FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
(Mark One)
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-1160
THE PROVIDENCE GAS COMPANY
(Exact name of registrant as specified in its charter)
Rhode Island 05-0203650
(State or other jurisdiction of (I.R.S. Employer)
incorporation or organization) Identification No.)
100 Weybosset Street, Providence, Rhode Island 02903
(Address of principal executive offices)
(Zip Code)
401-272-5040
Registrant's telephone number, including area code
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No .
APPLICABLE ONLY TO CORPORATE ISSUERS:
Common Stock, $1.00 par value; 1,243,598 shares outstanding at
February 10, 1995.
THE PROVIDENCE GAS COMPANY
FORM 10-Q
DECEMBER 31, 1994
PART I: FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements
Consolidated Statements of Income for the
three and twelve months ended
December 31, 1994 and 1993 I-1
Consolidated Balance Sheets as of
December 31, 1994, December 31, 1993
and September 30, 1994 I-2
Consolidated Statements of Cash Flows for the
three months ended December 31, 1994 and 1993 I-3
Consolidated Statements of Capitalization as of
December 31, 1994, December 31, 1993
and September 30, 1994 I-4
Notes to Consolidated Financial Statements I-5
Item 2 - Management's Discussion and Analysis of
Financial Conditions and Results of Operations I-7
PART II: OTHER INFORMATION
Item 6 - Exhibits, Reports on Form 8-K and Signature II-1
PAGE i
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
THE PROVIDENCE GAS COMPANY
STATEMENTS OF INCOME
FOR THE PERIODS ENDED DECEMBER 31
(Unaudited)
THREE MONTHS TWELVE MONTHS
1994 1993 1994 1993
(thousands, except per share amounts)
Operating revenues $48,282 $62,055 $205,370 $207,533
Cost of gas sold 25,692 38,369 120,638 126,035
Operating margin 22,590 23,686 84,732 81,498
Operating expenses:
Other operation 9,844 10,317 41,035 40,300
Maintenance 854 767 3,822 3,480
Depreciation and amortization 2,485 2,321 9,509 8,987
Taxes -
State gross receipts 1,293 1,863 5,756 6,091
Local property and other 1,596 1,588 6,095 6,680
Federal income 1,675 1,858 4,186 3,309
Total operating expenses 17,747 18,714 70,403 68,847
Operating income 4,843 4,972 14,329 12,651
Other income, net 149 194 364 357
Income before interest expense 4,992 5,166 14,693 13,008
Interest expense:
Long-term debt 1,283 1,118 5,152 5,170
Other 388 271 1,358 1,261
Interest capitalized (22) (22) (107) (78)
1,649 1,367 6,403 6,353
Net income 3,343 3,799 8,290 6,655
Dividends on preferred stock (174) (174) (696) (696)
Net income applicable to
common stock $ 3,169 $ 3,625 $ 7,594 $ 5,959
======= ======= ======== ========
Earnings per common share $ 2.55 $ 2.91 $ 6.11 $ 4.79
======= ======= ======== ========
Dividends paid per common share $ .92 $ .89 $ 3.65 $ 3.56
======= ======= ======== ========
Weighted average common shares
outstanding 1,243.6 1,243.6 1,243.6 1,243.6
======= ======= ======== ========
PAGE I-1
THE PROVIDENCE GAS COMPANY
BALANCE SHEETS
(Unaudited)
(Thousands)
December 31, December 31, September 30,
1994 1993 1994
ASSETS
Gas plant, at original cost $235,129 $217,125 $230,926
Less - Accumulated depreciation and
utility plant acquisition adjustment 81,721 73,337 79,447
153,408 143,788 151,479
Current assets:
Cash and temporary cash investments 3,087 3,545 844
Accounts receivable, less allowance of
$2,353 at 12/31/94, $2,179 at 12/31/93
and $2,923 at 9/30/94 29,393 30,746 17,664
Unbilled revenues 11,264 12,016 2,877
Deferred gas costs 5,319 18,389 15,349
Inventories, at average cost -
Liquefied natural gas, propane and
underground storage 10,702 9,846 11,123
Materials and supplies 1,464 1,781 1,590
Prepaid and refundable taxes 2,349 4,060 3,507
Prepayments 844 1,011 1,458
64,422 81,394 54,412
Deferred charges and other assets 15,148 16,440 15,286
Total assets $232,978 $241,622 $221,177
======== ======== ========
CAPITALIZATION AND LIABILITIES
Capitalization: $138,222 $135,823 $137,919
Current liabilities:
Notes payable 32,600 35,000 24,700
Current portion of long-term debt 2,091 2,071 2,085
Accounts payable 20,322 26,161 18,039
Accrued taxes 7,603 7,727 6,057
Accrued vacation 1,562 1,681 1,543
Customer deposits 3,562 3,157 3,520
Other 2,750 3,303 2,779
70,490 79,100 58,723
Deferred credits and reserves:
Accumulated deferred Federal income
taxes 15,272 18,312 15,065
Unamortized investment tax credits 2,787 2,945 2,826
Other 6,207 5,442 6,644
24,266 26,699 24,535
Total capitalization and liabilities $232,978 $241,622 $221,177
======== ======== ========
PAGE I-2
THE PROVIDENCE GAS COMPANY
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED DECEMBER 31
(Unaudited)
1994 1993
(Thousands of Dollars)
Cash provided by (used for)
Operations:
Net income $ 3,343 $ 3,799
Items not requiring cash:
Depreciation and amortization 2,485 2,321
Deferred Federal income taxes 207 118
Amortization of investment tax credits (39) (39)
Changes in assets and liabilities
which provided (used) cash:
Accounts receivable (11,729) (13,806)
Unbilled revenues (8,387) (9,229)
Deferred gas costs 10,030 580
Inventories 547 1,499
Prepaid and refundable taxes 1,158 3,028
Prepayments 614 (174)
Accounts payable 2,283 5,098
Accrued taxes 1,546 637
Accrued vacation, customer deposits
and other 32 627
Net cash provided by (used for) operations 2,090 (5,541)
Investment Activities:
Expenditures for property, plant and
equipment (4,496) (4,220)
Deferred charges and other (214) (96)
Total (4,710) (4,316)
Financing Activities:
Issuance of mortgage bonds - 16,000
Payments on long-term debt (1,719) (114)
Increase (decrease) in notes payable, net 7,900 (1,800)
Cash dividends on preferred stock (174) (174)
Cash dividends on common stock (1,144) (1,107)
Total 4,863 12,805
Increase in cash & temporary cash
investments 2,243 2,948
Cash and cash equivalents at beginning
of period 844 597
Cash and cash equivalents at end of period $ 3,087 $ 3,545
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period-
Interest (net of amount capitalized) $ 1,182 $ 911
Income taxes (net of refunds) $ 200 $ 93
PAGE I-3
THE PROVIDENCE GAS COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(UNAUDITED)
(Thousands)
December 31, December 31, September 30,
1994 1993 1994
Common stock equity:
Common stock, $1 par
Authorized - 2,500 shares
Outstanding - 1,244 as of 12/31/94,
12/31/93 and 9/30/94 $ 1,244 $ 1,244 $ 1,244
Amount paid in excess of par 37,886 36,452 37,883
Retained earnings 32,739 29,683 30,714
Total common stock equity 71,869 67,379 69,841
Cumulative preferred stock:
Redeemable 8.70% Series, $100 par
Authorized - 80 shares
Outstanding - 80 shares as of
12/31/94, 12/31/93 and 9/30/94 8,000 8,000 8,000
Long-term debt:
First mortgage bonds 59,400 61,000 61,000
Capital leases 1,044 1,515 1,163
Total long-term debt 60,444 62,515 62,163
Less: current portion 2,091 2,071 2,085
Long-term debt, net 58,353 60,444 60,078
Total capitalization $138,222 $ 135,823 $137,919
======== ========= ========
PAGE I-4
THE PROVIDENCE GAS COMPANY
Notes to Consolidated Financial Statements
Accounting Policies
It is the Registrant's opinion that the financial information
contained in this report reflects all normal, recurring adjustments
necessary to a fair statement of the results for the periods
reported; however, such results are not necessarily indicative of
results to be expected for the year, due to the seasonal nature of
the Registrant's operations. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted in this Form 10-Q pursuant to the rules and
regulations of the Securities and Exchange Commission. However, the
disclosures herein when read with the annual report for 1994 filed
on Form 10-K are adequate to make the information presented not
misleading.
Reclassifications
Certain prior period consolidated balance sheet amounts have
been reclassified for consistent presentation with the current year.
Environmental Matters
Federal, state and local laws and regulations establishing
standards and requirements for protection of the environment have
increased in number and in scope within recent years. The
Registrant cannot predict the future impact of such standards and
requirements which are subject to change and can take effect
retroactively. The Registrant continues to monitor the status of
these laws and regulations. Such monitoring involves the review of
past and current operations and properties. To the best of its
knowledge, subject to the following paragraph, the Registrant
believes it is in substantial compliance with such laws and
regulations. However, should future costs be incurred, relating to
the items mentioned below, the Registrant anticipates recovery from
third parties or through rates.
The Registrant is aware of four sites at which it may incur
costs for environmental investigation and clean-up. Based on
current available information, however, the amount of costs, if any,
related to these sites will not be material to the operation of the
Registrant or its financial position.
Management anticipates requesting rate relief for all costs
related to the environmental matters and believes that the ultimate
resolution of these matters will not have a materially adverse
effect on the Registrant's results of operations and financial
condition.
PAGE I-5
Gas Supply Restructuring
Federal Energy Regulatory Commission (FERC) Order 636 and other
related orders (the Orders) have significantly changed the structure
and types of services offered by pipeline transportation companies.
The most significant components of the restructuring occurred in
November 1993. In response to these changes, the Registrant has
successfully negotiated new pipeline transportation and gas storage
contracts.
At the same time, a number of contracts with gas suppliers have
been negotiated to complement the transportation and storage
contracts. The portfolio of supply contracts is designed to be
market responsive and is diversified with respect to contract
lengths, source location, and other contract terms. On a periodic
basis, the Registrant reviews all of its contracts to ensure a
diverse, secure, flexible and economical supply portfolio is
maintained.
To meet the requirements of the Orders, the pipelines have
incurred significant costs, collectively known as transition costs.
The majority of these costs will be reimbursed by the pipeline's
customers including the Registrant. Based upon current information,
the Registrant anticipates its transition costs to total between $16
million and $19 million of which $8.3 million has been included in
the Cost of Gas Adjustment (CGA) clause and is currently being
collected from customers. The remaining minimum obligation of $7.7
million has been recorded in the accompanying consolidated balance
sheet along with a regulatory asset anticipating future recovery
through the CGA.
The Registrant's ultimate liability may differ from the above
estimates based on FERC settlements with the Registrant's pipeline
transportation suppliers. FERC has approved settlements with two of
its pipelines, which account for the bulk of its transition costs.
Negotiations are continuing on the two additional pipelines, but
recent developments have considerably reduced the uncertainty
surrounding the two remaining pipelines. Therefore, the Registrant
believes that its current range for transition costs is appropriate.
PAGE I-6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
For the current quarter, the Registrant's current operating
revenues, operating margin and net income have decreased over the
comparable period presented, as shown in the table below:
(thousands where applicable)
PERCENT
1994 1993 VARIANCE VARIANCE
Operating revenues $48,282 $62,055 $(13,773) (22.2)
======= ======= ======== =======
Operating margin $22,590 $23,686 $ (1,096) (4.6)
======= ======= ======== =======
Net income applicable
to common stock $ 3,169 $ 3,625 $ (456) (12.6)
======= ======= ======== =======
Factors having a direct impact on these results were:
During the latest quarter, the Registrant experienced
unseasonably warm weather resulting in temperatures averaging 18.5
percent warmer than last year. This loss of heating load due to the
warmer temperatures represents $2.5 million. The adverse impact of
the warm weather was offset by approximately $1.0 million due to
rate design changes that went into effect in November 1993. This
makes the first quarter results incomparable to last year's first
quarter results. This $1.0 million will reverse itself throughout
the remainder of the fiscal year.
Another factor having an impact on the quarterly results was
the change in the Registrant's rate design that occurred in the
first quarter of fiscal 1994. The Rhode Island Public Utilities
Commission (RIPUC) approved the Registrant's request for a declining
block rate structure and an increased customer charge. This new
rate structure not only allows the Registrant to recover fixed costs
sooner but also protects the Registrant and its customers from
extreme changes in weather conditions. Had the Registrant not had
this type of rate structure, the effect of the current warm spell on
the Registrant's operating margin would have been more severe.
The net increase in the average number of customers for the
latest period as compared to last year was approximately 1,200 or
.8 percent. The modest increase was the result of new housing
PAGE I-7
construction and conversions from other energy sources offset by
shut-offs for non-payments and housing vacancies due to a stagnant
economy.
As a result of the warm temperatures experienced during the
latest quarter offset by a slight increase in customers, residential
sales, which provide the Registrant with its greater source of
operating margin, decreased 515 million cubic feet (MMcf) or 15.3
percent.
Overall, other operating and maintenance expenses decreased
approximately $400,000 or 3.5 percent. The primary reasons for the
decrease are attributable to a lower uncollectible revenue provision
due to the decrease in operating revenues, a reduction in labor and
related costs due to the restructuring initiative that occurred at
the Registrant in June 1994 and the impact of new technologies and
efficiency reviews as part of a continuous improvement program. The
restructuring savings, however, will be somewhat mitigated once the
Registrant's new positions have been filled. Offsetting the above
was an increase in maintenance expense due to the timing of expenses
associated with the Registrant's joint sealing program.
Taxes for the current quarter versus last year decreased
approximately $750,000 or 14 percent. The decrease in taxes, mainly
Federal income and state gross receipts tax, was the result of lower
pretax income and lower operating revenues, respectively.
Interest expense increased approximately $300,000 or 20.6
percent. An increase in short-term interest rates offset by a
slight decrease in weighted average short-term borrowings caused
short-term interest expense to increase. Furthermore, long-term
interest expense increased due to the issuance of First Mortgage
Bonds, Series Q.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant meets seasonal cash requirements and finances
its capital expenditures program on an interim basis through short-
term borrowings. For example, during the latest quarter, the
Registrant's accounts receivable and unbilled revenue have increased
$20.1 million. These fluctuations are the result of higher monthly
sales during the latest quarter and a moratorium on residential
shut-offs during the heating season. Because of these increases,
which negatively impact cashflow, the Registrant must borrow to
maintain an appropriate level of liquidity. Management believes its
available financings are sufficient to meet these seasonal needs.
The Registrant experienced a sharp increase in its net cash
provided by operations during the latest quarter as compared to last
year. The primary reason for the increase was due to the collection
of gas costs from the undercollection that existed in 1994.
PAGE I-8
In November 1993, the Registrant received proceeds of $16
million related to an issuance of First Mortgage Bonds, Series Q
(5.62%). The net proceeds received from the issuance were used to
pay down short-term debt. Short-term debt was earlier used to call
long-term debt bearing a higher interest rate. The previous
issuances called were First Mortgage Bonds, Series L (8.85%) and the
Series II Senior Debentures (8.50%). This issuance is expected to
generate annual interest savings of approximately $300,000, net of
tax.
The Registrant anticipates filing a rate case with the RIPUC
seeking a realignment of costs between rate classifications and a
general annual revenue increase.
The Registrant is currently reviewing its capitalization
structure with the intent of possibly changing appropriate ratios.
Capital expenditures for the latest quarter were $4.5 million
as compared to $4.2 million last year. The increase in capital
expenditures was for new and replacement mains, services, meters and
electronic meter reading equipment. Anticipated capital
expenditures for the next three years are expected to total between
$45 million to $55 million.
PAGE I-9
THE PROVIDENCE GAS COMPANY
PART II. OTHER INFORMATION
Item 6(a). Exhibits
10.1 Employment agreements dated December 19, 1994 between all
officers listed below. (All officers listed below have
identical contracts.)
Schedule of Officers with Employment Agreements
Date of
Name Title Execution Date
James DeMetro Vice President 12/19/94
James H. Dodge Chairman, President 12/19/94
and Chief Executive
Officer
Gary S. Gillheeney Vice President 12/19/94
Alycia L. Goody Vice President, 12/19/94
General Counsel and
Secretary
William D. Mullin Vice President 12/19/94
Robert W. Owens Vice President 12/19/94
Bruce G. Wilde Vice President 12/19/94
PAGE II-1
THE PROVIDENCE GAS COMPANY
PART II. OTHER INFORMATION
Item 6 (b). Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
It is the opinion of management that the financial information
contained in this report reflects all adjustments necessary to a
fair statement of results for the period reported, but such results
are not necessarily indicative of results to be expected for the
year, due to the seasonal nature of the Registrant's
gas operations. All accounting policies and practices have been
applied in a manner consistent with prior periods.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
The Providence Gas Company
(Registrant)
BY:/s/ Gary S. Gillheeney
GARY S. GILLHEENEY
Vice President, Financial and
Information Services, Treasurer
and Assistant Secretary
Date: February 10, 1995
PAGE II - 2
THE PROVIDENCE GAS COMPANY
PART II. OTHER INFORMATION
Item 6 (b). Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter for which this
report is filed.
It is the opinion of management that the financial information
contained in this report reflects all adjustments necessary to a
fair statement of results for the period reported, but such results
are not necessarily indicative of results to be expected for the
year, due to the seasonal nature of the Registrant's
gas operations. All accounting policies and practices
have been applied in a manner consistent with prior periods.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly author-
ized.
The Providence Gas Company
(Registrant)
BY:
GARY S. GILLHEENEY
Vice President, Financial and
Information Services, Treasurer
and Assistant Secretary
Date: February 10, 1995
PAGE II - 2
EMPLOYMENT AGREEMENT
This Employment Agreement is made this 19th day of
December 1994, by and between PROVIDENCE GAS COMPANY, a
Rhode Island corporation with principal offices at 100 Weybosset
Street, Providence, Rhode Island 02903 (the "Company") and Name
of Officer , of Town of Residence (the "Employee"), with
respect to the following facts:
1. The Employee is currently employed by the Company as
Title of Officer ; the Company has confidence in the managerial
and other skills of the Employee and desires to continue the
employment of the Employee on the terms and conditions hereinafter
contained; and in order to encourage the full attention by the
Employee to his duties in his capacity aforesaid the Company wishes
to make provision for certain protections for the Employee in the
event of the termination of his employment under specified
conditions.
2. The Employee is willing to continue to be employed by the
Company on such terms and conditions and with the benefit of such
protections.
NOW, THEREFORE, in consideration of the mutual promises
hereinafter contained, the parties hereto mutually agree as follows:
1. Term of Agreement
The Company hereby employs the Employee, and the Employee hereby
accepts employment by the Company, for a term commencing with the
date hereof and continuing indefinitely hereafter, subject to
termination in accordance with the provisions of paragraphs 6, 7 and
8, below.
2. Capacity and Responsibilities
The Employee shall be employed by the Company in the capacity of
Title of Officer of the Company, or in such other executive
capacities or positions as the board of directors of the Company may
determine from time to time, with such duties and authority as
customarily appertain to such office or other capacities or
positions, and with such additional duties and authority as may be
agreed upon by the Employee and the Company from time to time.
While in the employ of the Company, the Employee agrees to serve the
Company faithfully and diligently and to use his best efforts to
promote the interests of the Company.
3. Compensation
The Company agrees to compensate the Employee for his services
rendered hereunder at a rate per annum which shall be commensurate
with the Employee's office with the Company and shall be determined
from time to time by the board of directors of the Company, which
rate shall, however, in no case be less than the rate of
compensation being paid to the Employee at the time of execution of
this Agreement or such higher rate as may be in effect for the
Employee from time to time during his employment by the Company.
Such compensation shall be payable in substantially equal monthly
installments, in arrears, or in such other installments, not less
often than monthly, as the board of directors of the Company may
approve from time to time, subject to such withholdings and
deductions as may be required by law. For the purposes of this
paragraph, the term "compensation" shall mean the Employee's base
annual compensation as established by the board of directors and
shall exclude (i) any incentive pay, bonuses or similar
compensation, (ii) the value of any fringe benefits, and (iii)
contributions by the Company to or for the account of the Employee
under the Voluntary Investment Plan of Providence Energy Corporation
or any other contributory plan of Providence Energy Corporation or
of the Company in effect from time to time.
4.Reimbursement for Expenses
The Employee shall be reimbursed for such expenses as may be
reasonably incurred in connection with the carrying out of the
Employee's duties hereunder, subject to the presentation of vouchers
in such detail as the board of directors may require from time to
time.
5. Vacation; Fringe Benefits
The Employee shall be entitled to the same vacation privileges and
other fringe benefits as those enjoyed by other salaried employees
of the Company generally, but subject to such variations as may be
determined by the board of directors of the Company from time to
time to reflect differences between the compensation levels and
terms of employment of the Employee and other salaried employees of
the Company. In any case, such vacation privileges and other
fringe benefits shall at no time be less favorable to the Employee
than those currently enjoyed by the Employee.
6. Termination (Absent Change in Control)
If there shall have been no Change in Control (as defined
hereinafter), this Agreement and the employment of the Employee
hereunder may be terminated as follows:
(a) by the Employee, on not less than thirty (30) days' notice to
the Company; or
(b) by the Company, on not less than thirty (30) days' notice to
the Employee; provided, that if the termination of the Employee's
employment by the Company shall be without cause (as defined
hereinafter), the Employee shall be entitled to the payment of an
amount equal to the Employee's annual compensation (as defined in
paragraph 3, above), as reportable to the Internal Revenue Service
for federal income tax purposes, at the rate in effect immediately
prior to such termination, such amount to be paid to the Employee in
twelve (12) consecutive equal monthly installments on the last day
of each month beginning with the month next following the month in
which the termination is effective. If and for as long as the
Employee is entitled to payments under this paragraph, the Company
will continue to provide to the Employee, at the Company's expense,
the health and medical insurance benefits being provided to the
Employee at the time of termination of his employment.
7. Termination (After Change in Control)
(a) If a Change in Control shall have occurred, this Agreement and
the employment of the Employee hereunder may be terminated as
follows:
(i) by the Employee, on not less than thirty (30) days' notice to
the Company; or
(ii) by the Company, at any time on not less than thirty (30)
days' notice to the Employee,
provided that (A) if there shall have been a Change in Employment
Conditions, as defined hereinafter, prior to the exercise by the
Employee of his termination rights referred to above, or (B) if the
termination of the Employee's employment by the Company shall be
without cause (as defined hereinafter), then in either case the
Employee shall be entitled to the payment of an amount equal to the
sum of (i) the aggregate of his compensation (as defined in
paragraph 3, above) paid or payable with respect to the thirty-six
months of employment next preceding the date of termination, as
reportable to the Internal Revenue Service for federal income tax
purposes, plus (ii) the aggregate of the amounts paid or payable
under the Providence Energy Corporation Performance and Equity
Incentive Plan (or under such other incentive plan of the Company or
of Providence Energy Corporation as may be in effect from time to
time) for the three full fiscal years next preceding the date of
termination. Such amount shall be paid to the Employee in twenty-
four (24) consecutive equal monthly installments on the last day of
each month beginning with the month next following the month in
which the termination is effective. If and for as long as the
Employee is entitled to payments under this paragraph, the Company
will continue to provide to the Employee, at the Company's expense,
the health and medical insurance benefits being provided to the
Employee at the time of termination of his employment.
(b) Any payment provided for in paragraph 6(b) or in subparagraph
(a), above, shall be made without reduction whether or not any
portion thereof shall be deemed an "excess parachute payment" under
the provisions of Section 280G of the Internal Revenue Code of 1986,
as the same may be amended from time to time.
(c) For the purposes of this Agreement, the Employee's employment
shall be deemed to have been terminated for cause only if there
shall have been an act of fraud, misappropriation or embezzlement on
the part of the Employee. Notwithstanding the foregoing, the
Employee shall not be deemed to have been terminated for cause
unless and until there shall have been delivered to the Employee a
copy of a resolution duly adopted by the unanimous vote of the
entire membership of the Company's board of directors at a meeting
of such board duly called and held for that purpose (after
reasonable notice to the Employee and an opportunity for the
Employee, together with the Employee's counsel, to be heard by the
board) finding that in the good faith opinion of the board the
Employee was guilty of conduct set forth in the first sentence of
this subparagraph (c) and specifying the particulars thereof in
detail.
8. Other Termination
(a) Notwithstanding the provisions of paragraphs 6 and 7, above,
this Agreement and the employment of the Employee hereunder shall
terminate without further action by either party upon the earlier of
(i) the attainment by the Employee of his normal retirement age
under the Company's pension plan for salaried employees;
(ii) the permanent disability of the Employee; or
(iii) the death of the Employee; provided, that if at the time of
his death the Employee is entitled to payments under paragraph 6(b)
or paragraph 7(a), above, such payments shall be made following his
death to his estate.
(b) For the purposes of this Agreement, the Employee shall be
deemed to be permanently disabled if (i) on the basis of medical
evidence reasonably satisfactory to the board of directors of the
Company, the board of directors finds that the Employee is unable to
carry out substantially his duties hereunder as a result of bodily
injury or disease, or mental condition, either occupational or non-
occupational in cause, and (ii) such disability shall have continued
for a period of six (6) consecutive months.
(c) If the Employee and the Company shall not be in agreement as to
whether he is permanently disabled for the purposes of this
Agreement, the matter shall be referred to a panel of three medical
doctors, one of which shall be selected by the Employee, one of
which shall be selected by the Company, and one of which shall be
selected by the two doctors as so selected, and the decision of a
majority of the panel with respect to the question of whether the
Employee is or is not permanently disabled shall be binding upon the
Employee and the Company. The expenses of any such referral shall
be borne by the party against whom the decision of the panel is
rendered. The Employee may be required by the Company to submit to
medical examination at any time during the period of his employment
hereunder, but not more often than quarter-annually, to determine
whether a permanent disability exists for the purposes of this
Agreement.
9. Definition of Change in Control
For the purposes of this Agreement, a Change in Control shall be
deemed to have occurred if
(a) there shall be consummated (i) any consolidation
or merger of Providence Energy Corporation, a
Rhode Island corporation and the holder of all of
the outstanding capital stock of the Company
("Providence Energy"), in which Providence Energy
is not the continuing or surviving corporation,
or pursuant to which shares of Providence
Energy's common stock are converted into cash,
securities or other property, other than a merger
of Providence Energy in which the holders of
Providence Energy's common stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving
corporation immediately after the merger, or (ii)
any sale, lease, exchange or other transfer (in
one transaction or a series of related
transactions) of all or substantially all of the
assets of the Company; or
(b) the shareholders of the Company or of Providence
Energy approve any plan or proposal for the
liquidation or dissolution of the Company or of
Providence Energy; or
(c) any person (as such term is used in Sections
13(d) and 14(b)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") ), other
than Providence Energy or a successor corporation
resulting from a merger excluded under clause (i)
of subparagraph (a), above, shall become directly
or indirectly the owner or the beneficial owner
(within the meaning of Rule l3d-3 under the
Exchange Act) of thirty percent (30%) or more of
the outstanding common stock of the Company, or
any person (as such term is so used) shall become
directly or indirectly the owner or the
beneficial owner (within the meaning of said Rule
l3d-3) of thirty percent (30%) or more of the
outstanding common stock of Providence Energy.
10. Definition of Change in Employment Conditions
For the purposes of this Agreement, a "Change in
Employment Conditions" shall mean any of the following:
(a) the assignment to the Employee by the Company of
duties inconsistent with the Employee's position,
duties, responsibilities and status with the
Company as Name of
Officer , or a change in the Employee's titles
or offices as in effect immediately prior to a
Change in Control, or any removal of the Employee
from any of such positions, except in connection
with the termination of his employment for cause
or as a result of the Employee's retirement,
permanent disability, or death;
(b) a reduction by the Company in the Employee's
compensation (as defined in paragraph 3, above)
as in effect on the date hereof or as the same
may be increased from time to time during the
term of this Agreement, or the Company's
failure to increase (within 12 months of the
Employee's last increase in compensation) the
Employee's compensation after a Change in Control
in an amount which at least equals, on a
percentage basis, the weighted average percentage
increase in compensation for all officers of the
Company effected in the preceding 12 months;
(c) any failure by the Company or Providence Energy
to continue in effect any benefit plan or
arrangement in which the Employee is
participating at the time of a Change in Control
(or any other plans providing the Employee with
substantially similar benefits) (hereinafter
referred to as "Benefit Plans"), or the taking
of any action by the Company or by Providence
Energy which would adversely affect the
Employee's participation in or materially reduce
the Employee's benefits under any such Benefit
Plan or deprive the Employee of any material
fringe benefit enjoyed by the Employee at the
time of a Change in Control;
(d) a relocation of the Company's principal executive
offices to a location outside of the greater
Providence, Rhode Island area, or the Employee's
relocation to any place other than the location
at which the Employee performed his duties prior
to a Change in Control, except for required
travel by the Employee on the Company's business
to an extent substantially consistent with the
Employee's business travel obligations at the
time of a Change in Control;
(e) any failure by the Company to provide the
Employee with the number of paid vacation days to
which the Employee is entitled at the time of a
Change in Control; or
(f) any breach by the Company of any material
provision of this Agreement.
11. Confidentiality and Noncompetition.
(a) Confidentiality. During the term of this
Agreement and thereafter in perpetuity, the Employee will not
directly or indirectly divulge or appropriate to his own use, or to
the use of any third party, any Trade Secrets, other secret or
Confidential Information, knowledge or financial information of the
Company or any of the Company's subsidiaries or affiliates
(hereinafter, the Company and its subsidiaries and affiliates shall
be collectively referred to as the "Company Group"), except as may
be in the public domain other than by violation of this Agreement.
(b) Noncompetition. From the date hereof until two
(2) years after the termination of his employment hereunder, the
Employee will not (i) directly or indirectly own any equity or
proprietary interest in (except for ownership of shares in a
publicly-traded company not exceeding 5% of any class of outstanding
securities), or be an employee, agent, director, advisor or
consultant to or for any corporation (other than the Company Group),
business enterprise or any person engaged anywhere in the State of
Rhode Island or the Commonwealth of Massachusetts, whether on his
own behalf or on behalf of any person other than the Company Group,
in the manufacture, procuring, sale, marketing, promotion or
distribution of any product or product lines functioning
competitively with any product or product lines of the Company Group
during the term of this Agreement, and the Employee will not assist
in, manage or supervise any of the foregoing activities; (ii)
undertake any action to induce or cause any customer or client of
the Company Group to discontinue any part of its business with the
Company Group; (iii) cause, induce or in any way facilitate the
employment by any other person or organization of any employee of or
consultant to the Company Group, provided, that this covenant shall
become operative only upon the termination of the Employee's
employment; or (iv) take or assist directly or indirectly in the
taking, by acting as consultant to a third party or otherwise, of
any position on any matter involving the Company and pending before
any state or other public agency, when such position is adverse to
the position being promoted before such agency at the time by the
Company.
(c) Definitions. "Trade Secrets" as used herein means
all secret discoveries, inventions, formulae, designs, methods,
processes, techniques of production and know-how relating to the
Company Group's business. "Confidential Information" as used herein
means the Company Group's internal policies and procedures,
suppliers, customers, financial information and marketing practices,
as well as secret discoveries, inventions, formulae, designs,
techniques of production, know-how and other information relating to
the Company Group's business not rising to the level of a trade
secret under applicable law.
(d) The breach by the Employee of any of the covenants
contained in this Paragraph 11 shall relieve the Company of all
further payment obligations under Paragraph 6 or Paragraph 7.
12. Successor to the Company
The Company will require any successor to or assignee
of (whether direct or indirect, by purchase, merger, consolidation
or otherwise) all or substantially all of the business and/or assets
of the Company, by agreement, expressly, absolutely and
unconditionally to assume 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 or assignment had taken
place. Any failure of the Company to obtain such agreement prior to
the effectiveness of any such succession or assignment shall be
deemed a breach of a material provision of this Agreement. As used
in this Agreement, "Company" shall include any successor to or
assignee of the Company's business and/or assets as aforesaid which
executes and delivers the agreement provided for in this paragraph
12 or which otherwise becomes bound by all the terms and provisions
of this Agreement by operation of law.
13. Performance and Equity Incentive Plan
Nothing in this agreement shall be deemed to alter or
modify in any way such rights as the Employee may now or in the
future have under the 1992 Performance and Equity Incentive Plan
(the "Plan") of Providence Energy Corporation, as the same may be
amended from time to time, including without limitation rights of
the Employee with respect to the accelerated vesting of Grant Shares
(as defined in the Plan) under certain circumstances as provided in
the Plan.
14. Notices
Any notice given or required to be furnished to the
Employee under this Agreement shall be mailed to him by registered
mail, postage prepaid, at his last-known mailing address as the same
appears on the records of the Company, or at such other address as
he may furnish to the Company in writing for the purpose. Any
notice given or required to be furnished to the Company hereunder
shall be mailed to it by registered mail, postage prepaid, at 100
Weybosset Street, Providence, Rhode Island 02903, attention:
Secretary, or at such other address as the Company may furnish to
the Employee in writing for the purpose. Any such notice shall be
deemed to have been given when mailed in accordance with the
foregoing.
15. Termination of Prior Employment Agreements
This agreement is intended to supersede all prior
employment agreements, oral or written, between the Employee and the
Company, all of which are hereby terminated and cancelled. Neither
the Company nor the Employee shall have any further rights against
or obligations to the other under any of such prior agreements.
16. Binding Effect, etc.
This Agreement shall be binding upon and inure to the
benefit of the Employee and his heirs and the representatives of his
estate. The interests of the Employee hereunder shall not be
assignable. This Agreement shall also be binding upon and shall
inure to the benefit of the Company and its successors and assigns.
17. Applicable Law
This Agreement shall be governed in all respects by the
laws of the State of Rhode Island.
IN WITNESS WHEREOF, the parties have executed this
Employment Agreement as of the day and year first above written.
PROVIDENCE GAS COMPANY
By:/s/ James H. Dodge /s/ Signature of Officer
James H. Dodge Name of Officer
Chairman, President, and CEO