Exhibit 10.16(b)
CHANGE OF CONTROL
AGREEMENT
THIS AGREEMENT (the
“Agreement”) dated as of the 8th day of September, 2008
(the “Effective Date”) is made by and between EQUITABLE
RESOURCES, INC., a Pennsylvania corporation with its principal
place of business at Pittsburgh, Pennsylvania (the
“Company”), and Steven T. Schlotterbeck, an individual
(the “Employee”);
WITNESSETH:
WHEREAS, the Board of Directors of
the Company (the “Board”) continues to believe that it
is in the best interest of the Company and its shareholders to
assure that the Company will have the continued dedication of the
Employee, notwithstanding the possibility, threat or occurrence of
a Change of Control (as defined below) of the Company; that it is
imperative to diminish the inevitable distraction of the Employee
by virtue of the personal uncertainties and risks created by a
pending or threatened Change of Control and to encourage the
Employee’s full attention and dedication to the Company
currently and in the event of any threatened or pending Change of
Control; and that it is appropriate to provide the Employee with
compensation and benefits arrangements upon a Change of Control
which ensure that the compensation and benefits expectations of the
Employee will be satisfied and which are competitive with those of
other corporations in the industry in which the Company’s
principal business activity is conducted; and
WHEREAS, in consideration of the
compensation and benefits payable to the Employee under this
Agreement, the Company desires to restrict the Employee from
competing with the Company and from soliciting customers and
employees of the Company for one (1) year following the
termination of the Employee’s employment following a Change
of Control. Employer also desires to require that Employee
maintain the confidentiality of certain information for two years
following any such termination, and the Employee is willing to
agree to such restrictions in consideration of the compensation and
benefits payable under this Agreement; and
WHEREAS, in order to accomplish the
foregoing objectives, the Company and the Employee desire to enter
into this Agreement which, among other things, reflects the
parties’ best efforts to comply with the provisions of
Section 409A of the Internal Revenue Code of 1986, as amended,
(the “Code”) to the benefit of the Employee;
NOW THEREFORE, in consideration of the premises and mutual
covenants contained herein, and intending to be legally bound
hereby, the parties hereto agree as follows:
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1.
Term
. The term of this Agreement shall commence on the Effective
Date hereof and, subject to Sections 3(f), 5 and 8, shall terminate
on the earlier of (i) the date of the termination of
Employee’s employment with the Company for any reason prior
to a Change of Control; (ii) the date of Employee’s
transition to employment with the Company on a part-time basis,
including without limitation assumption of “Executive
Alternative Work Arrangement” status; or (iii) unless
further extended as hereinafter set forth, the date which is
twenty-four (24) months after the Effective Date; provided, that,
commencing on the last day of the first full calendar month after
the Effective Date and on the last day of each succeeding calendar
month, the term of this Agreement shall be automatically extended
without further action by either party (but not beyond the date of
the termination of Employee’s employment or transition to
part-time employment prior to a Change of Control) for one (1)
additional month unless one party provides written notice to the
other party that such party does not wish to extend the term of
this Agreement. In the event that such notice shall have been
delivered, the term of this Agreement shall no longer be subject to
automatic extension and the term hereof shall expire on the date
which is twenty-four (24) calendar months after the last day of the
month in which such written notice is received.
2.
Change of Control
. Except as provided in Section 12, Change of Control
shall mean any of the following events (each of such events being
herein referred to as a “Change of
Control”):
(a)
The sale or other disposition by the Company of all or
substantially all of its assets to a single purchaser or to a group
of purchasers, other than to a corporation with respect to which,
following such sale or disposition, more than eighty percent (80%)
of, respectively, the then outstanding shares of Company common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of the Board
of Directors is then owned beneficially, directly or indirectly, by
all or substantially all of the individuals and entities who were
the beneficial owners, respectively of the outstanding Company
common stock and the combined voting power of the then outstanding
voting securities immediately prior to such sale or disposition in
substantially the same proportion as their ownership of the
outstanding Company common stock and voting power immediately prior
to such sale or disposition;
(b)
The acquisition in one or more transactions by any person or group,
directly or indirectly, of beneficial ownership of twenty percent
(20%) or more of the outstanding shares of Company common stock or
the combined voting power of the then outstanding voting securities
of the Company entitled to vote generally in the election of the
Board of Directors; provided, however, that the following shall not
constitute a Change of Control: (i) any acquisition by
the Company or any of its subsidiaries, or any employee benefit
plan (or related trust) sponsored or maintained by the Company or
any of its subsidiaries and (ii) an acquisition by
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any person or group of persons of not more than forty percent (40%)
of the outstanding shares of Company common stock or the combined
voting power of the then outstanding voting securities of the
Company if such acquisition resulted from the issuance of capital
stock by the Company and the issuance and the acquiring person or
group was approved in advance of such issuance by at least
two-thirds of the Continuing Directors then in office;
(c)
The Company’s termination of its business and liquidation of
its assets;
(d)
There is consummated a merger, consolidation, reorganization, share
exchange, or similar transaction involving the Company (including a
triangular merger), in any case, unless immediately following such
transaction: (i) all or substantially all of the persons
who were the beneficial owners of the outstanding common stock and
outstanding voting securities of the Company immediately prior to
the transaction beneficially own, directly or indirectly, more than
60% of the outstanding shares of common stock and the combined
voting power of the then outstanding voting securities entitled to
vote generally in the election of directors of the corporation
resulting from such transaction (including a corporation or other
person which as a result of such transaction owns the Company or
all or substantially all of the Company’s assets through one
or more subsidiaries (a “Parent Company”)) in
substantially the same proportion as their ownership of the common
stock and other voting securities of the Company immediately prior
to the consummation of the transaction, (ii) no person (other
than (A) the Company, any employee benefit plan sponsored or
maintained by the Company or, if reference was made to equity
ownership of any Parent Company for purposes of determining whether
clause (i) above is satisfied in connection with the
transaction, such Parent Company, or (B) any person or group
that satisfied the requirements of subsection (b)(ii), above)
beneficially owns, directly or indirectly, 20% or more of the
outstanding shares of common stock or the combined voting power of
the voting securities entitled to vote generally in the election of
directors of the corporation resulting from such transaction and
(iii) individuals who were members of the Company’s
Board of Directors immediately prior to the consummation of the
transaction constitute at least a majority of the members of the
board of directors resulting from such transaction (or, if
reference was made to equity ownership of any Parent Company for
purposes of determining whether clause, (i) above is satisfied
in connection with the transaction, such Parent Company);
or
(e)
The following individuals (sometimes referred to herein as
“Continuing Directors”) cease for any reasons to
constitute a majority of the number of directors then
serving: individuals who, on the date hereof, constitute the
entire Board of Directors and any new director (other than a
director whose initial assumption of office is in connection with
an actual or threatened election contest, including but not limited
to a consent solicitation, relating to the election of directors of
the Company) whose appointment or election by the Board or
nomination for election by the Company’s shareholders was
approved by a vote of at least two-thirds (2/3) of the directors
then still in office who either were
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directors on the date hereof or whose appointment, election or
nomination for election was previously so approved.
3.
Salary and Benefits Continuation
.
(a)
“Salary and Benefits Continuation” shall be defined to
mean the following:
(i)
payment of an amount of cash equal to two (2) times the
Employee’s base salary at the rate of base salary per annum
in effect immediately prior to the Change of Control or the
termination of Employee’s employment, whichever is
higher;
(ii)
payment of an amount of cash equal to two (2) times the
greater of (A) the highest annual incentive (bonus) payment
earned by the Employee under the Company’s applicable
Short-Term Incentive Plan (or any successor plan) for any year in
the five (5) years prior to the termination of
Employee’s employment or (B) the target incentive
(bonus) award under the Company’s applicable Short-Term
Incentive Plan (or any successor plan) for the year in which the
Change of Control or termination of Employee’s employment
occurs, whichever is higher;
(iii)
provision to Employee and his/her eligible dependents of medical,
long-term disability, dental and life insurance coverage (to the
extent such coverage was in effect immediately prior to the Change
of Control) for twenty-four (24) months (at the end of which period
the Company shall make such benefits available to the Employee and
his/her eligible dependents in accordance with the Consolidated
Omnibus Budget Reconciliation Act of 1985 (“COBRA”),
whether or not the Company is then required to comply with COBRA);
and if the Employee would have become entitled to benefits under
the Company’s post-retirement health care or life insurance
plans (as in effect immediately prior to the Change of Control or
the date of the Employee’s termination of employment,
whichever is most favorable to the Employee) had the
Employee’s employment terminated at any time during the
period of twenty-four (24) months after such date of termination,
the Company shall provide such post-retirement health care or life
insurance benefits to the Employee (subject to any employee
contributions required under the terms of such plans at the level
in effect immediately prior to the Change of Control or the date of
termination, whichever is more favorable to the Employee)
commencing on the later of (i) the date that such coverage
would have first become available or (ii) the date that
benefits described in this subsection
(iii) terminate;
(iv)
contribution by the Company to Employee’s account under the
Company’s defined contribution retirement plan (currently,
the Equitable Resources, Inc. Employee Savings Plan) of an
amount of cash equal to the amount that the Company would have
contributed to such plan (including
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both retirement contributions and Company matching contributions in
respect of Employee contributions to the plan) had the Employee
continued to be employed by the Company for an additional
twenty-four (24) months at a base salary equal to the
Employee’s base salary immediately prior to the Change of
Control or the termination of Employee’s employment,
whichever is higher (and assuming for this purpose that the
Employee continued to make the maximum permissible contributions to
such plan during such period), such contribution being deemed to be
made immediately prior to the termination of Employee’s
employment; provided, that to the extent that the amount of such
contribution exceeds the amount then allowed to be contributed to
the plan under the applicable rules relating to tax-qualified
retirement plans, then the excess shall be paid to the Employee in
cash in respect of both retirement and matching contributions under
the Company’s Employee Savings Plan (or any successor plan)
because of applicable rules relating to tax-qualified
retirement plans; and
(v)
Payment of an amount of cash equal to $20,000.
(b)
All amounts payable by the Company to the Employee pursuant to
Sections 3(a)(i), (ii), (iv) and
(v)
shall be made in a lump sum on the first day following the
six-month anniversary of the Employee’s termination.
For purposes of this Agreement, the term “termination”
when used in the context of a condition to, or timing of, payment
hereunder shall be interpreted to mean a “separation from
service” as that term is used in Section 409A of the
Code.
(c)
To the extent that medical, long-term disability, dental and life
insurance benefits cannot be provided on a non-taxable basis to the
Employee under appropriate Company group insurance policies
pursuant to Section 3(a)(iii), an amount equal to the premium
necessary for the Employee to purchase directly the same level of
coverage in effect immediately prior to the Change of Control shall
be added to the Company’s payments to Employee pursuant to
Section 3(a). Any such payment shall be made in a lump
sum, payable on the first day following the six-month anniversary
of Employee’s termination. If Employee is required to
pay income or other taxes on any medical, long-term disability,
dental or life insurance benefits provided or paid to the Employee
pursuant to Section 3(a)(iii) or this Section 3(c),
then the Company shall pay to the Employee an amount of cash
sufficient to “gross-up” such benefits or payments at
the time specified in Section 10 hereof so that
Employee’s “net” benefits received under
Section 3(a)(iii) and this Section 3(c) are not
diminished by any such taxes that are imposed with respect to the
same or the Company’s gross-up hereunder with respect to such
taxes.
(d)
If there is a Change of Control as defined above, the Company will
provide Salary and Benefits Continuation if at any time during the
first twenty-four (24) months following the Change of Control,
either (i) the Company terminates the Employee’s
employment other than for Cause as defined in Section 4 below
or
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(ii) the Employee terminates his/her employment for
“Good Reason” as defined below.
(e)
For purposes of this Agreement, “Good Reason” is
defined as:
(i)
Removal of the Employee from the position he/she held immediately
prior to the Change of Control (by reason other than death,
disability or Cause);
(ii)
The assignment to the Employee of any duties inconsistent with
those performed by the Employee immediately prior to the Change of
Control or a substantial alteration in the nature or status of the
Employee’s responsibilities which renders the
Employee’s position to be of less dignity, responsibility or
scope;
(iii)
A reduction by the Company in the overall level of compensation of
the Employee for any year from the level in effect for the Employee
in the prior year. For purposes of this subsection (iii), the
following shall not constitute a reduction in the overall level of
compensation of the Employee: (A) across-the-board
reductions in base salary similarly affecting all executives of the
Company and all executives of any person in control of the Company,
provided, however, that the Employee’s annual base salary
rate shall not be reduced by an amount equal to ten percent or more
of the Employee’s annual base salary rate in effect
immediately prior to the Change of Control; (B) changes in the
mix of base salary payable to and the short-term incentive
opportunity available to the Employee; provided, that in no event
shall the Employee’s base salary for any year be reduced
below 90% of the annual base salary paid to such Employee in the
prior year; (C) a reduction in the compensation of the
Employee resulting from the failure to achieve corporate, business
unit and/or individual performance goals established for purposes
of incentive compensation for any year or other period; provided,
that the aggregate short-term incentive opportunity, when combined
with the Employee’s annual base salary, provides, in the
aggregate, an opportunity for the Employee to realize at least the
same overall level of base salary and short term incentive
compensation as was paid in the immediately prior year or period at
target performance levels; and provided, further, that such target
performance levels are reasonable at all times during the
measurement period, taking into account the fact that one of the
purposes of such compensation is to incentivize the Employee;
(D) reductions in compensation resulting from changes to any
Company benefit plan; provided, that such changes are generally
applicable to all participants in such Company benefit plan; and
(E) any combination of the foregoing;
(iv)
The failure to grant the Employee an annual salary increase
reasonably necessary to maintain such salary as reasonably
comparable to salaries of senior executives holding positions
equivalent to the Employee’s in the
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industry in which the Company’s then principal business
activity is conducted;
(v)
The Company requiring the Employee to be based anywhere other than
the Company’s principal executive offices in the city in
which the Employee is principally located immediately prior to the
Change of Control, except for required travel on the
Company’s business to an extent substantially consistent with
the Employee’s business travel obligations prior to the
Change of Control;
(vi)
Any material reduction by the Company of the benefits enjoyed by
the Employee under any of the Company’s pension, retirement,
profit sharing, savings, life insurance, medical, health and
accident, disability or other employee benefit plans, programs or
arrangements, the taking of any action by the Company which would
directly or indirectly materially reduce any of such benefits or
deprive the Employee of any material fringe benefits, or the
failure by the Company to provide the Employee with the number of
paid vacation days to which he/she is entitled on the basis of
years of service with the Company in accordance with the
Company’s normal vacation policy, provided that this
subparagraph (vi) shall not apply to any proportional
across-the-board reduction or action similarly affecting all
executives of the Company and all executives of any person in
control of the Company; or
(vii)
The failure of the Company to obtain a satisfactory agreement from
any successor to assume and agree to perform this Agreement, as
contemplated in Section 15 hereof, or any other material
breach by the Company of its obligations contained in this
Agreement.
(f)
The Employee’s right to Salary and Benefits Continuation
shall accrue upon the occurrence of either of the events specified
in (i) or (ii) of Section 3(d) and shall
continue as provided, notwithstanding the subsequent termination or
expiration of this Agreement pursuant to Section 1
hereof. The Employee’s subsequent employment, death or
disability following the Employee’s termination of employment
in connection with a Change of Control shall not affect the
Company’s obligation to continue making Salary and Benefits
Continuation payments. The Employee shall not be required to
mitigate the amount of any payment provided for in this
Section 3 by seeking employment or otherwise. The rights
to Salary and Benefits Continuation shall be in addition to
whatever other benefits the Employee may be entitled to under any
other agreement or compensation plan, program or arrangement of the
Company; provided, that the Employee shall not be entitled to any
separate or additional severance payments pursuant to the
Company’s severance plan as then in effect and generally
applicable to similarly situated employees. The Company shall
be authorized to withhold from any payment to the Employee, his/her
estate or his/her beneficiaries hereunder all such amounts, if any,
that the Company may
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reasonably determine it is required to withhold pursuant to any
applicable law or regulation.
4.
Termination of Employee for Cause
.
(a)
Upon or following a Change of Control, the Company may at any time
terminate the Employee’s employment for Cause.
Termination of employment by the Company for “Cause”
shall mean termination upon: (i) the willful and
continued failure by the Employee to substantially perform his/her
duties with the Company (other than (A) any such failure
resulting from Employee’s disability or (B) any such
actual or anticipated failure resulting from Employee’s
termination of his/her employment for Good Reason), after a written
demand for substantial performance is delivered to the Employee by
the Board of Directors which specifically identifies the manner in
which the Board of Directors believes that the Employee has not
substantially performed his/her duties, and which failure has not
been cured within thirty days (30) after such written demand; or
(ii) the willful and continued engaging by the Employee in
conduct which is demonstrably and materially injurious to the
Company, monetarily or otherwise, or (iii) the breach by the
Employee of any of the covenants set forth in Section 8
hereof.
(b)
For purposes of this Section 4, no act, or failure to act, on
the Employee’s part shall be considered “willful”
unless done, or omitted to be done, by the Employee in bad faith
and without reasonable belief that such action or omission was in
the best interest of the Company. Notwithstanding the
foregoing, the Employee shall not be deemed to have been terminated
for Cause unless and until there shall have been deliv
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