Exhibit 10(g)
January 2, 1997
Mr. Richard G. Drolet
Vice President, Information Systems and Corporate Planning
Valley Resources, Inc.
1595 Mendon Road
Cumberland, RI 02864
Dear Mr. Drolet:
Valley Resources, Inc. (which, together with its subsidiaries, is
hereinafter called "the Company") considers it essential to the best interests
of its stockholders to foster the continuous employment of key management
personnel. In connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control may exist that such possibility, and the
uncertainty and questions which it may raise among management, may result in the
departure or distraction of management personnel to the detriment of the Company
and its stockholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company.
In order to induce you to remain in the employ of the Company and in
consideration of your agreeing to remain in the employ of the Company subject to
the terms and conditions set forth below, this letter agreement sets forth the
severance benefits which the Company agrees will
be provided to you in the event your employment with the Company is terminated
subsequent to a "change in control of the Company" (as defined in Section 2
hereof) under the circumstances described below.
1. Term of Agreement. This Agreement shall commence on January 1, 1997 and
shall continue in effect through December 31, 1997; provided, however, that
commencing on January 1, 1998 and each January 1 thereafter, the term of this
Agreement shall automatically be extended for one (1) additional year unless,
not later than August 31 of the preceding year, the Company shall have given
notice that it does not wish to extend this Agreement; provided, further, that
notwithstanding any such notice by the Company not to extend, if a change in
control of the Company shall have occurred during the original or extended term
of this Agreement, this Agreement shall continue in effect for a period of
twenty-four (24) months from the occurrence of such change in control.
Notwithstanding the foregoing, the Company may terminate your employment at any
time, whether before or after a change in control, subject to providing such
benefits as shall be hereinafter specified.
2. Change in Control. (i) No benefits shall be payable hereunder unless
there shall have been a change in control of the Company, as set forth below and
your employment by the Company shall thereafter have been terminated in
accordance with Section 3 below. For purposes of this Agreement, a "change in
control of the Company" shall mean a change in control of a nature that would be
required to be reported in response to Item 5(f) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), whether or not the Company is then subject to such reporting
requirement; provided that, without limitation, such a change in control shall
be deemed to have occurred if (a) any "person" (as such term is used in Sections
13(d) and 14(d) of the Exchange Act), other than a
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trustee or other fiduciary holding securities under an employee benefit plan of
the Company, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the Company's then
outstanding securities; (b) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals who
at the beginning of such period constitute the Board and any new director whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two thirds (2/3) of the directors then still
in office who either were directors at the beginning of the period or whose
election or nomination for election was previously so approved, cease for any
reason to constitute a majority thereof; or (c) the business or businesses of
the Company for which your services are principally performed are disposed of by
the Company pursuant to a partial or complete liquidation of the Company, a sale
of assets (including stock of a subsidiary) of the Company, or otherwise.
(ii) For purposes of this Agreement, a "potential change in control of the
Company" shall be deemed to have occurred if (A) the Company enters into an
agreement, the consummation of which would result in the occurrence of a change
in control of the Company, (B) any person publicly announces (including an
announcement by the Company) an intention to take actions which if consummated
would constitute a change in control of the Company; (C) any person publicly
announces (including an announcement by the Company) that it has become the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding securities; or (D) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a potential change in control of the Company has
occurred. You agree that, subject to the terms and conditions of this Agreement,
in
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the event of a potential change in control of the Company, you will remain in
the employ of the Company for a period of six (6) months from the occurrence of
such potential change in control of the Company.
3. Termination Following Change in Control. If any of the events described
in Subsection 2(i) hereof constituting a change in control of the Company shall
have occurred, you shall be entitled to the benefits provided in Subsection 4
(iii) hereof upon the subsequent termination of your employment during the term
of this Agreement unless such termination is (A) because of your death,
Retirement or Disability, (B) by the Company for Cause or (C) by you other than
for Good Reason.
(i) Disability; Retirement. If, as a result of your incapacity due to
physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months,
your employment may be terminated for "Disability." Termination of your
employment based on "Retirement" shall mean termination in accordance with
the Company's retirement policy generally applicable to its salaried
employees or in accordance with any retirement arrangement established with
your consent with respect to you.
(ii) Cause. Termination by the Company of your employment for "Cause"
shall mean termination upon (A) 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 or
any such actual or anticipated failure after the occurrence of
circumstances giving rise to a Notice of Termination by you for Good
Reason) after a written demand for substantial performance is delivered to
you by the Board, which demand specifically identifies the manner in which
the Board believes that
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you have not substantially performed your duties, or (B) the willful
engaging by you in conduct which is demonstrably and materially injurious
to the Company, monetarily or otherwise. For purposes of this Subsection,
no act, or failure to act, on your part shall be deemed "willful" unless
done, or omitted to be done, by you not in good faith and without
reasonable belief that your action or omission was in the best interest of
the Company. Notwithstanding the foregoing, you shall not be deemed to have
been terminated for Cause unless and until there shall have been delivered
to you a copy of a resolution duly adopted by the affirmative vote of not
less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such 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 above in clauses (A) or (B) of
the first sentence of this Subsection and specifying the particulars
thereof in detail.
(iii) Good Reason. You shall be entitled to terminate your employment
for Good Reason. For purposes of this Agreement, "Good Reason" shall mean,
without your express written consent, any of the following:
(A) the assignment to you of any duties inconsistent with your
status as Vice President of Operations or a substantial alteration in
the nature or status of your responsibilities from those in effect
immediately prior to a change in control of the Company;
(B) a reduction by the Company in your annual base salary as in
effect on the date of the occurrence of a change in control of the
Company or as the same may be increased from time to time except for
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across-the-board salary reductions similarly affecting all executives
of the Company and all executives of any person in control of the
Company; or the failure of the Company to grant increases in salary in
accordance with the Company's regular practices;
(C) the relocation of the Company's principal executive offices
to a location more than twenty-five (25) miles from your present
office location or the Company's requiring you to be based anywhere
other than the Company's principal executive offices except for
required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;
(D) the failure by the Company to continue in effect any
compensation plan in which you participate, or any plan adopted prior
to the change in control of the Company, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan in connection with the change
in control of the Company, or the failure by the Company to continue
your participation therein on substantially the same basis, both in
terms of the amount of benefits provided and the level of your
participation relative to other participants, as existed at the time
of the change in control;
(E) the failure by the Company to continue to provide you with
benefits substantially similar to those enjoyed by you under any of
the Company's pension, life insurance, medical, health and accident,
or disability plans in which you were participating at the time of a
change in control of
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the Company, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive you of any material fringe benefit enjoyed by you at the time
of the change in control of the Company, or the failure by the Company
to provide you with the number of paid vacation days to which you are
entitled on the basis of years of service with the Company in
accordance with the Company's normal vacation policy in effect at the
time of the change in control;
(F) the failure by the Company without your consent to pay to you
any portion of your current compensation or to pay to you any
installment of deferred compensation at the time such installment is
due under any deferred compensation program of the Company;
(G) the failure of the Company to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 5 hereof; or
(H) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the
requirements of Subsection (iv) below (and, if applicable, the
requirements of Subsection (ii) above); for purposes of this
Agreement, no such purported termination shall be effective.
In addition to your right to terminate for Good Reason as stated above, and
not in substitution therefor, you shall have the option at your discretion to
terminate your employment at any time within fifteen (15) months after the later
of (a) a change in control of the Company or (b) the expiration of the six (6)
months period during which you agree to remain in the employ of the
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Company under paragraph 2(ii) of this Agreement. Such termination shall be
conclusively deemed to be a termination for good Reason, but shall not affect
your right to terminate for Good Reason under any of the provisions of
subsection (iii) above.
Your right to terminate your employment pursuant to this Subsection shall
not be affected by your incapacity due to physical or mental illness.
(iv) Notice of Termination. Any purported termination by the Company
or by you shall be communicated by written Notice of Termination to the
other party hereto in accordance with Section 6 hereof. For purposes of
this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination of your employment under the
provision so indicated.
(v) Date of Termination, Etc. "Date of Termination" shall mean (A) if
your employment is terminated for Disability, thirty (30) days after Notice
of Termination is given (provided that you have not returned to the
full-time performance of your duties during such period) (B) if your
employment is terminated pursuant to Subsection (ii) or (iii) above or for
any other reason (other than Disability), the date specified in the Notice
of Termination (which shall not be less than thirty (30) days, and in the
case of a termination pursuant to Subsection (iii) above shall not be less
than thirty (30) nor more than sixty (60) days, respectively, from the date
such Notice of Termination is given); provided that if within thirty (30)
days after any Notice of Termination is given, the party receiving such
Notice of Termination notifies the other party that a dispute exists
concerning the termination, the Date of Termination shall be the date on
which the dispute
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is finally determined, either by mutual written agreement of the parties,
by a binding arbitration award, or by a final judgment, order or decree of
a court of competent jurisdiction (which is not appealable or the time for
appeal therefrom having expired and no appeal having been perfected);
provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving
such notice pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the pendency of any such dispute, the Company
will continue to pay you your full compensation in effect when the notice
giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise
to the dispute was given, until the dispute is finally resolved in
accordance with this Subsection. Amounts paid under this Subsection are in
addition to all other amounts due under this Agreement and shall not be
offset against or reduce any other amounts due under this Agreement except
as otherwise provided in paragraph (C) of Subsection 4 (iii).
4. Compensation Upon Termination. Following a change in control of the
Company, as defined by Subsection 2(i), upon termination of your employment
you shall be entitled to the following benefits:
(i) If your employment shall be terminated by the Company for
Cause or by you other than for Good Reason, the Company shall pay you
your full base salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given plus any other
amounts to which you are entitled under any compensation plan of the
Company, at the time such payments are due, and the Company shall have
no further obligations to you under this Agreement.
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(ii) If your employment shall be terminated by the Company or by
you for Retirement, or by reason of your death or for Disability, your
benefits shall be determined in accordance with the Company's
retirement and insurance program then in effect.
(iii) If your employment by the Company shall be terminated (a)
by the Company other than for Cause, Retirement or Disability or (b)
by you for Good Reason, then you shall be entitled to the benefits
provided below:
(A) The Company shall pay you your full base salary through
the Date of Termination at the rate in effect at the time Notice
of Termination is given, plus any other amounts to which you are
entitled under any compensation plan of the Company, at the times
such payments are due;
(B) In lieu of any further salary payments to you for
periods subsequent to the Date of Termination, the Company shall
pay as a severance payment to you, not later than the fifth day
following the Date of Termination, a lump sum severance payment
(the "Severance Payment") equal to 1.00 times the base salary
paid to you during the twelve (12) months immediately prior to
the issuance of the Notice of Termination (provided, however,
that in the case of a termination at your option under that
portion of Section 3 (iii) giving you an option to terminate at
your discretion, the severance payment under this paragraph shall
be in an amount equal to your base salary for the
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twelve (12) months immediately prior to the issuance of the
Notice of Termination);
(C) For a period after such termination equal to the period
actually used in calculating severance pay due to you under
Section 4(iii)(B), the Company shall provide you with life,
disability, accident and health insurance benefits substantially
similar to those which you are receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you
pursuant to this Section 4(iii) (C) shall be reduced to the
extent comparable benefits are actually received by you during
such period following your termination, and any such benefits
actually received by you shall be reported to the Company;
(D) In addition to the retirement benefits to which you are
entitled under the Retirement Plan or any successor plan thereto,
the Company shall pay you in one lump sum in cash on the fifth
day following the Date of Termination, a sum equal to the
actuarial equivalent of the excess of (x) the retirement pension
(determined as a straight life annuity commencing at age 65)
which you would have accrued under the terms of the Retirement
Plan (without regard to any amendment to the Retirement Plan made
subsequent to a change in control of the Company and on or prior
to the Date of Termination, which amendment adversely affects in
any manner the computation of retirement benefits thereunder),
determined as if you
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were fully vested thereunder and had accumulated (after the Date
of Termination) that number of additional months of service
credit thereunder equal to the number of months for which
severance pay shall be due to you under Section 4 (iii) (B)
hereof, at your highest annual rate of compensation during the
twelve (12) months immediately preceding the Date of Termination
(but in no event shall you be deemed to have accumulated
additional months of service credit after your sixty-fifth (65th)
birthday), and (y) the retirement pension (determined as a
straight-life annuity commencing at age 65) which you had then
accrued pursuant to the provisions of the Retirement Plan. For
purposes of clause (x), the term "compensation" shall include
amounts payable pursuant to Section 4 (iii) (B) hereof. For
purposes of this Subsection, "actuarial equivalent" shall be
determined using the same methods and assumptions utilized under
the Retirement Plan immediately prior to the change in control of
the Company;
(E) In the event that any payment or benefit received or to
be received by you in connection with a change in control of the
Company or the termination of your employment (whether payable
pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose
actions result in a change in control of the Company or any
person affiliated with the Company or such person) (the "Total
Payments")
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would not be deductible (in whole or in part) as a result of
Section 280G of the Internal Revenue Code of 1954 as amended (the
"Code"), the benefits provided under this Section 4(iii) shall be
reduced or eliminated in the following order, viz., first,
Subsection D; then, Subsection C; then, Subsection B; and
finally, Subsection A, but only to the extent necessary so that
no portion of the Total Payments is not deductible as a result of
Section 280G of the Code. For purposes of this limitation (i) no
portion of the Total Payments the receipt or enjoyment of which
you shall have effectively waived in writing prior to the date of
payment shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which, in the opinion of tax
counsel selected by the Company's independent auditors and
acceptable to you, does not constitute a "parachute payment"
within the meaning of Section 280G of the Code, (iii) the Total
Payments shall be reduced only to the extent necessary so that
the Total Payments (other than those referred to in clause (i) or
clause (ii) of this paragraph) in their entirety constitute
reasonable compensation for services actually rendered within the
meaning of Section 280G of the Code, in the opinion of the tax
counsel referred to in clause (ii); and (iv) the value of any
non-cash benefit or any deferred payment or benefit included in
the Total Payments shall be determined by the Company's
independent auditors in accordance with the principles of
Sections 280G of the Code;
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(F) The Company shall also pay to you all legal fees and
expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in
contesting or disputing any such right of benefit provided by
this Agreement) except to the extent that the payment of such
fees and expenses would not be, or would cause any other portion
of the Total Payments not to be, deductible by reason of Section
280G of the Code.
(iv) You shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for
in this Section 4 be reduced by any compensation earned by you as the
result of employment by another employer except as expressly provided
herein.
(v) In addition to all other amounts payable to you under this
Section 4, you shall be entitled to receive all benefits payable to
you under the Retirement Plan and any other plan or agreement relating
to retirement benefits.
5. Successors; Binding Agreement. (i) The Company will require any
successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of
the Company to 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. Failure of the Company to
obtain such assumption and agreement prior to the effectiveness of any such
succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as
you would be entitled hereunder if you terminate your employment for
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Good Reason following a change in control of the Company, except that for
purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As
used in this Agreement, "Company" shall mean the Company as hereinbefore
defined and any successor to its business and/or assets as aforesaid which
assumes and agrees to perform this Agreement by operation of law or
otherwise.
(ii) This Agreement shall inure to the benefit of and be enforceable
by your personal or legal representatives, executors, administrators,
successors, assigns, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to your
devisees, legatees, or other designee or if there is no such designee, to
your estate.
6. Notice. For the purposes of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall
be deemed to have been duly given when delivered or mailed by United States
certified or registered 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 Board with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notice of change of address
shall be effective only upon receipt.
7. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is
agreed to in writing and signed by you
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and such officer as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
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 expressly set forth in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Rhode Island. All
references to sections of the Exchange Act or the Code shall be deemed also
to refer to any successor provisions to such sections.
8. Validity. The invalidity or unenforceability or any provision 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.
9. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of
which together will constitute one and the same instrument.
10. Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration
in Providence, Rhode Island, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however,
that you shall be entitled to seek specific performance of your right to be
paid until the Date of Termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.
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If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Company the enclosed copy of this letter which
will then constitute our agreement on this subject.
Sincerely,
VALLEY RESOURCES, INC.
By s/Alfred P. Degen
------------------------------------------
Name: Alfred P. Degen
Title: President & Chief Executive Officer
Agreed to this 16th day
of May, 1997
s/Richard G. Drolet
- ----------------------
Richard G. Drolet
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