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EXECUTIVE
EMPLOYMENT AGREEMENT
This
EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”)
is made and entered into effective as of April 1, 2008 (the
“Effective Date”), by and between Regency GP LLC,
a Delaware limited liability company (together with its
successors and assigns permitted hereunder, the
“Company”), and Byron R. Kelley (the
“Executive”).
WHEREAS,
the Company and Executive desire to provide for
Executive’s employment by the Company commencing upon
the Effective Date on the terms and conditions set forth
herein.
NOW,
THEREFORE, THE PARTIES HERETO HEREBY AGREE AS
FOLLOWS:
1.
TERM.
Subject
to Section 3, the Company hereby agrees to employ Executive,
and Executive hereby agrees to be employed by the Company, in
accordance with the terms and provisions of this
Agreement. The term of this Agreement (the
“Term”) shall be the period commencing on the
Effective Date and ending on the second anniversary of the
Effective Date; provided, however, that commencing on such
second anniversary date of the Effective Date, and on each
anniversary of such date occurring thereafter, the Term
automatically shall be extended for one additional year to the
next anniversary of the Effective Date unless at least 365
days prior to the ensuing expiration date, the Company or
Executive shall have given written notice to the other that it
or he, as applicable, does not wish to extend this Agreement
(a “Non-Renewal Notice”). If the Term
ends due to a non-renewal, Executive shall continue after such
termination as an “at will
employee.” Notwithstanding, the foregoing, in
the event a Change in Control occurs during the Term, the Term
automatically shall be extended to the second anniversary of
the effective date of such Change in Control. For
purposes of this Agreement, a “Change in Control”
means and shall be deemed to have occurred only upon the date
that the GE EFS Group ceases to be the “beneficial
owner” (as such term is defined in Rule 13d-3 and Rule
13d-5 of the Securities Exchange Act of 1934, as amended),
directly or indirectly, of at least 50% of the combined voting
power of the then outstanding voting securities of the
Company. For purposes of this Agreement, “GE
EFS Group” means Regency GP Acquirer L.P., a Delaware
limited partnership, Regency LP Acquirer LP, a Delaware
limited partnership, and any Person (as defined in Section
9(e)(iv)) that, directly or indirectly, controls Regency GP
Acquirer LP or Regency LP Acquirer LP and their respective
directors, officers, shareholders, members, managers,
representatives of management committees and employees (and
members of their respective families and trusts for the
primary benefit of such family members).
(i)
During
the Term, Executive shall serve as the Chief Executive Officer and
President of the Company and, in so doing, shall report to the
Board of Directors or comparable managing body of the Company (the
“Board”). In addition, Executive shall be
appointed as a member of the Board and, if elected, serve as the
Chairman of the Board. Executive shall have supervision
and control over, and responsibility for, such management and
operational functions of the Company currently assigned to such
positions, and he shall have such other powers and duties as may
from time to time be prescribed by the Board, so long as such
powers and duties are reasonable and customary for the Chief
Executive Officer of an enterprise or division comparable to the
Company.
(ii)
During
the Term, Executive agrees to serve, if elected or appointed to any
such positions, as a member of the board of directors of each
subsidiary and affiliate of the Company, and as an officer of each
subsidiary and affiliate of the Company; provided, however, that
Executive is indemnified for serving in any and all such capacities
in a manner acceptable to the Company and
Executive. Executive agrees that he shall not be
entitled to receive any compensation for serving as a member of the
Board or as an officer or director of any other Person as provided
in this Section 2(a)(ii) other than the compensation to be paid to
Executive pursuant to this Agreement or any other written agreement
between the Company and Executive.
(iii)
During
the Term, and excluding any periods of vacation and sick leave to
which Executive is entitled and periods of Disability (as defined
in Section 3(a)), Executive agrees to devote substantially all of
his business time and attention to the business and affairs of the
Company and perform his lawful duties and responsibilities in good
faith. During the Term, it shall not be a violation of
this Agreement for Executive to manage his personal investments, so
long as such activities do not materially interfere with the
performance of Executive’s duties and responsibilities under
this Agreement. Executive agrees that, without the
written approval of the Board he shall not serve on the board or
committee of any Person (other than charitable non-profit
organizations) or engage in any other business activities without
the prior consent of the Board, which consent shall not be
unreasonably withheld.
(iv)
The
parties expressly acknowledge that any performance of
Executive’s duties and responsibilities hereunder shall
necessitate, and the Company shall provide, access to and the
disclosure of Confidential Information (as defined in Section 6(a)
below) to Executive and that Executive’s duties and
responsibilities shall include the development of the
Company’s goodwill through Executive’s contacts with
the Company’s customers and suppliers. Such access
to and disclosure of Confidential Information by the Company to
Executive, and such development of goodwill by Executive on behalf
of the Company, shall commence immediately upon the Effective
Date.
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(b)
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Compensation
During the Term.
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(i)
Base
Salary. Executive shall receive an annual base salary
(the “Annual Base Salary”), which shall be paid in
accordance with the customary payroll practices of the Company, at
the rate of $475,000 (prorated for any partial calendar year of the
Term). The Annual Base Salary shall be reviewed by the
Board (or the compensation committee thereof) at least as often as
the compensation of other senior executives of the Company is
reviewed, and may be increased (but not decreased below the amount
set forth in the first sentence of this Section 2(b)(i)) at any
time in the sole discretion of the Board (or the compensation
committee thereof). Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to
Executive under this Agreement. The term “Annual
Base Salary” as utilized in this Agreement shall refer to the
Annual Base Salary as then in effect. Notwithstanding
anything in this Agreement to the contrary, amounts paid to
Executive under the Company’s short-term disability plan or
policy shall reduce the amount of Annual Base Salary otherwise then
payable to Executive.
(ii)
Bonuses. Executive
shall be eligible to receive an annual performance bonus (a
“Bonus”) in accordance with the annual bonus plan of
the Company for executives (the “Bonus
Plan”). The Bonus Plan shall have objective
performance standards established annually by the
Board. Executive has a targeted bonus equal to his
Annual Base Salary, if such performance standards are
achieved. Without regard to the standards achieved, for
the 2008 calendar year Executive shall receive a Bonus of not less
than $400,000 and for the 2009 calendar year a Bonus of not less
than $200,000. The Bonus shall be payable on the first
day of the first calendar month after the determination of the
extent to which the Company achieved such performance targets for
the calendar year to which the Bonus relates, but not later than
the March 15 following the completion of such calendar
year.
(iii)
Incentive,
Savings and Retirement Plans. Executive shall be
entitled to participate in all incentive, savings and retirement
plans, practices, policies and programs applicable generally to
other executives of the Company.
(iv)
Welfare
Benefit Plans. Executive and Executive’s family
shall be eligible to participate in all employee welfare benefit
plans, practices, policies and programs provided by the Company to
the extent applicable generally to other executives of the
Company.
(v)
Expenses. Executive
shall be entitled to receive prompt reimbursement for all
reasonable business expenses incurred by Executive in accordance
with the policies, practices and procedures of the Company
applicable generally to executives.
(vi)
Vacation
and Holidays. Executive shall be entitled to 27 days of
paid vacation time each calendar year (prorated for any partial
calendar year of employment), accrued in accordance with the
Company’s vacation policy, in addition to those days
designated as paid holidays in accordance with the plans, policies,
programs and practices of the Company for its executive
officers. Unused vacation time may not be carried over
to the next year.
(vii)
Perquisites. Executive
shall be entitled to receive (in addition to the benefits described
above) such perquisites and fringe benefits appertaining to his
position in accordance with any practice established by the
Board. Executive shall be furnished with all such
facilities and services suitable to his position and adequate for
the performance of his duties.
(viii)
LTIP
Awards. As of the Effective Date, the Board will grant
to Executive the following awards under the Regency Gas Long Term
Incentive Plan (“LTIP”): a grant of 56,300
Restricted Units substantially in the form of the grant agreement
attached hereto as Attachment A; and a grant of 50,000 Restricted
Units substantially in the form of the grant agreement attached
hereto as Attachment B.
(ix)
Additional
Award. Upon Executive providing proof from his former
employer that, as a result of his resignation from such employer,
Executive has forfeited any portion of the benefits he had accrued
under his former employer’s Executive Retirement Plan,
Supplemental Retirement Plan or Supplemental Savings Plan, the
Board will grant to Executive up to an additional 7,500 Restricted
Units under the LTIP effective as of April 1, 2008, under the same
terms and conditions of this Agreement and Attachment
A. The total number of Restricted Units granted pursuant
to this Section 2(b)(ix) shall be equal to (a) 7,500, multiplied by
(b) a percentage derived by dividing the dollar amount forfeited by
Executive at the date of his termination by $225,000.
(x)
Allowances
and Travel Expenses. The Company shall promptly pay or
reimburse Executive, on a grossed-up basis (as provided below), for
the following expenses he reasonably incurs in commuting to and
from work between Houston and Dallas: (1) the cost of
airplane tickets (for travel that is consistent with the
Company’s policy) and for the actual vehicle mileage for
trips to and from Houston at the Company mileage rate and any
direct automobile expenses incurred on such trips, and (2) the cost
of staying in a hotel in Dallas (or other similar temporary
residence) The reimbursement for the cost of hotel
expenses in Dallas shall be limited to a two-month period following
the Effective Date. The grossed-up amount shall be
determined by dividing actual expenses by a factor of
.63. Additionally, the Company shall pay monthly to
Executive a monthly living allowance of $4,500, less applicable
taxes and withholdings, until the date Executive and his
family’s permanent residence is within 50 miles of the
Company’s headquarters.
(xi)
Reimbursements. Notwithstanding
anything to the contrary contained herein, and whether or not this
Agreement has been terminated for any reason, any reimbursement by
the Company to Executive of any costs and expenses under this
Agreement shall be made by the Company upon or as soon as
practicable following the receipt of supporting documentation
reasonably satisfactory to the Company, but in no event later than
the close of Executive’s taxable year following the taxable
year in which the cost or expense is incurred by
Executive. The expenses incurred by Executive in any
calendar year that are eligible for reimbursement under this
Agreement shall not affect the expenses incurred by Executive in
any other calendar year that are eligible for reimbursement
hereunder and Executive’s right to receive any reimbursement
hereunder shall not be subject to liquidation or exchange for any
other benefit.
(xii)
Indemnification/D&O
Insurance. Executive shall be indemnified and receive
advances of expenses from the Partnership in accordance with
Section 7.7 of the Agreement of Limited Partnership of Regency
Energy Partners LP, and Section 9.1 of the Limited Liability
Company Agreement of the Company, each as amended from time to
time. The Company shall, or shall cause the Partnership
to, maintain D&O Insurance coverage at levels consistent with
industry standards.
3.
TERMINATION
OF EMPLOYMENT.
(a)
Death
or Disability. Executive’s employment shall
terminate automatically upon Executive’s death during the
Term. If a Disability occurs during the Term, the
Company may give to Executive written notice in accordance with
Section 12(b) of its intention to terminate Executive’s
employment. In such event, Executive’s employment
with the Company shall terminate effective on the 30 th
day after such notice is given to Executive (the “Disability
Effective Date”), provided that, within the 30 days after
such receipt, Executive shall not have returned to the full-time
performance of Executive’s duties. For purposes of
this Agreement,
“Disability”
shall mean Executive’s inability to perform his duties and
obligations hereunder, with or without reasonable accommodation,
for the period contained in the Company’s effective long-term
disability plan (“LTD Plan”) and in the event no such
LTD Plan exists, such period shall be 180 consecutive days, due to
a mental or physical incapacity as determined by a physician
mutually selected by the Company and Executive or his
representative. Notwithstanding anything in this
Agreement to the contrary, in the event of any incapacity or
Disability of Executive, the Company may, for the period of such
incapacity or Disability, assign Executive’s duties to any
other employee of the Company or may engage or hire a third party
to perform such duties and any such action shall not be deemed
“Good Reason” for Executive to terminate this Agreement
pursuant to Section 3(c).
(b)
Cause. The
Board may terminate Executive’s employment during the Term
for Cause or without Cause. For purposes of this
Agreement, “Cause” shall mean (i) a breach by Executive
of Executive’s obligations under Section 2(a) (other than as
a result of physical or mental incapacity or other Disability)
which constitutes a material nonperformance by Executive of his
obligations and duties under Section 2(a); (ii) commission by
Executive of an act of fraud upon, or willful misconduct with
respect to, the Company or an affiliate; (iii) a material breach by
Executive of Section 6 or a breach by Executive of Section 7, 9 or
11 hereof; (iv) the conviction of Executive of any felony or a
misdemeanor involving moral turpitude, or a plea by Executive of
other than not guilty to a felony or such a misdemeanor; (v)
conduct that results in the Company or any of its affiliates
suffering a public disgrace or public disrepute, or (vi) the
failure of Executive to carry out, or comply with, in any material
respect, any directive (in compliance with law) of the Board
consistent with the terms of this
Agreement. Notwithstanding the foregoing, no act or
omission shall constitute “Cause” for purposes of this
Agreement unless the Board provides Executive written notice
clearly and fully describing the particular acts or omissions which
the Board reasonably believes in good faith constitutes
“Cause” and, with respect to acts or omissions in
clauses (i) and (vi), Executive fails to remedy such acts or
omissions within 10 days of his receipt of such
notice. Executive shall have the right to contest a
determination of Cause by the Board by requesting arbitration in
accordance with the terms of Section 12(h) hereof, but such request
shall not affect the Company’s right to terminate or to have
terminated Executive’s employment hereunder.
For
purposes of this Agreement, “without Cause” shall
mean a termination of Executive’s employment during the
Term by the Board for any reason other than a termination for
Cause (it being understood that a termination resulting from
Executive’s death or Disability shall not constitute a
termination “without Cause”).
(c)
Good
Reason. Executive’s employment may be terminated
during the Term by Executive for Good Reason or without Good
Reason; provided, however, that Executive may not terminate his
employment for Good Reason unless (i) Executive has given the
Company prior written notice of his intent to terminate his
employment for Good Reason, which notice must be given within 30
days of the event alleged to constitute Good Reason and must
specify the facts and circumstances constituting Good Reason, and
(ii) the Company has 30 days after its receipt of such notice to
remedy the event if and to the extent the event is described under
Section 3(c)(i) and (iii). If the Company has not
remedied such event constituting Good Reason under Section 3(c)(i)
and (iii) by the end of such 30-day period, Executive’s
employment shall be terminated by Good Reason on the 31
st day. If the Company timely remedies such
event,
Executive’s
employment shall continue. For purposes of this
Agreement, “Good Reason” shall mean:
(i)
a
material reduction in Executive’s authority, duties or
responsibilities as contemplated by Section 2(a), excluding for
this purpose (A) an isolated, insubstantial and inadvertent action
not taken in bad faith and which is remedied by the Company after
receipt of notice thereof given by Executive), (B) any diminution
during any period of Executive’s incapacity or Disability,
and (C) the failure to elect or re-elect Executive as Chairman of
the Board or the removal of Executive as the Chairman of the
Board;
(ii)
a
reduction in Executive’s Annual Base Salary;
(iii)
without
limiting the foregoing, any other material breach by the Company of
a material provision of this Agreement; or
(iv)
the
relocation of the Company’s corporate office to any location
outside of Texas.
(f)
Notice
of Termination. Any termination by the Company for Cause
or without Cause, or by Executive for Good Reason or without Good
Reason, shall be communicated by Notice of Termination to the other
party hereto given in accordance with Section 12(b). For
purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination
provision in this Agreement relied upon and (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of
Executive’s employment under the provision so
indicated. The failure by Executive or the Company to
set forth in the Notice of Termination any fact or circumstance
which contributes to a showing of Good Reason or Cause shall not
waive any right of Executive or the Company hereunder or preclude
Executive or the Company from subsequently asserting such fact or
circumstance in enforcing Executive’s or the Company’s
rights hereunder.
(g)
Date
of Termination. “Date of Termination” means
(i) if Executive’s employment is terminated by his death, the
date of his death; (ii) if Executive’s employment is
terminated by a Disability, as specified in Section 3(a); (iii) if
Executive’s employment is terminated by the Company for
Cause, then the date specified in the Notice of Termination;
(iv) if Executive’s employment is terminated by
Executive for Good Reason, as specified in Section 3(c); and (v) if
Executive’s employment is terminated for any other reason,
the effective date of termination as stated in the Notice of
Termination, which shall not be before the expiration of the 60-day
period following the date on which the Notice of Termination is
given, unless mutually agreed to by the
parties. Effective upon his termination of employment
for any reason, Executive hereby resigns as an officer and director
of the Company and each affiliate for which he may serve as an
officer or a director.
4.
OBLIGATIONS
OF THE COMPANY UPON TERMINATION.
(a)
Good
Reason; by the Company Other Than for Cause, Death or
Disability. If, during the Term, (i) the Company shall
terminate Executive’s employment other than for Cause
(it
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