AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1997, by and among The
Southern Connecticut Gas Company, a company incorporated in the State of
Connecticut with executive offices at 855 Main Street, Bridgeport,
Connecticut ("Southern"), and Connecticut Energy Corporation, a company
incorporated in the State of Connecticut with executive offices at 855 Main
Street, Bridgeport, Connecticut ("the Company"), and Samuel W. Bowlby, an
individual residing at 131 Underhill Road, Hamden, Connecticut 06517 (the
"Executive").
WHEREAS, Executive serves as Vice President, General Counsel and Secretary
of the Company and Southern; and
WHEREAS, Southern and the Company seek to retain Executive in these
positions; and
WHEREAS, Executive desires to continue his employment with Southern and the
Company in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the remuneration and other benefits to
be provided by Southern and the Company and the services to be provided by
Executive, and in consideration of other mutual promises herein contained,
the parties hereby agree as follows:
1. DEFINITIONS.
The following terms when used herein with initial capital letters shall,
unless the context clearly requires to the contrary, have the meanings
assigned to them below:
(a) "Cause" means the Executive's gross negligence, willful misconduct or
conviction of a felony, which negligence, misconduct or conviction has a
demonstrable and material adverse affect upon the Company or Southern,
provided that the Company or Southern shall have given the Executive written
notice of the alleged negligence or misconduct and the Executive shall have
failed to cure such negligence or misconduct within 30 days after his receipt
of such notice. The Executive shall be deemed to have been terminated for Cause
effective upon the effective date stated in a written notice of such
termination delivered by the Company or Southern to the Executive and
accompanied by the resolution duly adopted by the affirmative vote of not
less than 2/3 of the entire membership of the Board of Directors of the
Company or Southern at a meeting of said Board (after reasonable notice to the
Executive and an opportunity for the Executive, with his counsel present, to be
heard before the Board) finding that, in the good faith opinion of the Board of
Directors of the Company or Southern, the Executive was guilty of conduct
constituting Cause hereunder and setting forth in reasonable detail the facts
and circumstances claimed to provide the basis for the Executive's termination,
provided that the effective date shall not be less than 30 days from the date
such notice is given.
(b)"Change in Control" of the Company shall be deemed to have occurred if:
(i) Any Person is or becomes an Acquiring Person;
(ii) Less than 2/3 of the total membership of the Board of Directors of the
Company shall be Continuing Directors; or
(iii) The shareholders of the Company shall approve a merger or
consolidation of the Company or a plan of complete liquidation of the Company
or an agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
In connection with the preceding definition of "Change in Control", the
capitalized terms therein are defined as follows:
(iv) "Acquiring Person" means any Person who is or becomes a "beneficial
owner" (as defined in Rule 13d-3 of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding voting
securities, unless such person has filed Schedule 13G and all required
amendments thereto with respect to its holdings and continues to hold such
securities for investment in a manner qualifying such Person to utilize
Schedule 13G for reporting of ownership.
(v) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act as in effect as of the date hereof.
(vi) "Continuing Directors" means any member of the Board of Directors of
the Company who was a member of said Board prior to the date hereof and any
successor of a Continuing Director while such successor is a member of the
Board of Directors of the Company who is not an Acquiring Person or an
Affiliate or Associate of an Acquiring Person and who is recommended or
elected to succeed the Continuing Director by a majority of the Continuing
Directors.
(vii) "Person" shall have the meaning assigned to it in Section 13(d) and
14(d) of the Exchange Act.
(c) "Good Reason" means:
(i) An adverse change in the Executive's status, duties or responsibilities
as an Executive of the Company or Southern;
(ii) Failure of the Company or Southern to pay or provide the Executive in
a timely fashion the salary or benefits to which he is entitled under any
Employment Agreement between the Company or Southern and the Executive then
in effect or under any benefit plans or policies in which the Executive was
then participating (including, without limitation, any incentive, bonus,
stock option, restricted stock, health, accident, disability, life insurance,
thrift, vacation pay, deferred compensation and retirement plans or policies);
(iii) The reduction of the Executive's salary (except in connection with a
uniform and general reduction of salaried employees' compensation effected by
the Company or Southern);
(iv) The taking of any action by the Company or Southern (including the
elimination of a plan without providing substitutes therefore, the reduction
of the Executive's awards thereunder or failure to continue the Executive's
participation therein) that would substantially diminish the aggregate
projected value of the Executive's awards or benefits under the Company's or
Southern's benefit plans or policies described in Section 1(c)(ii) in which
the Executive was then participating; provided, however, that the Board of
Directors may determine at any time to discontinue Southern's Management
Incentive Compensation Plan. The Executive further acknowledges that awards
under such Plan may vary from year to year and that, under the terms of such
Plan, no awards or reduced awards may be made in any particular year.
(v) A failure by the Company or Southern to obtain from any successors the
assent to this Agreement contemplated by Section 12 hereof; or
(vi) The relocation of the principal office at which the Executive is to
perform his services on behalf of the Company or Southern to a location
outside the State of Connecticut or a substantial increase in the Executive's
business travel obligations.
The Executive shall be deemed to have terminated his employment for Good
Reason effective upon the effective date stated in a written notice of such
termination given by him to the Company and Southern setting forth in
reasonable detail the facts and circumstances claimed to provide the basis
for termination, provided that the effective date may not precede, nor be
more than 60 days from, the date such notice is given. The Executive's
continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstance constituting Good Reason hereunder.
(d) "Qualifying Surviving Spouse" means the Executive's widow to whom he
has been married for more than one year at the time of benefit payment
commencement pursuant to this Agreement.
2. EMPLOYMENT: Southern and the Company shall employ Executive and
Executive hereby accepts such employment upon the terms and conditions
hereinafter set forth.
3. TERM OF EMPLOYMENT: The term of this Agreement shall begin on July 1,
1997, and shall continue thereafter until terminated by either party by
written notice given to the other party at least thirty (30) days prior to
the effective date of any such termination. The effective date of the
termination shall be the date stated in such notice, provided that if the
Company or Southern specifies an effective date that is more than thirty (30)
days following the date of such notice, the Executive may, upon thirty (30)
days' written notice to the Company or Southern, accelerate the effective date
of such termination.
4. COMPENSATION: For all services rendered by Executive under this
Agreement, Southern shall pay Executive an annual base salary, payable at
such times as is customary for Southern to pay its officers, in such amount
as Southern's Board of Directors shall establish from time to time.
Executive's base salary is subject to upward or downward revision by the
Board of Directors at such time as the Board generally increases or reduces
the salary rates of other officers of Southern. Executive shall also
participate in Southern's Management Incentive Compensation Plan (the "Plan")
for such years as the Board of Directors determines the Plan shall be in
effect. Executive shall be entitled to any other benefits available to officers
and employees of Southern generally.
5. CHANGE IN CONTROL: If a Change in Control of the Company shall have
occurred, and Executive's employment by the Company or Southern is terminated
effective as of a date within three (3) years after the date of such Change
in Control for any reason other than (1) his death, (2) his Disability, (3)
his retirement on his Normal Retirement Date, (4) by the Company for Cause,
or (5) by Executive without Good Reason, Executive shall be under no further
obligation to perform services for the Company or Southern and shall be
entitled to receive the following payments:
(a) The Company or Southern shall pay to Executive his full base salary
through the effective date of the termination within five (5) business days
thereafter and all benefits and awards (including both the cash and stock
components) to which Executive is entitled under any benefit plans or
policies in which he was a participant prior to the Change in Control, at the
time such payments are due pursuant to the terms of such benefit plans or
policies as in effect immediately prior to the Change in Control.
(b) In addition to the entitlements set forth in Section 3(a), the Company
or Southern shall pay to Executive, in a lump sum not later than ten (10)
business days following the effective date of the termination:
(i) an amount equal to three (3) times Executive's annual base salary on
the effective date of the termination or, if higher, immediately prior to the
Change in Control;
(ii) an amount equal to three (3) times the greater of (A) the highest amount
of the annual bonus awarded to Executive in the five (5) fiscal years
immediately preceding the year in which the Change in Control occurred or (B)
an amount equal to the amount Executive would have been awarded under the
Company's bonus plan in effect immediately prior to the Change in Control for
the fiscal year in which the Change of Control occurred had he continued to
render services to the Company at the same level of performance at the same
level of salary, and in the same position as immediately prior to the Change
in Control.
(iii) an amount equal to three (3) times the greater of (A) the largest annual
contribution made by Southern (or the Company, or by both) to The Southern
Connecticut Gas Company TARGET Plan for Salaried and Certain Other Executives
on Executive's behalf during the five (5) fiscal years immediately preceding
the year in which the Change of Control occurred or (B) an amount equal to
the contribution the Company would have made to said Plan on his behalf for
the fiscal year in which the Change of Control occurred had he participated
in said Plan for the entire fiscal year, received a base salary equal to the
salary he was receiving immediately prior to the Change in Control and had he
elected to contribute to the Plan the same percentage of his base salary as
he was contributing on said date; and
(iv) an amount equal to thirty five percent (35%) of Executive's annual base
salary on the effective date of the termination or, if higher, immediately
prior to the Change in Control (as compensation for medical, life insurance
and other benefits lost as a result of termination of his employment).
(v) If a payment may be increased by reference to an alternate calculation
which cannot be made by the time the payment is due, payment of the lesser
known amount shall be made when due, and if any additional amount becomes
due, such additional amount shall be paid within ten (10) days after the
information upon which calculation of such payment is dependent first becomes
available.
The amount of all payments due to Executive pursuant to this Section 5(b)
shall be reduced by four percent (4%) for each full calendar month by which
the date which is two (2) years from the effective date of the Executive's
termination extends beyond his Normal Retirement Date (as that term is
defined in The Southern Connecticut Gas Company Pension Plan for Salaried
Employees).
Upon entering into this Agreement and for a period of fourteen (14) days
following each anniversary of the date hereof (the "Election Period"), the
Executive may, in writing, direct the Company or Southern to pay any amounts
to which he is entitled under this Section 5(b) in five (5) equal annual
installments, with the first such installment payable within ten (10)
business days of the effective date of the termination and each successive
installment payable on the anniversary of the effective date of the termination
or the next following business day if such date is not a business day (the
"Deferred Payment Election"). A Deferred Payment Election, once made, cannot
be revoked except during an Election Period; provided, however, no Deferred
Payment Election can be made or revoked by Executive during an Election
Period that occurs after a Change in Control or at a time when, in the judgment
of the Company, a Change in Control may occur within sixty (60) days of such
Election Period.
(c) The Company or Southern shall pay or provide to Executive, or his widow
or children as the case may be, such amounts and benefits as may be required
so that the pension and other post-retirement benefits paid or made available
to him, his widow and his children are equal to those, if any, which would
have been paid under The Southern Connecticut Gas Company Pension Plan for
Salaried Executives as in effect immediately prior to the Change in Control,
assuming Executive continued in the employ of the Company or Southern at the
same salary until the third anniversary of the effective date of the termination
of his employment or until his Normal Retirement Date, whichever is earlier.
(d) Executive shall not be required to mitigate the amount of any payment
provided in this Section 5, nor shall any payment or benefit provided for in
this Section 5 be offset by any compensation earned by him as the result of
employment by another employer, by retirement benefits, or by offset against
any amount claimed to be owed by the Executive to the Company or Southern, or
otherwise.
(e) If any payment to Executive required by this Section 5 is not made
within the time for such payment specified herein, the Company or Southern
shall pay to him interest on such payment at the legal rate payable from time
to time upon judgments in the State of Connecticut from the date such payment
is payable under the terms hereof until paid.
(f) If any payment or benefit to Executive provided for in this Agreement is
subject to the excise tax imposed pursuant to Section 4999 of the Internal
Revenue Code of 1986, as amended, (which tax, together with any similar tax
hereafter imposed is referred to in this Agreement as the "Excise Tax") the
Company or Southern shall pay to him an additional amount such that the total
amount of the payments to or for the benefit of Executive under this
Agreement (including payments made pursuant to this Section 5(f), net of the
Excise Tax and all other applicable federal, state and local taxes shall
equal the total amount of the payments and benefits to which Executive
would have been entitled under this Agreement but for this Section 5(f), net
of all applicable federal, state and local taxes except the Excise Tax.
The amount of the payment to Executive under this Section 5(f) shall be
estimated by the Company's independent auditors based upon the following
assumptions:
(i) All payments to Executive under this Agreement and all other payments and
benefits to him in connection with a Change in Control of the Company shall be
deemed to be "parachute payments" within the meaning of Section 280G(b)(2) of
the Code, and all "excess parachute payments" shall be deemed to be subject
to the Excise Tax unless, in the written opinion of tax counsel selected by
the Company's independent auditors, (a signed copy of which opinion shall be
delivered to Executive) such payment or benefits are not subject to the Excise
Tax;
(ii) Except to the extent that the total of the payments and benefits to
Executive under this Agreement exceeds the total of the "excess parachute
payments" made to him, no such payments or benefits shall be deemed to be
part of the "base amount" within the meaning of Section 280G(b)(3) of the
Code; and
(iii) Executive shall be deemed to pay federal, state and local taxes at the
highest marginal rate of taxation for the applicable calendar year.
The estimated amount of the payment due to Executive pursuant to this
Section 5(f) shall be paid to him in a lump sum not later than thirty (30)
business days following the effective date of termination. In the event that
the amount of the estimated payment is less than the amount actually due to
him under this Section 5(f), the amount of any such shortfall shall be paid
to him within ten (10) days after the existence of the shortfall is discovered.
(g) If the Executive's employment terminates for any reason following a
Change in Control before the Executive has met the five-year (or other,
then-current) Credited Service requirement imposed by the terms of the
Pension Plan for Salaried and Certain Other Employees of The Southern
Connecticut Gas Company (the "Plan") as a prerequisite for 100% vesting of
benefits from the Company or Southern in amounts equal to the benefits he
would have been eligible to receive under the Plan had he
completed the number of Years of Service requisite
for 100% vesting of benefits under the Plan, determined by crediting all such
Years of Service for purposes of benefit accrual and assuming that
compensation (including incentive or other bonus-type compensation) for such
years was payable at the rate being paid to the Executive at the time of
termination of employment (or prior to the Change in Control, if higher).
For purposes of interpretation and implementation of the provisions of
Section 5(c) of this Agreement, the Executive will be deemed to have
satisfied the vesting service requirements of the Plan when determining the
benefits to which he, his widow and children are entitled pursuant to that
Section.
6. DUTIES: Executive shall serve in such capacities and with such titles as
may be assigned to him by the Board of Directors of Southern and the Company,
and shall assume such duties as the Board of Directors of Southern and the
Company shall assign to him.
7. TERMINATION: Subject to the applicable provisions of Section 5 of this
Agreement, Executive's employment pursuant to this Agreement may be
terminated by Southern or the Company on thirty (30) days written notice at
any time, with or without Cause. Executive's term of employment shall also
terminate upon his death or permanent disability. Such terminations shall
not constitute a termination of employment without Cause for purposes of
Section 5 of this Agreement. Permanent disability shall mean Executive's
inability by reason of physical or mental impairment or illness to fulfill his
obligation hereunder for the reasonably foreseeable future, as determined by the
Board of Directors of Southern and the Company after considering all relevant
medical evidence.
8. AMENDMENT: Amendment of the terms of this Agreement shall not be valid
unless made in writing and signed by duly authorized representatives of
Southern and the Company and by Executive.
9. EXECUTIVE'S EXPENSES: The Company and Southern, or the successor of
either of such companies, shall pay or reimburse Executive (or, if
appropriate, his Qualified Surviving Spouse) for all costs, including
reasonable attorney's fees and expenses of litigation and arbitration,
incurred by Executive (or his Qualified Surviving Spouse) in successfully
contesting or disputing any action taken by the Company and Southern, or the
successor of either of such companies, purportedly pursuant to Section 5 of
this Employment Agreement or in successfully seeking to obtain or enforce any
right or benefit provided by Section 5 of this Employment Agreement.
10. NOTICES: Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and personally delivered or sent
by registered or certified mail postage prepaid, properly addressed (if to
Executive, at his residence address as then reflected in the Company's
personnel records; if to Southern and the Company, at 855 Main Street,
Bridgeport, Connecticut 06604, Attention: Vice President, Human Resources or
at such other address as the executive offices of the Company may be
located), return receipt requested, and shall be deemed given as of the date of
delivery or personally delivered or of mailing if properly mailed.
11. WAIVER OF BREACH: The waiver by Southern or the Company of a breach of
any provision of this Agreement by Executive shall not operate or be
construed as a waiver of any prior or subsequent breach by Executive.
12. INTEGRATION: This Agreement shall be the sole and exclusive Agreement
among Southern, the Company, and Executive, and any other agreements or
arrangements among them are hereby superseded, canceled, and made void and of
no effect.
13. BINDING AGREEMENT: This Agreement shall inure to the benefit of and be
enforceable by Executive, his heirs, executors, administrators, successors,
and assigns. This Agreement shall be binding upon the Company, Southern and
their successors and assigns. The Company and Southern respectively shall
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of its or their
business and/or assets expressly to assume and agree to perform this Agreement
in accordance with its terms. The Company and Southern respectively shall
obtain such assumption and agreement prior to the effectiveness of any
succession. The obligations of this Agreement may not be assigned by Executive.
14. COUNTERPARTS: This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
15. CHOICE OF LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut (except that, if
application of Connecticut's choice of law rules would result in this
Agreement being governed, construed or interpreted in accordance with the
substantive law of a jurisdiction other than Connecticut, Connecticut's
choice of law rules shall not supersede or vary the choice of law made by
this Section 15).
16. SEVERABILITY: The provisions of this Agreement are severable, and the
invalidity or unenforceability of any provision shall not affect the validity
or enforceability of any other provision.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
day and year first above written.
THE SOUTHERN CONNECTICUT GAS COMPANY
By /s/Samuel M. Sugden
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Samuel M. Sugden, duly authorized Chairman,
Nominating and Salary Committee
CONNECTICUT ENERGY CORPORATION
By /s/Samuel M. Sugden
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Samuel M. Sugden, duly authorized Chairman,
Nominating Salary Committee
/s/Samuel W. Bowlby
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