the Change in
Control); (B) 24 months incentive compensation calculated as
40% of the amount payable pursuant to clause (A); and (C) 24
months fringe benefits calculated as 20% of the amount payable
pursuant to clause (A);
(iii) The Company shall pay the Employee's normal business
expenses incurred through the date the Employee's employment
terminates (except with respect to seminars or travel as
provided below), including automobile, plus any conventions,
seminars or travel either incurred prior to the applicable date
of termination or scheduled at the time of notification of
termination; and
(iv) Any benefits under the DCP and the SERP which are fully vested
on the date the Employee's employment terminates, in accordance
with applicable payment schedules and any applicable elections;
provided, however that the Employee shall receive additional
benefits under the SERP such that the Employee will be
permitted to add to the formula for purposes of eligibility for
benefits, vesting and calculation of benefits, 10 points which,
at the election of the Employee, may be applied either to an
age assumption or continuous length of service assumption
(e.g., if an officer is 50 and has 20 years of service, he
could allocate the points so that for purposes of eligibility,
vesting and calculation of benefits, he is age 55 and has 25
years of service); such amounts having been deposited with a
trustee under an appropriate Trust Agreement providing for a so-
called Rabbi Trust Arrangement pursuant to I.R.S. Rev. Proc. 92-
64, as described in Section 19.
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The Company reserves the right to modify, suspend, or discontinue any or
all of its benefit programs at any time without recourse by the Employee
(subject to Section 4(b)(ii)(C)).
5. ARBITRATION AND LITIGATION
In the event that, following a Change in Control, the Company terminates
the Employee by reason of his Permanent Disability or for Cause and the
Employee disputes the accuracy of the assertion of Permanent Disability or
Cause, or in the event that, following a Change in Control, the Employee
terminates his employment for Good Reason and the Company disputes the
accuracy of such assertion of Good Reason, or in the event either party
disputes the occurrence of a Change in Control, such dispute shall be resolved
through final and binding arbitration in Xxxxx County, Nevada in accordance
with the then current commercial arbitration rules of the American Arbitration
Association ("ASSOCIATION") or its successor, provided the Employee or the
Company files a written demand for arbitration at a regional office of the
Association within 30 calendar days following the date the Employee notifies
the Company that he disputes the accuracy of the assertion of Permanent
Disability or Cause or Change in Control, or the Company notifies the Employee
that it disputes the accuracy of the assertion of Good Reason or Change in
Control. In no event shall a demand for arbitration be made after the date
when institution of legal or equitable proceedings based on the dispute in
question would be barred by any applicable statute of limitations. In the
event the Arbitrator finds that a Change in Control has occurred and the
termination by the Company was not for Permanent Disability or not for Cause
or that the termination by the Employee was for Good Reason, the Employee
shall not be entitled to reinstatement, but shall be entitled to the
appropriate benefits under Section 4 and payment of his reasonable legal
expenses in such arbitration. Any reasonableness of costs and expenses shall
be determined by the arbitrator.
Should the Employee at any time bring suit against the Company for breach
of this Agreement (not including any matter required to be submitted to
arbitration pursuant to the foregoing provisions of this Section 5) and obtain
judgment in his favor, the Company shall pay his reasonable legal expenses and
costs of suit. The provisions of this Section 5 shall in no way limit the
right of any party to exercise self-help remedies or to obtain provisional or
ancillary relief from a court of competent jurisdiction before, after, or
during the pendency of any arbitration proceeding. The exercise of such
remedy shall not waive the right of any party to resort to arbitration. The
parties each acknowledge and agree that to any extent any legal proceeding
other than arbitration is permitted in this Section 5, the Superior Court of
the State of Nevada in and for Xxxxx County, and the associated federal and
appellate courts, shall have exclusive jurisdiction over such legal
proceedings.
Except as may be necessary to enter judgment upon the award or to the
extent required by applicable law, all claims, defenses and proceedings
(including, without limiting the generality of the foregoing, the existence of
the controversy and the fact that there is an arbitration proceeding) shall be
treated in a confidential manner by the arbitrator, the parties and their
counsel, and each of their agents and employees, and all others acting on
behalf or in concert with them. Without limiting the generality of the
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foregoing, no one shall divulge to any third party or person not directly
involved in the arbitration, the contents of the pleadings, papers, orders,
hearings, trials, or awards in the arbitration, except as may be necessary to
enter judgment upon an award as required by applicable law. Any court
proceedings relating to the arbitration hereunder, including, without limiting
the generality of the foregoing, to prevent or compel arbitration to perform,
correct, vacate or otherwise enforce an arbitration award, shall be filed
under seal with the court, to the extent permitted by law.
6. BENEFIT AND BINDING EFFECT
This Agreement shall inure to the benefit of and be binding upon the
Company, its successors and assigns, including but not limited to any
corporation, person or other entity which may acquire all or substantially all
of the assets and business of the Company or any corporation with or into
which the Company may be consolidated or merged and the Employee, his heirs,
executors, administrators and legal representatives, provided that the
obligations of the Employee hereunder may not be delegated.
7. OTHER AGREEMENTS
In the event the Company shall elect to insure all or part of its health
and long-term disability benefits, the Employee shall submit to such
reasonable physical examination as the Company may request.
Provided that the Company duly performs all of its obligations (if any)
arising by virtue of this Agreement, the Employee will not publicly disparage
the Company or its officers, directors, employees or agents and will refrain
from any action which would reasonably be expected to cause material adverse
public relations or embarrassment to the Company or to any of such persons.
The preceding sentence shall not apply to disclosures required by applicable
law, regulation or order of a court or governmental agency.
The Company may withhold from any amounts payable under this Agreement
all federal, state, local and foreign taxes as may be required to be withheld
pursuant to any applicable law or regulation.
8. NOTICES
All notices or other communications relating to this Agreement shall be
in writing and delivered personally or sent by registered or certified mail,
postage prepaid and return receipt requested, to the party concerned at the
address set forth below:
If to the Company, to: Southwest Gas Corporation
0000 Xxxxxx Xxxxxxxx Xxxx
Xxx Xxxxx, Xxxxxx 00000
Attn: General Counsel
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If to the Employee, to: [Employee's Name]
Either party may change the address to which notices are to be sent to it
by giving 10 days written notice of such change of address to the other party
in the manner provided above for giving notice. Notices will be considered
delivered on the date of personal delivery or on the date of deposit in the
United States mail in the manner provided for giving notice by mail.
9. PARACHUTE PAYMENTS
(a) In the event that any payment or distribution by the Company to or
for the benefit of the Employee (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement
or otherwise, but determined without regard to any additional
payments under this Section 9(a)) (a "PAYMENT") is determined to 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 Employee 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 pay to the Employee an additional payment (a
"GROSS-UP PAYMENT") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect
thereto) and Excise Tax imposed upon the Gross-Up Payment, the
Employee retains an amount of the Gross-Up Payment equal to the
Excise Tax imposed upon the Payments.
(b) Subject to the provisions of Section 9(c), all determinations
required to be made under this Section 9, including whether and when
a Gross-Up Payment is required and the amount of such Gross-Up
Payment and the assumptions to be utilized in arriving at such
determination, shall be made by a nationally recognized certified
public accounting firm which is satisfactory to the Company (the
"ACCOUNTING FIRM"), which shall provide detailed supporting
calculations both to the Company and the Employee within 15 business
days after such determinations are requested by the Employee or the
Company. All fees and expenses of the Accounting Firm shall be
borne solely by the Company. Any Gross-Up Payment, as determined
pursuant to this Section 9(b), shall be paid by the Company to the
Employee within five days after the Company's receipt of the
Accounting Firm's determination. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the
Company should have been made ("UNDERPAYMENT"), consistent with the
calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 9(c) and the
Employee thereafter is required to make a payment of any Excise Tax,
the Accounting Firm shall determine the amount of the Underpayment
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that has occurred and any such Underpayment shall be promptly paid
by the Company to or for the benefit of the Employee.
(c) The Employee shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the
payment by the Company of a Gross-Up Payment. Such notification
shall be given as soon as practicable but no later than ten business
days after the Employee is informed in writing of such claim and
shall apprise the Company of the nature of such claim, and the date
on which such claim is requested to be paid. The Employee shall not
pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the
Employee in writing prior to the expiration of such period that it
desires to contest such claim, the Employee shall:
(i) give the Company any information reasonably requested by the
Company relating to such claim,
(ii) take such action in connection with contesting such claim as
the Company shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order to
contest such claim effectively, and
(iv) permit the Company to participate in any proceedings relating
to such claim;
provided, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties)
incurred in connection with such contest and shall indemnify and
hold the Employee harmless, on an after-tax basis, for any Excise
Tax or income tax (including interest and penalties with respect
thereto) imposed as a result of such representation and payment of
costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings
taken in connection with such contest and, at its sole option, may
pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of
such claim and may, at its sole option, either direct the Employee
to pay the tax claimed and xxx for a refund or contest the claim in
any permissible manner, and the Employee agrees to prosecute such
contest to a determination before any administrative tribunal, in a
court of initial jurisdiction and in one or more appellate courts,
as the Company shall determine; provided, however, that if the
Company directs the Employee to pay such claim and xxx for a refund,
the Company shall advance the amount of such payment to the
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Employee, on an interest-free basis and shall indemnify and hold the
Employee harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of taxes
for the taxable year of the Employee with respect to which such
contested amount is claimed to be due is limited solely to such
contested amount. Furthermore, the Company's control of the contest
shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Employee shall be entitled to
settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Employee of an amount advanced by the
Company pursuant to Section 9(c) the Employee becomes entitled to
receive any refund with respect to such claim, or if the actual
amount of the Excise Tax is less than the amount of the Gross-Up
Payment, the Employee shall (subject to the Company's complying with
the requirements of Section 9(c)) promptly pay to the Company the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto) or the amount of such
difference. If, after the receipt by the Employee of an amount
advanced by the Company pursuant to Section 9(c), a determination is
made that the Employee shall not be entitled to any refund with
respect to such claim and the Company does not notify the Employee
in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the
amount of Gross-Up Payment required to be paid.
10. ENTIRE AGREEMENT
The entire understanding and agreement between the parties has been
incorporated into this Agreement, and this Agreement supersedes all other
agreements, negotiations, and understandings between the Employee and the
Company with respect to the Employee's rights in the event of a change in
control of the Company (including any prior change in control agreements
between the Employee and the Company). This Agreement may not be amended
orally, but only by an agreement in writing signed by both parties.
11. GOVERNING LAW
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of Nevada. It is intended by the parties that this
Agreement be interpreted in accordance with its fair and simple meaning, not
for or against either party, and neither party shall be deemed to be the
drafter of this Agreement.
Prior to a Change in Control, nothing in this Agreement shall confer upon
the Employee any right to continue in the employ or other service of the
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Company or constitute any contract or agreement of employment or service, nor
shall interfere in any way with the right of the Company to change Employee's
compensation or other benefits or to terminate the employment of the Employee,
with or without cause; and, following a Change in Control, the Employee's only
rights under this Agreement shall be to receive those benefits provided for in
Section 4(c) following a termination described in Section 4(a).
12. CAPTIONS; COUNTERPARTS
The section headings and captions included herein are for convenience and
shall not constitute a part of this Agreement.
This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
shall together constitute one and the same Agreement.
13. FUNDING OF CERTAIN SEVERANCE BENEFITS
The method of providing funding for the amounts payable under Section
4(c)(v) shall be by way of a Rabbi Trust. Such trust shall be established by
the Company upon a Change in Control with either (i) a major bank located in a
major city of the United States or (ii) any other party located in a major
city of the United States that may be granted corporate trustee powers under
state law, in favor of the Employee. Such trust shall not be revocable and
shall continue until such trust is terminated in accordance with the
termination provisions set forth in the Trust Agreement described in Section
4(c)(v).
14. SEVERABILITY
If any portion or provision of this Agreement is determined by
arbitration or by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the remaining portions or provisions hereof shall not be
affected.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
SOUTHWEST GAS CORPORATION
By:
Xxxxxxx X. Xxxxxx
Its: President and Chief Executive Officer
THE EMPLOYEE
[Employee]
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