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EXHIBIT 10.10
HERITAGE HOLDINGS, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is entered into effective as of
the Closing ("Effective Date") by and between Heritage Holdings, Inc., a
Delaware corporation ("Company"), and H. Michael Krimbill ("Employee").
RECITALS
WHEREAS, Employee is currently an employee of the Company; and
WHEREAS, the Company desires for Employee to continue with the Company
and Employee is willing to continue with the Company, on the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties, and agreements contained herein, and for other
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATIONS
1.1 DEFINITIONS
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, the following terms shall have the
following respective meanings:
"Accounting Firm" shall have the meaning specified in Section
4.5(d)(iii).
"Base Salary" shall have the meaning specified in Section 3.1.
"Board" shall mean the Board of Directors of the Company.
"Bonus Payment" shall have the meaning specified in Section 4.5(a).
"Change of Control" shall mean the date that the Specified Entities
cease to own, directly or indirectly through wholly-owned subsidiaries, in the
aggregate at least 65% of the capital stock of the Company.
"Closing" shall mean the closing date of the purchase of Company stock
contemplated in the Stock Purchase Agreement, dated June 15, 2000, among U.S.
Propane, L.P. and the other parties thereto.
"Code" shall have the meaning specified in Section 4.5(d)(i).
"Confidential Information" shall have the meaning specified in Section
5.1(a).
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"Continuation Period" shall have the meaning specified in Section
4.5(a).
"Designated Current Manager" shall mean each of R.C. Mills and
Employee, current executive officers of the Company, together with, in the case
of either such executive officer, the heirs of, and trusts for the benefit of
family members controlled by, such executive officer.
"Disability" shall mean a physical or mental condition of Employee
that, in the good faith judgment of not less than a majority of the entire
membership of the Board (excluding Employee, if Employee is then a member of the
Board), based upon certification by a licensed physician reasonably acceptable
to Employee and the Board, (i) prevents Employee from being able to perform the
services required under this Agreement, (ii) has continued for a period of at
least 180 days during any 12-month period, and (iii) is expected to continue.
"Dispute" shall have the meaning specified in Article 6.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"Expiration Date" shall have the meaning specified in Section 2.2.
"Good Reason" shall mean any of the following:
(i) the assignment to Employee of any duties materially inconsistent
with Employee's position (including a materially adverse change in Employee's
office, title and reporting requirements), authority, duties or
responsibilities;
(ii) the Company's requiring Employee to be based at any office other
than the Company's executive offices in the greater Tulsa, Oklahoma area;
(iii) any termination by the Company of Employee's employment other
than as expressly permitted by this Agreement;
(iv) any failure by the Company to comply with and satisfy Section 7.5
(requiring the Company to require any successor to expressly assume and agree to
perform all obligations under this Agreement); or
(v) a breach or violation by the Company of any material provision of
this Agreement, which breach or violation remains unremedied for more than 30
days after written notice thereof is given to the Company by Employee.
For purposes of this definition, no act or failure to act on the Company's part
shall be considered a "Good Reason" unless Employee has given the Company
written notice of such act or failure to act within 30 days thereof and the
Company fails to remedy such act or failure to act within 15 days of its receipt
of such notice.
"Gross-Up Payment" shall have the meaning specified in Section
4.5(d)(ii).
"Misconduct" shall mean one or more of the following:
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(i) the willful and continued failure by Employee to perform
substantially his duties hereunder (other than any such failure resulting from
Employee's incapacity due to physical or mental illness) after written notice of
such failure has been given to Employee by the Company and Employee has had a
reasonable period (not to exceed 15 days) to correct such failure;
(ii) conviction (or plea of nolo contendere) of Employee for any felony
or any other crime which is materially detrimental to the Company (monetarily or
otherwise);
(iii) any act or omission by Employee which materially damages the
integrity, reputation or financial viability of the Company or its affiliates;
(iv) a breach or violation by Employee of (a) any material provision of
this Agreement or (b) any material Company employment policy, which (in either
case), if capable of being remedied, remains unremedied for more than 15 days
after written notice thereof is given to Employee by the Company; or
(v) chronic alcohol abuse or illegal drug use by Employee that is
determined by the Board to impair Employee's ability to perform his duties and
responsibilities hereunder.
For purposes of this definition, no act or failure to act on Employee's
part shall be considered "Misconduct" if done or omitted to be done by Employee
in good faith and in the reasonable belief that such act or failure to act was
in the best interest the Company or in furtherance of Employee's duties and
responsibilities hereunder.
"Notice of Discontinuance" shall have the meaning specified in Section
2.2.
"Notice of Termination" shall mean a notice purporting to terminate
Employee's employment in accordance with Section 4.1(a) or 4.2. Such notice
shall specify the effective date of such termination, which date shall neither
be less than 30 (10 in the case of a termination by the Company for Misconduct)
nor more than 60 days after the date such notice is given. If such termination
is by Employee for Good Reason or by the Company for Disability or Misconduct,
such notice shall set forth in reasonable detail the reason for such termination
and the facts and circumstances claimed to provide a basis therefor. Any notice
purporting to terminate Employee's employment which is not in compliance with
the requirements of this definition shall be ineffective.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization and any other
entity.
"Qualifying Termination" shall have the meaning specified in Section
4.5.
"Severance Plan" shall have the meaning specified in Section 4.5(a).
"Specified Entities" shall mean any one or more of the following
entities: (i) Atmos Energy Corporation, a Texas and Virginia corporation, (ii)
Piedmont Natural Gas Company, Inc., a North Carolina corporation, (iii) AGL
Resources, Inc., a Georgia corporation, and (iv) TECO Energy, Inc., a Florida
corporation, or a successor to any entity referred to in clause (i), (ii), (iii)
or (iv) of this definition.
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"Successor" shall mean, with respect to a Specified Entity, any entity
in which the holders of capital stock of such Specified Entity outstanding
immediately prior to a consolidation, acquisition or merger involving such
Specified Entity hold, directly or indirectly, through wholly-owned
subsidiaries, immediately after such consolidation, acquisition or merger.
"Term" shall have the meaning specified in Section 2.2.
"Termination Date" shall mean the termination date specified in a
Notice of Termination delivered in accordance with this Agreement.
"Total Payment" shall have the meaning specified in Section 4.5(d)(i).
1.2 INTERPRETATIONS
(a) In this Agreement, unless a clear contrary intention appears, (i)
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to this Agreement as a whole and not to any particular Article, Section or
other subdivision, (ii) reference to any "Article" or "Section", means such
Article or Section hereof, (iii) the word "including" (and with correlative
meaning "include") means including, without limiting the generality of any
description preceding such term, (iv) the word "affiliate" has the meaning
stated in Rule 405 promulgated under the Securities Act of 1933, as amended, and
(v) where any provision of this Agreement refers to action to be taken by either
party, or which such party is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such party.
(b) The Article and Section headings herein are for convenience only
and shall not affect the construction hereof.
ARTICLE 2
EMPLOYMENT; TERM; POSITION AND DUTIES; ETC.
2.1 EMPLOYMENT
The Company agrees to continue Employee's employment with the Company
and Employee agrees to remain in the employment of the Company, in each case on
the terms and conditions set forth in this Agreement.
2.2 TERM OF AGREEMENT
Unless sooner terminated pursuant to Article 4, the term of this
Agreement (the "Term") shall commence on the Effective Date and shall continue
until the third anniversary of the Effective Date (the "Expiration Date");
provided, however, that beginning on the second anniversary of the Effective
Date and on each day thereafter the Expiration Date shall be automatically
extended one additional day unless either party (i) shall give written notice to
the other (a "Notice of Discontinuance") that the Term shall cease to be so
extended beginning immediately after the date of such notice or (ii) shall give
a Notice of Termination to the other party pursuant to Section 4.1(a) or 4.2, as
the case may be. No Notice of Discontinuance given
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by the Company shall be effective unless given pursuant to a resolution duly
adopted by the affirmative vote of a least a majority of the entire membership
of the Board (excluding Employee, if Employee is then a member of the Board). If
either party gives a Notice of Discontinuance, Employee's employment hereunder
shall continue until the expiration of the Term, subject to earlier termination
pursuant to Article 4. Employee's continued employment, if any, after the
expiration of the Term shall be "at will" employment.
2.3 POSITION AND DUTIES
(a) While employed hereunder, Employee shall serve as the Chief
Executive Officer of the Company and shall have and may exercise all of the
powers, functions, duties and responsibilities normally attributable to such
position. Employee shall have such additional duties and responsibilities
commensurate with such position as from time to time may be reasonably assigned
to Employee by the Board or the Chairman of the Board of the Company. While
employed hereunder, Employee shall (i) report directly to the Chairman of the
Board of the Company and the Board and (ii) observe and comply with all lawful
policies, directions and instructions of the Board and the Chairman of the Board
of the Company which are consistent with the foregoing provisions of this
paragraph (a).
(b) While employed hereunder, Employee shall devote substantially all
of his business time, attention, skill and efforts to the faithful and efficient
performance of his duties hereunder. Notwithstanding the foregoing, Employee may
engage in the following activities so long as they do not interfere in any
material respect with the performance of Employee's duties and responsibilities
hereunder: (i) serve on corporate, civic, religious, educational and/or
charitable boards or committees and (ii) manage his personal investments.
(c) While employed hereunder, Employee shall conduct himself in such a
manner as not to intentionally and knowingly prejudice, in any material respect,
the reputation of the Company or any of its affiliates, including U.S. Propane,
L.P., or with the investment community or the public at large.
2.4 PLACE OF EMPLOYMENT
Employee's place of employment hereunder shall be at the Company's
principal executive offices in the greater Tulsa, Oklahoma area.
ARTICLE 3
COMPENSATION AND BENEFITS
3.1 BASE SALARY
(a) For services rendered by Employee under this Agreement, the Company
shall pay to Employee an annual base salary of $350,000.00 ("Base Salary"). The
Board shall review the Base Salary at least annually and may adjust the amount
of the Base Salary at any time as the Board may deem appropriate in its sole
discretion; provided, however, that in no event may the Base Salary be decreased
below the above stated amount without the prior written consent of Employee.
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(b) The Base Salary shall be payable in accordance with the Company's
payroll practice for its executives as it is earned.
3.2 BONUS
The Employee will participate in bonus and incentive plans with
substantially equivalent economic provisions as set forth in Exhibit A hereto.
3.3 VACATION
While employed hereunder, Employee shall be entitled to vacation
benefits in accordance with the vacation policy approved by the Board from time
to time for the Company's executives in general. Employee shall not be entitled
to accumulate and carryover unused vacation time from year to year, except to
the extent permitted in accordance with the Company's vacation policy for
executives in general, nor shall Employee be entitled to compensation for unused
vacation time except as provided in Section 4.3(a).
3.4 BUSINESS EXPENSES
The Company shall, in accordance with the rules and policies that it
may establish from time to time for executives, reimburse Employee for business
expenses reasonably incurred in the performance of Employee's duties. Requests
for reimbursement for such expenses must be accompanied by appropriate
documentation as required by such rules and policies.
3.5 OTHER BENEFITS
Employee shall be entitled to receive all employee benefits, fringe
benefits and other perquisites that may be offered by the Company to its
executives as a group, including participation by Employee and, where
applicable, Employee's dependents, in the various employee benefit plans or
programs (including pension plans, profit sharing plans, stock plans, health
plans, life insurance and disability insurance) provided to executives of the
Company in general, subject to meeting the eligibility requirements with respect
to each of such benefit plans or programs. However, nothing in this Section 3.5
shall be deemed to prohibit the Company from making any changes in any of the
plans, programs or benefits described herein. In addition, Employee shall be
entitled to a life insurance benefit that is the same or reasonably comparable
to that which is provided to Employee by the Company at the Effective Date.
3.6 INDEMNIFICATION
Employee shall be entitled to (i) indemnification and advancement of
expenses from the Company in accordance with the provisions of the Bylaws of the
Company, and (ii) coverage under the applicable directors' and officers'
insurance policy (if any) maintained by the Company or any of its affiliates
regarding actions and omissions by Employee during the Term (whether on behalf
of the Company or any of its Affiliates).
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ARTICLE 4
TERMINATION OF EMPLOYMENT
4.1 TERMINATION BY EMPLOYEE; DEATH
(a) Employee may, at any time prior to the Expiration Date, terminate
his employment hereunder for any reason by delivering a Notice of Termination to
the Board and the Chairman of the Board of the Company.
(b) Employee's employment hereunder shall terminate upon his death.
4.2 TERMINATION BY THE COMPANY
The Company may, at any time prior to the Expiration Date, terminate
Employee's employment hereunder for any reason by delivering a Notice of
Termination to Employee; provided, however, that in no event shall the Company
be entitled to terminate Employee's employment prior to the Expiration Date
unless the Board shall duly adopt, by the affirmative vote of at least a
majority of the entire membership of the Board (excluding Employee, if Employee
is then a member of the Board), a resolution authorizing such termination and
stating that, in the opinion of the Board, sufficient reason exists therefor.
4.3 PAYMENT OF ACCRUED BASE SALARY, VACATION PAY, ETC.
(a) Promptly upon the termination of Employee's employment for any
reason (including death), the Company shall pay to Employee (or his estate) a
lump sum amount for (i) any unpaid Base Salary earned hereunder prior to the
termination date and any accrued but unpaid bonus for any fiscal year previously
completed as of the termination date, but only to the extent such bonus has
accrued and is payable to Employee after termination of employment pursuant to
the terms of the applicable bonus plan or policy; (ii) all unused vacation time
accrued by Employee as of the termination date in accordance with Section 3.3;
(iii) all unpaid benefits earned or vested, as the case may be, by Employee as
of the termination date under any and all incentive or deferred compensation
plans or programs of the Company and (iv) any amounts in respect of which
Employee has requested, and is entitled to, reimbursement in accordance with
Section 3.4.
(b) A termination of Employee's employment in accordance with this
Agreement under any Section of this Article 4 shall not alter or impair, nor
enhance or increase, any of Employee's rights or benefits under any employee
benefit plan or program or incentive or deferred compensation plan or program
maintained by the Company, in each case except as provided therein or in any
written agreement entered into between the Company and Employee pursuant
thereto.
(c) If Employee's employment hereunder is terminated due to his death
or Disability, by Employee for a Good Reason, by the Company other than for
Misconduct, or upon a Change of Control of the Company, all Company-imposed
restrictions on the transferability of the Units (as defined in the Subscription
Agreement dated as of June 15, 2000, by and among Heritage Propane Partners,
L.P., a Delaware limited partnership ("Heritage MLP") and the other parties
thereto (the "Subscription Agreement")) purchased by Employee on the Closing
shall
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automatically lapse in full on such date. Upon Employee's request accompanied by
Employee's certificate for Units, the Company shall cause a new certificate to
be issued to Employee for such Units without a legend referring to such Company-
imposed restrictions. A copy of such Company-imposed restrictions is attached as
Annex II to the Subscription Agreement.
4.4 DISABILITY PAYMENTS
If Employee incurs a Disability, the Company may terminate Employee's
employment hereunder by delivering a Notice of Termination to Employee;
provided, however, in such event the Company shall continue to pay to Employee,
through the remainder of the Term (as determined without regard to its earlier
termination upon Employee's termination due to Disability under this Section 4.4
and, if the Termination Date is on or after the second anniversary of the
Effective Date, without any extension of the Term under Section 2.2 after such
Termination Date) or until Employee's death, if earlier, at such regularly
scheduled times:
(A) the Base Salary in effect immediately prior to the date of such
termination, minus
(B) any amount payable to Employee under any disability plan maintained
by the Company for the benefit of Employee.
4.5 OTHER BENEFITS
The following provisions shall apply (i) following a Change of Control
or (ii) if Employee terminates his employment pursuant to Section 4.1 for Good
Reason or (iii) if the Company terminates Employee's employment pursuant to
Section 4.2 for any reason other than Misconduct (each a "Qualifying
Termination"):
(a) Base Salary and Bonus Payments. For the remainder of the Term (as
determined without regard to its earlier termination pursuant to Section 4.1(a)
or 4.2 and, if such termination date is on or after the second anniversary of
the Effective Date, without any extension of the Term after such termination
date) or until Employee's death, if earlier (the "Continuation Period"), the
Company shall pay to Employee, at the regularly scheduled times, the sum of the
Base Salary (as in effect on the date on which the relevant Notice of
Termination is given in accordance with this Agreement) and pay or vest the
Bonus Payment as applicable within sixty (60) days of the Qualifying
Termination. The "Bonus Payment" shall be an amount (A) for the Short Term
Incentive Plan, equal to the excess of the actual EBITDA compared to the
budgeted EBITDA to the month end accounting period nearest to the date of the
Qualifying Termination (the "Short Incentive Term") times 15% times the
Employee's Percentage of Incentive as indicated on Exhibit A attached hereto and
(B) for the Long Term Incentive Plan, the Employee will vest immediately in the
number of Common Units equal to the Employee's Percentage of Incentive as
indicated on Exhibit A hereto times the total Common Units at the Minimum Award
level (250,000) to the extent not previously awarded.
The amount payable to Employee under this paragraph (a) is in lieu of,
and not in addition to, any severance payment due or to become due to Employee
under any separate agreement or contract between Employee and the Company or
pursuant to any severance payment plan, program or policy of the Company or any
affiliate (collectively, "Severance Plan"). Any severance amounts received by
Employee under a Severance Plan shall be applied
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as an offset to (reduce or eliminate, as the case may be) any future payments
otherwise to be made to Employee under this paragraph (a); i.e., no additional
payments shall be made under this paragraph (a) until the aggregate amount of
the offsets hereunder equals the severance amounts received by Employee under
the Severance Plan.
(b) Health Plan Benefits. The Company shall at all times during the
Continuation Period cause Employee and Employee's eligible dependents to be
covered by and to participate in, to the fullest extent allowable under the
terms thereof, all group health insurance plans and programs that may be offered
to the executives of the Company so that Employee will receive, at all times
during the Continuation Period, the same benefits under such plans and programs
that Employee would have been entitled to receive had he remained an executive
of the Company; provided, however, (i) Employee must timely pay the "active"
employee premium, if any, for such continued coverage; (ii) Employee must timely
elect COBRA continuation coverage thereunder upon his termination of employment;
and (iii) in the event Employee and his eligible dependents become covered
during the Continuation Period by another employer's group health plan or
programs which does not contain any effective exclusion or limitation with
respect to any pre-existing conditions, then the Company's group health plans
shall no longer be liable for any benefits under this paragraph (b).
(c) Release. Notwithstanding anything in this Section 4.5 to the
contrary, as a condition to the receipt of any payment or benefit under this
Section 4.5, Employee must first execute and deliver to the Company a release in
a form prepared by the Company, releasing the Company, its officers, the Board,
employees and agents from any and all claims and from any and all causes of
action of any kind or character that Employee may have arising out of Employee's
employment with the Company or the termination of such employment, but excluding
any claims and causes of action that Employee may have arising under or based
upon this Agreement.
(d) Parachute Tax.
(i) If the payments and benefits provided to Employee under
this Agreement or under any other agreement with, or plan of, the
Company (the "Total Payment") (A) constitute a "parachute payment" as
defined in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code") and exceed three times Employee's "base amount" as
defined under Code Section 280G(b)(3) by less than 10% of three times
Employee's base amount, and (B) would, but for this Section 4.5(d)(i),
be subject to the excise tax imposed by Code Section 4999, then
Employee's payments and benefits under this Agreement shall be either
(I) paid in full, or (II) reduced and payable only as to the maximum
amount which would result in no portion of such payments and benefits
being subject to excise tax under Code Section 4999, whichever results
in the receipt by Employee on an after-tax basis of the greatest amount
of Total Payment (taking into account the applicable federal, state and
local income taxes, the excise tax imposed by Code Section 4999 and all
other taxes (including any interest and penalties) payable by
Employee). If a reduction of the Total Payment is necessary, Employee
shall be entitled to select which payments or benefits will be reduced
and the manner and method of any such reduction of such payments and
benefits. Within 30 days after the amount of any required reduction in
payments and benefits is finally determined under Section
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4.5(d)(iii), Employee shall notify the Company in writing regarding
which payments and benefits are to be reduced. If no notification is
given by Employee, the Company will determine which payments and
benefits to reduce. If, as a result of any reduction required by this
Section 4.5(d)(i), amounts previously paid to Employee exceed the
amount to which Employee is entitled, Employee will promptly return the
excess amount to the Company.
(ii) If the Total Payment constitutes a "parachute payment" as
defined in Code Section 280G and exceeds three times Employee's "base
amount" as defined under Code Section 280G(b)(3) by 10% or more of
three times Employee's base amount, the Company shall provide to
Employee, in cash, an additional payment in an amount to cover the full
excise tax due under Code Section 4999, plus Employee's state and
federal income, employment, excise, and other taxes (including interest
and penalties) on this additional payment (the "Gross-Up Payment"). Any
amount payable under this Section 4.5(d)(ii) shall be paid as soon as
possible following the date of Employee's Qualifying Termination, but
in no event later than 30 days after such date.
(iii) All determinations required to be made under this
Section 4.5(d), including whether reductions are necessary or whether a
Gross-Up Payment is required, the amount of such Gross-Up Payment and
the assumptions to be used in determining such Gross-Up Payment, shall
be made by the accounting firm used by the Company at the time of such
determination (the "Accounting Firm"). The Accounting Firm shall
provide detailed supporting calculations both to the Company and to
Employee within 15 business days of the receipt of notice from the
Company or Employee that there has been a Qualifying Termination, or
such earlier time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the individual,
entity, or group effecting the change in control transaction, Employee
may appoint another nationally recognized accounting firm to make the
determinations required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and expenses of
the Accounting Firm shall be borne solely by the Company.
(iv) In the event Employee is entitled to a Gross-Up Payment
under Section 4.5(d)(ii) and the Internal Revenue Service subsequently
increases the excise tax computation described in Section 4.5(d)(ii),
the Company shall reimburse Employee for the full amount necessary to
make Employee whole on an after-tax basis (less any amounts received by
Employee that Employee would not have received had the computations
initially been computed as subsequently adjusted), including the value
of any underpaid excise tax, and any related interest and/or penalties
due to the Internal Revenue Service.
4.6 NON-EXCLUSIVITY OF RIGHTS
Nothing in this Agreement shall prevent or limit Employee's continuing
or future participation in any plan, program, policy or practice provided by the
Company for which Employee may qualify, nor shall anything herein limit or
otherwise affect such rights as Employee may have under any other contract or
agreement with the Company. Amounts which
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are vested benefits or which Employee is otherwise entitled to receive under any
plan, policy, practice or program of or any contract or agreement with the
Company at or subsequent to the Termination Date shall be payable in accordance
with such plan, policy, practice or program or contract or agreement except as
explicitly modified by this Agreement. However, the Continuation Period shall
not be credited as continued employment of Employee for any purpose under any
such plan, policy, practice or program.
ARTICLE 5
CONFIDENTIAL INFORMATION AND NON-COMPETITION
5.1 CONFIDENTIAL INFORMATION
(a) Employee recognizes that the services to be performed by Employee
hereunder are special, unique, and extraordinary and that, by reason of
Employee's employment with the Company, Employee will be provided Confidential
Information concerning the operation of the Company, the use or disclosure of
which would cause the Company substantial loss and damages which could not be
readily calculated and for which no remedy at law would be adequate.
Accordingly, Employee agrees that Employee will not (directly or indirectly) at
any time, whether during or after Employee's employment with the Company and its
affiliates, (i) knowingly use for an improper personal benefit any Confidential
Information that Employee may learn or has learned by reason of Employee's
employment with the Company or (ii) disclose any such Confidential Information
to any Person except (A) in the performance of Employee's obligations to the
Company hereunder, (B) as required by applicable law, (C) in connection with the
enforcement of Employee's rights under this Agreement, (D) in connection with
any disagreement, dispute or litigation (pending or threatened) between Employee
and the Company or (E) with the prior written consent of the Board. As used
herein, "Confidential Information" includes, but is not limited to, information
with respect to the Company's products, facilities and methods, research and
development, trade secrets and other intellectual property, systems, patents and
patent applications, procedures, manuals, confidential reports, product price
lists, customer lists, financial information, business plans, prospects or
opportunities; provided, however, that such term shall not include any
information that (x) is or becomes generally known or available other than as a
result of improper disclosure by Employee or (y) is or becomes known or
available to Employee on a nonconfidential basis from a source (other than the
Company) which, to Employee's knowledge, is not prohibited from disclosing such
information to Employee by a legal, contractual, fiduciary or other obligation
to the Company.
(b) Employee confirms that all Confidential Information is the
exclusive property of the Company. All business records, papers and documents
kept or made by Employee while employed by the Company relating to the business
of the Company shall be and remain the property of the Company at all times.
Upon the request of the Company at any time, Employee shall promptly deliver to
the Company, and shall retain no copies of, any written materials, records and
documents made by Employee or coming into his possession while employed by the
Company concerning the business or affairs of the Company other than personal
materials, records and documents (including notes and correspondence) of
Employee not containing Confidential Information relating to such business or
affairs. Notwithstanding the foregoing, Employee shall be permitted to retain
copies of, or have access to, all such materials, records and
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documents relating to any disagreement, dispute or litigation (pending or
threatened) between Employee and the Company.
5.2 NON-COMPETITION
(a) In partial consideration for the Company's agreement to provide
Employee access to Confidential Information and the other benefits provided by
this Agreement, Employee agrees that while employed by the Company and for three
years after the termination of such employment (for any reason) (the "Restricted
Period"), Employee shall not, unless Employee receives the prior written consent
of the Board, own an interest in, manage, operate, join, control, lend money or
render financial or other assistance to or participate in or be connected with,
as an officer, employee, partner, stockholder, consultant or otherwise, any
Person which competes with the Company or its affiliates in the retail marketing
of propane and/or butane gas or appliance sales, service and/or repair business
in any city or within seventy-five (75) miles in all directions from the
boundary of the city limits of any city where the Company or any affiliate
conducts such business; provided, however, that following Employee's termination
of employment the foregoing restriction shall apply only to (i) those areas
where the Company or any affiliate was actually doing business on the date of
such termination of employment and (ii) those areas in respect of which the
Company or any affiliate actively and diligently conducted at any time during
the 12-month period ended on such date of termination an analysis to determine
whether or not it would commence doing business in such areas but, in the case
of each such area the foregoing restriction shall cease to apply when the
Company or its affiliates ceases to actively conduct business (disregarding any
temporary stoppages) in such area or, if applicable, abandons its intent to
conduct business in such area.
(b) Employee has carefully read and considered the provisions of this
Section 5.2 and, having done so, agrees that the restrictions set forth in this
Section 5.2 (including the Restricted Period, scope of activity to be restrained
and the geographical scope) are fair and reasonable and are reasonably required
for the protection of the interests of the Company, its officers, directors,
employees, creditors and shareholders. Employee understands that the
restrictions contained in this Section 5.2 may limit his ability to engage in a
business similar to the Company's business, but acknowledges that he will
receive sufficiently high remuneration and other benefits from the Company
hereunder to justify such restrictions.
(c) During the Restricted Period, Employee shall not, whether for his
own account or for the account of any other Person (excluding the Company),
intentionally (i) solicit, endeavor to entice or induce any employee of the
Company to terminate his employment with the Company or accept employment with
anyone else or (ii) interfere in a similar manner with the business of the
Company.
(d) It is specifically agreed that the Restricted Period, during which
the agreements and covenants of Employee made herein shall be effective, shall
be computed by excluding from such computation any time which Employee is in
violation of any provision of this Article 5.
(e) In the event that any provision of this Section 5.2 relating to the
Restricted Period and/or the areas of restriction shall be declared by a court
of competent jurisdiction to exceed the maximum time period or areas such court
deems reasonable and enforceable, the Restricted
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Period and/or areas of restriction deemed reasonable and enforceable by the
court shall become and thereafter be the maximum time period and/or areas.
5.3 STOCK OWNERSHIP
Nothing in this Agreement shall prohibit Employee from acquiring or
holding any issue of stock or securities of any Person that has any securities
registered under Section 12 of the Exchange Act, listed on a national securities
exchange or quoted on the automated quotation system of the National Association
of Securities Dealers, Inc. so long as (i) Employee is not deemed to be an
"affiliate" of such Person, and (ii) Employee and members of his immediate
family do not own or hold more than 3% of any class of voting securities of any
such Person.
5.4 INJUNCTIVE RELIEF
Employee acknowledges that a breach of any of the covenants contained
in this Article 5 may result in material irreparable injury to the Company for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of such a
breach, any payments remaining under the terms of this Agreement shall cease and
the Company shall be entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining Employee from engaging in
activities prohibited by this Article 5 or such other relief as may required to
specifically enforce any of the covenants contained in this Article 5. Employee
agrees to waive any requirement for the Company's securing or posting of any
bond in connection with such remedies. Employee further agrees to and hereby
does submit to in personam jurisdiction before each and every such court for
that purpose.
5.5 FORFEITURE FOR BREACH
A breach of this Article 5 by Employee shall cause an immediate
forfeiture of all rights Employee may have under this Agreement to receive any
payments or benefits after the date of such breach.
ARTICLE 6
ARBITRATION
EXCEPT WITH RESPECT TO INJUNCTIVE RELIEF AS PROVIDED IN SECTION 5.4
ABOVE, THE PARTIES AGREE TO RESOLVE ANY CLAIM OR CONTROVERSY ARISING OUT OF OR
RELATING TO THIS AGREEMENT, INCLUDING THE EMPLOYMENT OF EMPLOYEE, THE
TERMINATION OF EMPLOYMENT OF EMPLOYEE, OR CLAIMS UNDER TITLE VII OF THE CIVIL
RIGHTS ACT, THE AMERICANS WITH DISABILITIES ACT, THE AGE DISCRIMINATION IN
EMPLOYMENT ACT, AND THE FAMILY MEDICAL LEAVE ACT, BY BINDING ARBITRATION UNDER
THE FEDERAL ARBITRATION ACT BEFORE ONE ARBITRATOR IN THE CITY OF TULSA, STATE OF
OKLAHOMA, ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION UNDER ITS
COMMERCIAL ARBITRATION RULES, AND JUDGMENT ON THE AWARD RENDERED BY THE
ARBITRATOR MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF. THE FEES AND
EXPENSES OF THE ARBITRATOR SHALL BE BORNE SOLELY BY THE NON-PREVAILING PARTY OR,
IN THE EVENT THERE IS NO CLEAR PREVAILING PARTY, AS THE ARBITRATOR DEEMS
APPROPRIATE. EXCEPT AS PROVIDED ABOVE, EACH PARTY SHALL PAY ITS OWN COSTS AND
EXPENSES (INCLUDING ATTORNEYS' FEES) RELATING TO ANY ARBITRATION PROCEEDING
CONDUCTED UNDER THIS ARTICLE 6.
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ARTICLE 7
MISCELLANEOUS PROVISIONS
7.1 NO MITIGATION OR OFFSET
The provisions of this Agreement are not intended to, nor shall they be
construed to, require that Employee mitigate the amount of any payment provided
for in this Agreement by seeking or accepting other employment or becoming
self-employed, nor shall the amount of any payment provided for in this
Agreement be reduced by any compensation earned by Employee as the result of
employment by another employer, self-employment or otherwise. Without limitation
of the foregoing, the Company's obligations to make the payments to Employee
required under this Agreement and otherwise to perform its obligations hereunder
shall not be affected by any set off (other than as provided in Section 4.5(a)),
counterclaim, recoupment, defense or other claim, right or action that the
Company may have against Employee (other than as provided in Section 5.5).
7.2 ASSIGNABILITY
The obligations of Employee hereunder are personal and may not be
assigned or delegated by Employee or transferred in any manner whatsoever, nor
are such obligations subject to involuntary alienation, assignment or transfer.
The Company shall have the right to assign this Agreement and to delegate all
rights, duties and obligations hereunder as provided in Section 7.5.
7.3 NOTICES
All notices and all other communications provided for in the Agreement
shall be in writing and addressed (i) if to the Company, the Board, or the
Chairman of the Board at the principal office address of the Company or such
other address as it may have designated by written notice to Employee for
purposes hereof, directed to the attention of the Chief Executive Officer with a
copy to the Secretary of the Company and (ii) if to Employee, at his residence
address on the records of the Company or to such other address as he may have
designated to the Company in writing for purposes hereof. Each such notice or
other communication shall be deemed to have been duly delivered, provided or
given when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, except that any notice of change of address shall be
effective only upon receipt.
7.4 SEVERABILITY
The invalidity or unenforceability of 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.
7.5 SUCCESSORS; BINDING AGREEMENT
(a) 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 in form and substance
reasonably acceptable to Employee, to expressly assume and agree to perform this
Agreement in the same manner and to the same extent that the
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Company would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement. As used herein, the
term "Company" shall include any successor to its business and/or assets as
aforesaid which executes and delivers the assumption agreement provided for in
this Section 7.5 or which otherwise becomes bound by all terms and provisions of
this Agreement by operation of law.
(b) This Agreement and all rights of Employee hereunder shall inure to
the benefit of and be enforceable by Employee's personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If Employee should die while any amounts are due him
hereunder, all such amounts shall be paid in accordance with the terms of this
Agreement to Employee's devisee, legatee, or other designee or, if there be no
such designee, to Employee's estate.
7.6 TAX WITHHOLDINGS
The Company shall withhold from all payments hereunder all applicable
taxes (federal, state or other) which it is required to withhold therefrom
unless Employee has otherwise paid (or made other arrangements satisfactory) to
the Company the amount of such taxes.
7.7 AMENDMENTS AND WAIVERS
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 Employee and such member of the Board as may be specifically authorized by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or in 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.
7.8 ENTIRE AGREEMENT; TERMINATION OF ANY OTHER AGREEMENTS
This Agreement is an integration of the parties' agreement with respect
to the subject matter hereof and 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.
This Agreement hereby expressly terminates, rescinds and replaces any prior
agreement (written or oral) between the parties relating to the subject matter
hereof, including, without limitation, that certain Employment Agreement between
the parties dated June 28, 1996.
7.9 GOVERNING LAW; SUBMISSION TO JURISDICTION
(a) THE VALIDITY, INTERPRETATION, CONSTRUCTION AND PERFORMANCE OF THIS
AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF OKLAHOMA WITHOUT REGARD
TO ITS CONFLICT OF LAWS PROVISION, OTHER THAN THE PROVISIONS OF SECTION 5.2,
WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE OF ANY ALLEGED VIOLATION. IT IS
THE INTENT OF THE PARTIES THAT THE PROVISIONS OF SECTION 5.2 BE
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INTERPRETED TO IMPOSE THE MAXIMUM PERIOD OF RESTRICTION UNDER THE GOVERNING LAW
OF SUCH SECTION.
(b) EACH PARTY HERETO HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE STATE AND FEDERAL COURTS IN TULSA COUNTY, OKLAHOMA, FOR THE
PURPOSES OF ANY PROCEEDING ARISING OUT OF THIS AGREEMENT.
7.10 EMPLOYMENT WITH AFFILIATES
For purposes of this Agreement, employment with any affiliates of the
Company, U.S. Propane, L.P. or with any of their respective affiliates shall be
deemed to be employment with the Company.
7.11 SURVIVAL
The provisions of Articles 5 and 6 and Section 7.9 and any other
provisions necessary to give full effect to the terms of this Agreement, shall
survive the termination of this Agreement.
7.12 COUNTERPARTS
This Agreement may be executed in or more counterparts, each of which
shall be deemed to be an original, but all of which together will constitute one
and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the Effective Date.
HERITAGE HOLDINGS, INC.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
EMPLOYEE
----------------------------------------
H. Michael Krimbill
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EXHIBIT A
PROPOSED MANAGEMENT INCENTIVE COMPENSATION
PERCENTAGE OF INCENTIVE
POSITION BASE SALARY SHORT-TERM LONG-TERM
- --------------------------------------------- --------------------- -------------------- ----------------------
CEO $ 350,000 14.00% 16.00%
COO 335,000 14.00% 16.00%
CFO 325,000 14.00% 16.00%
Acquisition 200,000 14.00% 16.00%
VP Western Operations 150,000 7.00% 8.67%
VP Northern Operations 135,000 7.00% 8.67%
VP Southern Operations 135,000 7.00% 8.67%
Discretionary (Corp. & Others) 23.00% 10.00%
----------------- ------------ --------------
$ 1,630,000 100.00% 100.00%
================= ============ ==============
SHORT-TERM INCENTIVE PLAN
1. For FY 2001, management will receive the following for EBITDA in excess
of a Base $76.0 million. The beginning Base is higher than $73.2
million in order to offset the higher Base Salaries:
15% of EBITDA over $76 million up to $80 million
17.5% of EBITDA over $80 million up to $85 million
20% of EBITDA over $85 million
2. No cap on short-term incentive, and increasing percentage to encourage
outstanding performance.
3. In the very unlikely event that the short-term incentive earned is over
$2.0 million, the excess bonus would be deferred to the following year.
In this way, when the Board raises the "bar" the following fiscal year,
there is a bonus to be paid.
4. The Board sets the $76.0 million EBITDA Base Target which remains
unchanged during Fiscal YR 2001.
5. Targets in subsequent fiscal years will be set by the Board at its sole
discretion.
LONG-TERM INCENTIVE PLAN
1. A minimum of 250,000 units and a maximum of 500,000 units will be
awarded based on achieving certain targeted levels of Distributed Cash
per unit.
2. Awards under the program will be made starting in 2003 based upon the
average of the prior three years Distributed Cash per unit. Each year,
beginning after Fiscal YR 2003, units will be awarded based upon levels
detailed below.
Exhibit A - Page 1
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2003 2004 2005 TOTALS
----------- ----------- ---------- -----------
Moving Average Period 2001-2003 2002-2004 2003-2005
Three Year Average of Distributed Cash per Unit $ 2.50 $ 2.65 $ 2.80
Maximum Target Level $ 2.80 $ 2.95 $ 3.10
VALUE ASSUMING CURRENT COMMON UNIT PRICE
Minimum Award 83,333 83,333 83,333 250,000
Value at a Common Unit Price of $ 18.375 $ 1,531,250 $ 1,531,250 $ 1,531,250 $ 4,593,750
Maximum Award 166,667 166,667 166,667 500,000
Value at a Common Unit Price of $ 18.375 $ 3,062,500 $ 3,062,500 $ 3,062,500 $ 9,187,500
HYPOTHETICAL VALUES ASSUMING A HIGHER COMMON UNIT PRICE
Minimum Award 83,333 83,333 83,333 250,000
Value at a Common Unit Price of $ 25.000 $ 2,083,333 $ 2,083,333 $ 2,083,333 $ 6,250,000
Maximum Award 166,667 166,667 166,667 500,000
Value at a Common Unit Price of $ 25.000 $ 4,166,667 $ 4,166,667 $ 4,166,667 $12,500,000
Exhibit A - Page 2