EXHIBIT 10-151
CHANGE IN CONTROL AGREEMENT
Dear Mr. Torgerson:
Washington Energy Company and its affiliated companies (the Company) and
its Board of Directors recognize and insist that Company executives
exclusively consider and pursue the best interests of the Company and its
shareholders in maximizing the worth and potential of its shareholders
investment in any merger or acquisition by, with or of third parties. The
possibility of an associated Change in Control following such a merger or
acquisition can produce uncertainties as to the fair treatment of key
executives regardless of their value to the Company or their individual
merit. The Company is concerned that the potential for Change in Control
can make it difficult for key management personnel to function most
effectively in the best interest of the Company and its shareholders and
can make it difficult to retain such employees. In response to these
concerns, the Company s Board of Directors has determined that it is
appropriate to offer additional security to certain key management
personnel to better enable them to function effectively without distraction
in the event that uncertainties as to the future control of the Company
should arise.
Therefore, to induce you to remain in the employ of the Company and to
encourage a high level of effective management in the best interests of the
Company and its shareholders, this letter Agreement sets forth certain
benefits which the Company agrees will be provided to you if your
employment with the Company should be terminated other than for cause, or
by death, disability or normal retirement, subsequent to a "change in
control" of the Company as defined and set forth in this Agreement. As the
purpose of this Agreement is to provide you with stability of job tenure
without being discriminated against because of activities on behalf of the
Company and its shareholders in the face of possible "change in control" or
in the alternative to provide you with certain defined severance benefits
in the face of termination without cause or upon discriminatory treatment
after a "change in control," the provisions of this Agreement with regard
to benefits shall not apply unless and until a "change in control" occurs.
Further, the benefits set forth in Paragraph 7 of this Agreement will not
be provided if you cease to be in the Company's employ, even after a
"change in control" and during the term of this Agreement, because of
death, normal retirement, disability, "for cause," or because of voluntary
termination without good reason as they are defined herein.
1. TERM.
This Agreement will at all times have a three-year term. At such time
as either you or the Company give written notice to the other party that
this Agreement is to be terminated, then this Agreement will expire three
years from receipt of the notice. In any event, this Agreement will
terminate at your normal retirement date as defined herein.
2. CHANGE IN CONTROL.
For the purposes of invoking your benefits under this Agreement, a
"change in control" shall mean the occurrence of any one of the following
actions or events:
i. The acquisition by any person of the power, directly or
indirectly, to exercise a controlling influence over the management or
policies of the Company (either alone or pursuant to an arrangement or
understanding with one or more other persons), whether through the
ownership of voting securities, through one or more intermediary persons,
by contract, or otherwise; or
ii. The acquisition by a person (either alone or pursuant to an
arrangement or understanding with one or more other persons) of the
ownership or power to vote 25% or more of the outstanding voting securities
of the Company; or
iii. During a period of six years after the acquisition by any
person, directly or indirectly, of the ownership or power to vote 10k or
more of the outstanding voting securities of the Company, the ceasing of
the individuals who prior to such acquisition were Directors of the Company
(Prior Directors) to constitute a majority of the Board of Directors,
unless the nomination of each new Director was approved by a vote of a
majority of the Prior Directors;
iv. An arrangement, joint operating agreement, consolidation or
merger which results in a substantially new or combined entity in which the
controlling influence over the management or policies of the Company or the
combined entity ceases to reside in the Prior Directors.
The term "person" for purposes of this paragraph shall include a
natural person, corporation, partnership, association, joint-stock company,
trust fund, or organized group of persons.
3. DEATH, RETIREMENT AND DISABILITY.
In the event of your death, normal retirement, disability or voluntary
termination without good reason during the term hereof and following a
"change in control," you or your estate will be entitled to receive only
those applicable benefits under any plans, programs and policies in effect
with regard to the executives or salaried employees of the Company. For
the purposes of this Agreement, normal retirement and disability are
defined as follows:
i. Normal Retirement: Termination by the Company or you of your
employment based on normal retirement shall mean termination at age 65 or
such earlier or later age set in accordance with the retirement policy then
generally in effect with regard to the Company's salaried employees which
is not discriminatory as to you. Normal retirement shall also include
retirement in accordance with any retirement age or date established with
your consent.
ii. Disability: Disability as grounds for termination shall mean
physical or mental illness resulting in your absence from you duties with
the Company on a full time basis for 120 consecutive days following the
exhaustion of all current and accrued sick leave and vacation (as provided
by Company policy to all salaried employees on a non-discriminatory basis).
If within thirty (30) days after written notice of proposed termination for
disability is given by the Company, you have not returned to the full time
performance of your duties, the Company may terminate your employment by
giving written Notice of Termination for "Disability."
4. OTHER TERMINATION FOLLOWING A CHANGE IN CONTROL.
If a "change in control" occurs during the term of this Agreement, you
will be entitled to those benefits set forth in Paragraph 7 hereof if you
are subsequently terminated as an employee of the Company during the
remainder of the term hereof, except for normal retirement, disability or
"for cause" as hereinafter defined. In addition, after a "change in
control" and during the remainder of the term hereof, you will be entitled
to receive the benefits set forth in Paragraph 7 if you terminate your
employment for good reason, as hereinafter defined.
5. CAUSE.
After a "change in control," the Company may terminate your employment
"for cause" without liability under the benefits provisions hereof only
upon:
i. the willful and continued failure by you to substantially perform
your duties with the Company (other than any such failure resulting from
your incapacity due to physical or mental illness), after a demand for
substantial performance is delivered to you by the Board which specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, or
ii. the willful engaging by you in gross misconduct materially and
demonstrably injurious to the Company.
For purposes of this paragraph, no act, or failure to act, on your
part shall be considered "willful" if done, or omitted to be done, by you
in good faith and in the reasonable belief that your act or omission was in
the best interests of the Company. You shall not be deemed to have been
terminated "for cause" unless and until you receive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board called and held
for that purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding
that in the good faith opinion of the Board you were guilty of conduct set
forth in clauses (i) or (ii) of the first sentence of this paragraph and
specifying the particulars thereof.
If your employment is terminated "for cause," the Company shall pay
you your then current full base salary plus vacation and any other
compensation actually accrued through the date of termination, and the
Company shall have no further obligation to you under the terms hereof.
6. GOOD REASON.
You may regard your employment as constructively terminated by the
Company, and yourself terminate your employment for "good reason" following
a "change in control" and during the term hereof, receiving the benefits
set forth in Paragraph 7, upon the happening of one or more of the
following events which will constitute good reason for your own termination
of your employment:
i. without your express written consent, the assignment to you of any
duties not customarily performed by senior executives of the Company and
inconsistent with your position as a senior executive prior to a "change in
control," or the failure of the Company to maintain you in a senior
executive position; or to provide you with the normal perquisites of a
senior executive of the Company, including but not limited to an office and
appropriate support services.
ii. a reduction by the Company in your base salary as in effect prior
to a "change in control" unless such reduction is applied to all officers
of the Company and does not exceed the average percentage reduction in base
salary for all officers of the Company, with a maximum permissible
reduction of 25%, or the failure by the Company to increase such base
salary each year following a "change in control" by an amount which equals
at least one-half (1/2), on a percentage basis, the average percentage
increase in base salary for all officers of the Company, and its
subsidiaries, or any parent or successor of the Company during the prior
two full calendar years;
iii. a failure by the Company to maintain any of the employee benefits
to which you are entitled prior to a "change in control" at a level equal
to or greater than that in effect prior to a "change in control," through
the continuation of the same or substantially similar plans, programs and
policies, or the taking of any action by the Company which would adversely
affect your participation in or materially reduce your benefits under any
such plans, programs or policies or deprive you of any fringe benefits
enjoyed by you prior to a "change in control," unless such a reduction in
benefits is non-discriminatory as to you and is applied generally to all
officers and management employees of the Company, its subsidiaries and
affiliates, and any parent or successor of the Company;
iv. the failure by the Company to provide you with the number of paid
vacation days to which you would be entitled as a salaried employee of the
Company, its subsidiaries or affiliates, or any parent or successor of the
Company on a non-discriminatory basis.
V. the Company's requiring you to be based anywhere other than your
current location except for required travel on the Company's business to an
extent substantially consistent with your present business travel
obligations; or the relocation of your offices outside the Seattle,
Bellevue, Everett, primary metropolitan statistical area without your
consent.
vi. any purported termination of your employment by the Company which
is not effected pursuant to the Notice of Termination and procedures
required by the specific provision relied upon (i.e., Disability, or
Cause), or normal retirement, or any purported termination for which the
grounds relied upon are not valid.
vii. the failure of the Company to obtain the assumption of this
Agreement by any successor as contemplated in Paragraph 11 hereof.
Upon the happening of one or more of these events, should you choose or
regard your employment as constructively terminated, delivery of a written
Notice of Termination setting forth the good reason therefore will entitle
you to the benefits as set forth in Paragraph 7 hereof.
7. COMPENSATION UPON TERMINATION WITHOUT CAUSE OR TERMINATION FOR
GOOD REASON.
If after a "change in control" and during the term hereof, you are
terminated by the Company other than by reason of normal retirement,
disability or "for cause" under the definitions and procedures set forth
herein, or you choose to terminate your employment for "good reason" as set
forth herein, then the Company shall pay to you the following amounts:
i. Your full base salary through the date of any Notice of
Termination plus payment for all accrued vacation, and any deferred
compensation to which you are entitled for the year most recently ended and
your pro-rata share of any compensation under any Company plan which has
accrued through the date of termination, regardless of whether or not
pursuant to the terms of the plan such amounts are vested or are payable in
the year of termination, up to the date of termination, to the extent not
already paid; plus
ii. an amount equal to:
(a) the sum of your annual base salary at the rate in effect as
of your termination plus the amount of any additional compensation awarded
you for the year most recently ended (whether or not fully paid), including
any sums awarded under an Annual Wage Accumulation Plan,
multiplied by:
(b) the number three. If your normal retirement date is less
than three (3) years from your termination date, then the multiplier shall
be that fraction remaining until your normal retirement date rounded to the
nearest tenth (i.e., 18 months equals 1.5, 8 months equals .7).
iii. The Company shall maintain in full force and effect for the
remaining term of the Agreement prior to your normal retirement date, all
employee benefits plans, programs and policies (including any life or
health insurance plans) in which you were entitled to participate
immediately prior to your termination, provided that your continued
participation is possible under the general terms and provisions of such
plans, programs and policies. In the event that your participation in any
such plan, program or policy is not possible under its terms and
conditions, the Company shall arrange to provide you with benefits
substantially similar to those which you would have been entitled to
receive under each plan, program or policy. At the end of the period of
coverage, you will have the option to have assigned to you at no cost and
with no apportionment of prepaid premiums, any assignable insurance
policies owned by the Company and relating to you and to take advantage of
any conversion privileges pertinent to the benefits available under Company
policies.
iv. In addition to the regular payment of benefits to which you are
entitled under the retirement plans or programs in effect on the date of
your termination, which shall not be affected by such termination, the
Company shall pay you in cash at age 65 or such earlier retirement date as
you may elect, an amount equal to the actuarial equivalent of the
additional retirement compensation to which you would have been entitled
under the terms of such retirement plans or programs (without regard to
"vesting") had you continued in the employ of the Company for an additional
three years [prior to your normal retirement date] at your base salary rate
as of the date of termination. If your normal retirement date would occur
during that three-year period, then the amount of such additional
compensation shall be calculated on the basis that your employment
continued to that date. For purposes of this calculation, the "actuarial
equivalent" shall be determined by assuming your survival to age 80.
v. In lieu of shares of common stock of the Company ("Company
Shares") issuable upon exercise of options ("Options"), if any, granted to
you under the Company's Incentive and Stock Option Plans (to which options
employee waives all rights upon the making of the payment referred to
below), you shall receive an amount in cash equal to the difference between
the exercise prices of all Options held by you whether or not then fully
exercisable, and the higher of (a) the average of the high and low sales
prices as reported by the NASDAQ for the National Market System on the date
of termination (or the closing price any national stock exchange on which
the Company's share may then be listed, as reported in the Pacific Edition
of the Wall Street Journal on the date of termination) or (b) the highest
price per Company Share actually paid in connection with any change in
control of the Company.
8. PAYMENTS AND DISPUTES.
For purposes of this Agreement, your date of termination will be the
date written notice of termination is given by the Company or you. If
termination is under circumstances invoking the benefits of Paragraph 7,
then the sums specified therein will be paid no more than ten (10) working
days after the date of termination.
In the event that the Company wishes to contest or dispute a
termination for "good reason" by you, it must give written notice of such
dispute within the five-day period after the date of termination. If you
wish to contest or dispute a termination by the Company, or any failure to
make payments claimed to be due hereunder, you must give written notice of
such dispute within thirty days of receiving a Notice of Termination, [or,
if no Notice is provided, within thirty days of your actual termination by
the Company.] In the event of a dispute, the Company shall continue to pay
your full base salary and continue all your employee benefits in force
until final resolution of any such dispute by mutual agreement or the final
judgment, decree or order of a court of competent jurisdiction (including
any appeals, if such are perfected). Such salary and benefit value paid to
you by the Company during the pendancy of such a dispute shall be credited
against the Company's obligation to you as it may ultimately be determined.
You may, at your or the Company's option, be suspended from all duties
during the pendency of such a contest or dispute. if you prevail in any
such contest or dispute, the Company shall thereupon be liable for the full
amounts due under Paragraph 7 as of the date of termination, less any
credits due to the Company for amounts paid pursuant to the preceding
paragraph.
The Company will pay all fees and expenses, including full attorney's
fees and costs, incurred by you in good faith in contesting or disputing
any termination after a "change in control" or in seeking to obtain or
enforce any right or benefit provided by this Agreement.
In the event that any payments due hereunder shall be delayed for any
reason for more than ten days from the date of termination, the amounts due
shall bear the maximum legal rate of interest until paid.
9. MITIGATION.
You shall not be required to mitigate the amount of any payment due
under Paragraph 7 by seeking other employment. if you should accept a
position with another employer after your date of termination and during
the period of provision of benefits under Paragraph 7, then the Company
shall have no further liability for the provision of benefits or further
payments under Section (iii) of Paragraph 7, and the remaining term of this
Agreement for purposes of Section (iii) of Paragraph 7, will terminate as
of the date of your new employment, provided, however, the Company will
continue such benefits or further payments under Section (iii) of Paragraph
7, and the remaining term of this Agreement for purposes of Section (iii)
of Paragraph 7 to the extent they exceed the comparable benefits from such
other employer(s) or from self-employment.
10. COVENANT FOR CONFIDENTIALITY AND NOT TO COMPETE.
You agree that as an executive of the Company, with important
responsibilities for and knowledge of its operations, your services are a
valuable asset to the Company and that you have access to business
information of material importance to the Company. Therefore, to protect
the Company's interest in you and in the integrity and success of its
operations, you agree that during the term of this Agreement while employed
by the Company you will keep all Company information confidential and will
not enter into the employment of, or invest in or contribute to,
participate in the activities of, or act as consultant to or advise any
enterprise in whatever form organized and carried on which is directly
competitive with any business activity then conducted or planned by the
Company or its subsidiaries, provided, however, that you may make
investments in publicly traded securities of any issuer if the securities
owned represent less than 1% of the class of such securities of such issuer
then issued and outstanding. You further agree that you will continue to
keep all Company information confidential and that for a period of two
years following the termination of your employment with the Company you
will not enter into the employment in an executive or consultant capacity
or serve on the Board of Directors of any enterprise in whatever form
organized and carried on which is directly competitive with any business
activity then conducted by the Company or its subsidiaries in the State of
Washington.
11. SUCCESSORS; BINDING AGREEMENT.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all
of the business and/or assets of the Company, by agreement, to expressly
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 had taken place. As used herein, "Company" shall mean the
Company as hereinbefore defined and any successor to its business or assets
as aforesaid which executes and delivers the agreement provided for in
Paragraph (ii) or which otherwise becomes bound by all the terms and
provisions of this Agreement by operation of law.
ii. This Agreement shall inure to the benefit of and be enforceable by
your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die
while any amounts are still payable to you hereunder, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee, or other designee or, if
there be not such designee, to your estate.
12. NOTICE.
For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered by United States certified
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement,
provided that all notices to the Company shall be directed to the attention
of the Chief Executive Officer of the Company or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notices of change of address shall be effective only
upon receipt.
13. MISCELLANEOUS.
No provisions of this Agreement may be modified, waived or discharged
unless such waiver, modification or discharge is agreed to in writing
signed by you and the Chief Executive Officer of the Company or such
officer as may be specifically designated by the Board of Directors of the
Company. No waiver by either party hereto at any time of any breach of, or
lack of compliance with, any conditions or provisions of this Agreement
shall be deemed a waiver of similar or dissimilar provisions or conditions
at the same or at any prior to subsequent time.
No agreements or representations, oral or otherwise, express or
implied, with respect to the subject matter hereof have been made by either
party which are not set forth expressly in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of Washington.
14. VALIDITY.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
15. COUNTERPARTS.
This Agreement is to be executed in counterparts, each of which shall
be deemed to be an original.
16. ADDITIONAL COMPENSATION.
Notwithstanding any other provisions of this Agreement, if any
severance benefits under Section 7 of this Agreement, together with any
other severance or compensatory payments (as defined under Internal Revenue
Code Section 28OG(b)(2)) made by the Company to you, if any, exceed the
Base Amount allocated to such payments (as described in Internal Revenue
Code Section 28OG(b)(3)), then the Company shall pay to you, in addition to
the payments to be received under Section 7 of this Agreement, an amount
equal to the excise taxes imposed by Section 4999 of the Code on your
severance benefits, plus an amount equal to the federal and, if applicable,
state income taxes which will be payable by you as a result of this
additional payment. In no event shall the aggregate of the additional
payment or payments made by the Company to you under this section be less
than the amount necessary to be paid to you to provide for your receipt,
after payment of all excise and income taxes, of an amount equal to your
Net Base Severance Payments. Net Base Severance Payments equal the net
value to you of all severance benefits to be received under Section 7 of
this Agreement, reduced for any federal or state income taxes that would be
imposed on such severance benefits.
If this letter correctly sets forth our agreement, sign and return to the
Company the enclosed copy of this letter, retaining your copy for your
files.
WASHINGTON ENERGY COMPANY
/s/ John W. Creighton, Jr.
___________________________________
Chairman
Compensation and Benefits Committee
/s/ J. P. Torgerson
____________________________
Employee
August 17, 1995