EXHIBIT 10(ii)
EMPLOYMENT AGREEMENT
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This EMPLOYMENT AGREEMENT (the "Agreement") is made as of April 16, 1999,
between DOMINION RESOURCES, INC. (the "Company") and THOS. E. CAPPS (the
"Executive").
RECITALS:
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The Board of Directors of the Company (the "Board of Directors") recognizes
that outstanding management of the Company is essential to advancing the best
interests of the Company, its shareholders and its subsidiaries. The Board of
Directors has and continues to believe that it is particularly important to have
stable, excellent management. The Board of Directors has and continues to
believe that this objective may be achieved by giving key management employees
assurances of financial security for a period of time, so that they will not be
distracted by personal risks and will continue to devote their full time and
best efforts to the performance of their duties. To accomplish this purpose, the
Company and the Executive entered into an agreement as of June 20, 1997, which
replaced a prior agreement (the "1997 Employment Agreement").
The Board of Directors wishes to foster an atmosphere of cooperation among
the key management employees of the Company and its subsidiaries, and provide an
incentive for such
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employees to continue to contribute to the future growth and success of the
Company and its subsidiaries. To accomplish this objective, the Organization and
Compensation Committee of the Board of Directors (the "Committee") has
recommended, and the Board of Directors has approved, entering into a new
employment agreement with the Executive, which shall replace the Executive's
1997 Employment Agreement. The Company acknowledges that the Executive's
contributions to the past and future growth and success of the Company have been
and will continue to be substantial. The Company and the Executive are entering
into this Agreement to induce the Executive to remain an employee of the Company
and to continue to devote his full energy to the Company's affairs. The
Executive has agreed to continue to be employed by the Company under the terms
and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the foregoing and the mutual
undertakings contained in this Agreement, the parties agree as follows:
1. Employment. The Company will employ the Executive, and the Executive
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will continue in the employment of the Company, as Chief Executive Officer and
President of the Company for the period beginning on the date of this Agreement
and ending on the date of the Company's annual meeting of shareholders in 2005
(the "Term of this Agreement"), according to the terms of this Agreement.
2. Duties. The Company and the Executive agree that, during the Term of
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this Agreement, the Executive will be Chief Executive Officer of the Company and
will report directly to the Board of Directors. During the Term of this
Agreement, the Executive will
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continue to exercise such authority and perform such executive duties as are
commensurate with his position as Chief Executive Officer. The Executive (i)
will devote his knowledge, skill and best efforts on a full-time basis to
performing his duties and obligations to the Company (with the exception of
absences on account of illness or vacation in accordance with the Company's
policies and civic and charitable commitments not involving a conflict with the
Company's business), and (ii) will comply with the directions and orders of the
Board of Directors of the Company with respect to the performance of his duties.
The Executive shall also be President of the Company and will perform such
executive duties as are commensurate with his position as President.
3. Effect on Other Agreements. This Agreement sets forth the entire
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understanding of the parties with respect to the terms of the Executive's
employment with the Company and its subsidiaries. This Agreement supersedes and
replaces the Executive's 1997 Employment Agreement, which will terminate as of
the date on which this Agreement is executed. This Agreement supersedes and
replaces all agreements that were superseded and replaced by the 1997 Employment
Agreement, including the Executive's Employment Continuity Agreement, the letter
dated April 21, 1994 to the Executive from James F. Betts, the employment
agreement between the Executive and the Company dated August 12, 1994, the
employment agreement between the Executive and the Company dated April 12, 1995
as amended as of September 15, 1995 and any other employment agreements between
the Executive and the Company or a subsidiary (collectively, the "Prior
Agreements"). The term "employment agreement" as used in
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the preceding sentence does not include any retirement, incentive or benefit
plan or program in which the Executive participates or the credited service
agreement described in Section 5(c). The Executive and the Company agree that
the Executive's Prior Agreements are null and void.
4. Compensation and Benefits.
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(a) During the Term of this Agreement, while the Executive is
employed by the Company, the Company will pay to the Executive the following
salary and incentive awards for services rendered to the Company:
(i) The Company will pay to the Executive an annual salary in an
amount not less than the base salary in effect for the Executive as of
the date on which this Agreement is executed. The Board of Directors
will evaluate the Executive's performance at least annually and will
consider annual increases in the Executive's salary based on the
Executive's performance.
(ii) The Executive will be entitled to receive incentive awards
based on the Executive's job performance, if and to the extent that
the Board of Directors determines that the Executive's performance
merits payment of an award. The Board of Directors will make its
determination consistent with the methodology used by the Board of
Directors for compensating its senior management employees.
(b) During the Term of this Agreement, while the Executive is
employed by the Company, the Executive will be eligible to participate in a
similar manner as other senior
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executives of the Company in retirement plans, cash and stock incentive plans,
fringe benefit plans and other employee benefit plans and programs provided by
the Company for its senior management employees from time to time.
5. Completion Benefits.
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(a) The Executive will be entitled to receive the following
additional benefits upon his termination of employment with the Company:
(i) The Executive's retirement benefits under the Company's
Retirement Plan and Benefit Restoration Plan will be computed using
compensation based on the Executive's highest rate of annual salary in
effect at any time during his employment. The supplemental benefit to
be provided under this subsection (i) will be provided as a
supplemental benefit under this Agreement and will not be provided
directly from the Retirement Plan.
(ii) The Executive's "Final Compensation" under the Company's
Executive Supplemental Retirement Plan (the "SRP") will be determined
by computing the "Incentive Compensation Amount" as if the Executive's
short-term incentive compensation target award was the unreduced
percentage (which will be at least 45%) of his salary midpoint as
approved by the Committee for the year (for example, for 1993 and
1994, the unreduced percentage was 45% of his salary midpoint, as
compared to the reduced target that was used for 1993 and 1994 in
order to make long-term compensation a larger part of the Executive's
incentive
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compensation for those years).
(iii) The benefit under the SRP will continue to be computed as
an equal periodic payment for 120 months, according to the SRP
document. However, this periodic payment will be payable for the
Executive's life (or for 120 payments, if longer).
(iv) All restricted stock held by the Executive as of the date
of termination of his employment will become fully vested (that is,
transferable and nonforfeitable) as of the date of termination of his
employment.
(v) The Company will pay to the Executive a single lump sum
payment equal to nine hundred fifty thousand dollars ($950,000) on the
day following the date of termination of his employment.
(b) In addition to the foregoing, the Executive will receive, upon
his termination of employment with the Company before the annual meeting of
shareholders in 2005, a single lump sum cash payment equal to the present value
of the annual base salary and annual cash incentive awards (computed as
described below) that the Executive is projected to receive for employment in
the "Calculation Year" to the extent otherwise not paid for services rendered.
For purposes of this Agreement, the Calculation Year is the period from the
annual meeting of shareholders in 2004 until the annual meeting of shareholders
in 2005. The lump sum will be computed as follows:
(i) For purposes of this calculation, the annual base salary
that the
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Executive is projected to receive for employment for the Calculation
Year will be calculated at the highest annual base salary rate in
effect for the Executive during the three-year period ending with the
last complete calendar year before his termination of employment. For
purposes of this calculation, the annual cash incentive awards that
the Executive is projected to receive for employment in the
Calculation Year will be calculated at a rate equal to the highest
annual cash incentive award paid to the Executive during the three-
year period ending with the last complete calendar year before his
termination of employment. Salary and bonus that the Executive elected
to defer will be taken into account for purposes of this Agreement
without regard to the deferral.
(ii) If the Executive has not yet received an annual cash
incentive award for the year in which his employment terminates, the
lump sum payment will be increased to include a pro-rated award for
the portion of the year preceding the Executive's termination of
employment. If the Executive has not yet received payment of his
annual cash incentive award for the year preceding his termination of
employment, the lump sum payment will be increased to include an award
for the year preceding the Executive's termination of employment. The
incentive award for the year or portion of the year preceding the
Executive's termination of employment will be determined according to
clause (i) above, unless the Board of Directors made a good faith
final determination of the amount of the applicable
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incentive award pursuant to Section 4(a)(ii) before the Executive's
termination of employment. If the Board of Directors made such a
determination, the applicable incentive award will be computed
according to the Board of Directors' determination.
(iii) Present value will be computed by the Company as of the
date of the Executive's termination of employment, based on a discount
rate equal to the applicable Federal short-term rate, as determined
under Section 1274(d) of the Internal Revenue Code of 1986, as amended
(the "Code"), compounded monthly, in effect on the date on which the
present value is determined.
(iv) The lump sum payment will be paid within 30 days after the
Executive's termination of employment.
(c) As set forth in the existing credited service agreement between
the Executive and the Company, the Executive will be credited with a total of 30
years of service for purposes of the Company's retirement plans.
6. Termination of Employment.
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(a) During the Term of this Agreement, the Company may terminate the
Executive's employment only for Cause. During the Term of this Agreement, the
Executive may voluntarily terminate employment under the circumstances described
in clauses (i)-(v) of this subsection (a). After July 31, 1998, the Executive
may voluntarily terminate employment under the circumstance described in clause
(vi) of this subsection (a). If the Executive's employment is
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terminated for Cause, or if the Executive voluntarily terminates employment
pursuant to this Section 6(a), the Executive will be entitled to receive the
benefits described in subsection (b). Subject to the provisions of this
subsection (a), the Executive may voluntarily terminate employment after (i) the
Executive's base salary is reduced, (ii) the Executive is not in good faith
considered for incentive awards as described in Section 4(a)(ii), (iii) the
Company fails to provide benefits as required by Section 4(b), (iv) the
Executive's place of employment is relocated to a location further than 30 miles
from Richmond, Virginia, (v) the Executive's working conditions or management
responsibilities are substantially diminished (other than on account of the
Executive's disability, as defined in Section 7 below), or (vi) the Executive
voluntarily terminates employment on or after August 1, 1998 upon 90 days prior
written notice to the Company and the Committee consents in writing to such
termination. In order for clause (i), (ii), (iii), (iv) or (v) of this
subsection (a) to be effective: (1) the Executive must give written notice to
the Company indicating that the Executive intends to terminate employment under
this subsection (a), (2) the Executive's voluntary termination under this
subsection must occur within 60 days after an event described in clause (i),
(ii), (iii), (iv) or (v) of the preceding sentence, or within 60 days after the
last in a series of such events, and (3) the Company must have failed to remedy
the event described in clause (i), (ii), (iii), (iv) or (v), as the case may be,
within 30 days after receiving the Executive's written notice. If the Company
remedies the event described in clause (i), (ii), (iii), (iv) or (v), as the
case may be, within 30 days after receiving the Executive's written notice, the
Executive may not terminate employment under this subsection (a) on account
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of the event specified in the Executive's notice.
(b) In accordance with the provisions of Section 6(a), the Executive
will be entitled to receive the following benefits determined as of the date of
his termination of employment:
(i) The Executive will receive the benefits described in
Section 5(a)(i), (ii), (iii), (iv) and (v) above as of the date of his
termination of employment. In addition, the Executive will receive the
single lump sum cash payment described in Section 5(b) of this
Agreement if such payment is not otherwise payable under the terms of
Section 5(b).
(ii) The Executive will be credited with a total of 30 years of
service and will be considered to have attained age 60 (if he has not
already done so) for purposes of the Company's retirement plans.
(iii) The Executive will be credited with age and service credit
through the end of the Term of this Agreement for purposes of
computing benefits under the Company's medical and other welfare
benefit plans, and the Company will continue the Executive's coverage
under the Company's welfare benefit plans as if the Executive remained
employed through the end of the Term of this Agreement.
Notwithstanding the foregoing, if the Company determines that giving
such age and service credit or continued coverage could adversely
affect the tax qualification or tax treatment of a benefit plan, or
otherwise have adverse
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legal ramifications, the Company may pay the Executive a lump sum cash
amount that reasonably approximates the after-tax value to the
Executive of such age and service credit and continued coverage
through the end of the Term of this Agreement, in lieu of giving such
credit and continued coverage.
(c) The amounts under this Agreement will be paid in lieu of
severance benefits under any severance plan or program maintained by the
Company. The amounts payable under this Agreement will not be reduced by any
amounts earned by the Executive from a subsequent employer or otherwise. If the
Executive voluntarily terminates employment prior to the end of the Term of this
Agreement for a reason not described in subsection (a) above or Section 7 below,
this Agreement will immediately terminate and the Executive shall be entitled to
the payment of the benefits under Sections 5(a), 5(b) and 5(c).
7. Disability or Death. If the Executive becomes disabled (as defined
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below) during the Term of this Agreement while he is employed by the Company,
the Executive shall be entitled to receive the benefits described in Sections
5(a)(i), 5(a)(ii), 5(a)(iii), 5(a)(iv), 5(a)(v), 5(b), and 6(b)(ii) of this
Agreement as of the date on which he is determined by the Company to be
disabled. If the Executive dies during the Term of this Agreement while he is
employed by the Company, the benefits described in Sections 5(a)(i), 5(a)(ii),
5(a)(iii), 5(a)(iv), 5(a)(v), 5(b), and 6(b)(ii) will be provided to the
Executive's beneficiary designated under the terms of the applicable benefit
plan. The foregoing benefits will be provided in addition to any death,
disability and other benefits provided under Company benefit plans in which the
Executive
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participates. Except to the extent provided in this Section 7, the provisions of
Sections 1, 2, 4, 5 and 6 of this Agreement will terminate upon the Executive's
death or disability. The term "disability" means a condition, resulting from
bodily injury or disease, that renders, and for a six consecutive month period
has rendered, the Executive unable to perform any and every duty pertaining to
his employment with the Company. A return to work of less than 14 consecutive
days will not be considered an interruption in the Executive's six consecutive
months of disability. Disability will be determined by the Company on the basis
of medical evidence satisfactory to the Company.
8. Cause. For purposes of this Agreement, the term "Cause" means (i)
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material misappropriation with respect to the business or assets of the Company,
(ii) persistent refusal or willful failure of the Executive materially to
perform his duties and responsibilities to the Company, which continues after
the Executive receives notice of such refusal or failure, (iii) conviction of a
felony involving moral turpitude, or (iv) the use of drugs or alcohol that
interferes materially with the Executive's performance of his duties. The
foregoing acts or events will constitute "Cause" for purposes of this Agreement
only to the extent that they were committed on or after September 15, 1995
(i.e., the date on which the 1995 Employment Agreement was amended).
9. Parachute Tax. If the Company determines that any amounts payable
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under this Agreement would be subject to the excise tax imposed under Code
Section 4999 on "excess parachute payments", the Company will compute the after-
tax amount that would be payable to
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the Executive if the total amounts that are payable to the Executive by the
Company, an affiliate, or a plan of the Company or an affiliate and are
considered "parachute payments" for purposes of Code Section 280G ("Parachute
Payments") were limited to the maximum amount that may be paid to the Executive
under Code Sections 280G and 4999 without imposition of the excise tax (this
after-tax amount is referred to as the "Capped Amount"). The Company will also
compute the after-tax amount that would be payable to the Executive if the total
Parachute Payments were payable without regard to the Code Sections 280G and
4999 limit (this after-tax amount is referred to as the "Uncapped Amount").
Notwithstanding anything in this Agreement to the contrary, if the Capped Amount
is greater than or equal to 97% of the Uncapped Amount, then the total benefits
and other amounts that are considered Parachute Payments and are payable to the
Executive under this Agreement will be reduced to the largest amount that will
result in no portion of any such payment being subject to the excise tax imposed
by Code Section 4999. Tax counsel selected by mutual consent of the Company and
the Executive will determine the amount of any such reduction in good faith. The
determination will be made before the payments are due and payable to the
Executive, to the extent possible. The Executive will determine which payments
will be reduced, subject to approval by the Company (which approval may not be
unreasonably withheld). The Executive will have no right to receive Parachute
Payments under this Agreement in excess of the reduced amount. The calculations
under this Section will be made in a manner consistent with the requirements of
Code Sections 280G and 4999, as in effect at the time the calculations are made.
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10. Indemnification. The Company will pay all reasonable fees and
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expenses, if any, (including, without limitation, legal fees and expenses) that
are incurred by the Executive to enforce this Agreement and that result from a
breach of this Agreement by the Company.
11. Form of Payment. All amounts payable under this Agreement (other than
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restricted stock, which will be paid according to the terms of the Company's
Long-Term Incentive Plan and Incentive Compensation Plan) will be paid in cash,
subject to required income and payroll tax withholdings.
12. Administration. The Committee will be responsible for the
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administration and interpretation of this Agreement on behalf of the Company. If
for any reason a benefit under this Agreement is not paid when due, the
Executive may file a written claim with the Committee. If the claim is denied or
no response is received within 90 days after the filing (in which case the claim
is deemed to be denied), the Executive may appeal the denial to the Board of
Directors within 60 days of the denial. The Executive may request that the Board
of Directors review the denial, the Executive may review pertinent documents,
and the Executive may submit issues and comments in writing. A decision on
appeal will be made within 60 days after the appeal is made, unless special
circumstances require that the Board of Directors extend the period for another
60 days. If the Company defaults in an obligation under this Agreement, the
Executive makes a written claim pursuant to the claims procedure described
above, and the Company fails to remedy the default within the claims procedure
period, then all amounts payable to the Executive under this Agreement will
become due and owing.
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13. Assignment. The rights and obligations of the Company under this
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Agreement will inure to the benefit of and will be binding upon the successors
and assigns of the Company. If the Company is consolidated or merged with or
into another corporation, or if another entity purchases all or substantially
all of the Company's assets, the surviving or acquiring corporation will succeed
to the Company's rights and obligations under this Agreement. The Executive's
rights under this Agreement may not be assigned or transferred in whole or in
part, except that the personal representative of the Executive's estate (or
other beneficiary designated under the terms of the applicable benefit plan)
will receive any amounts payable under this Agreement after the death of the
Executive.
14. Rights Under the Agreement. The right to receive benefits under the
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Agreement will not give the Executive any proprietary interest in the Company or
any of its assets. Benefits under the Agreement will be payable from the general
assets of the Company, and there will be no required funding of amounts that may
become payable under the Agreement. The Executive will for all purposes be a
general creditor of the Company. The interest of the Executive under the
Agreement cannot be assigned, anticipated, sold, encumbered or pledged and will
not be subject to the claims of the Executive's creditors.
15. Notice. For purposes of this Agreement, notices and all other
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communications must be in writing and are effective when delivered or mailed by
United States registered mail, return receipt requested, postage prepaid,
addressed to the Executive or his personal representative at his last known
address. All notices to the Company must be directed to the
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attention of the Chairman of the Committee. Such other addresses may be used as
either party may have furnished to the other in writing. Notices of change of
address are effective only upon receipt.
16. Miscellaneous. This instrument contains the entire agreement of the
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parties. To the extent not governed by federal law, this Agreement will be
construed in accordance with the laws of the Commonwealth of Virginia, without
reference to its conflict of laws rules. No provisions of this Agreement may be
modified, waived or discharged unless such waiver, modification or discharge is
agreed to in writing and the writing is signed by the Executive and the Company.
A waiver of any breach of or compliance with any provision or condition of this
Agreement is not a waiver of similar or dissimilar provisions or conditions. The
invalidity or unenforceability of any provision of this Agreement will not
affect the validity or enforceability of any other provision of this Agreement,
which will remain in full force and effect. This Agreement may be executed in
one or more counterparts, all of which will be considered one and the same
agreement.
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WITNESS the following signatures.
DOMINION RESOURCES, INC.
By: /s/ K. A. RANDALL
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Kenneth A. Randall,
Chairman, Organization and
Compensation Committee
Dated: April 19, 1999
/s/ THOS. E. CAPPS
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Thos. E. Capps
Dated: April 19, 1999
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