Document:

Change in Control Severance Agreement between TECO Energy, Inc. and S. W. Hudson

 Exhibit 10.3 
  
 PRIVILEGED AND CONFIDENTIAL 
  
 July 6, 2004 
  
 Sherrill W. Hudson 
 745 San Esteban Avenue 
 Coral Gables, FL 33146 
  
 Dear Sherrill:

  
 TECO Energy, Inc. (the “Company”) considers it
essential to the best interests of its stockholders to foster the continuous employment of key management personnel. In this connection, the Board of Directors of the Company (the “Board”) recognizes that, as is the case with many publicly
held corporations, the possibility of a change in control may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the
detriment of the Company and its stockholders. 
  
 The Board has
determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of members of the Company’s management, including yourself, to their assigned duties without distraction in the face of
potentially disturbing circumstances arising from the possibility of a change in control of the Company. 
  
 In order to induce you to remain in the employ of the Company and in consideration of your agreement set forth in Subsection 2(iii) hereof, the Company
agrees that you shall receive the severance benefits set forth in this letter agreement (the “Agreement”) in the event your employment with the Company is terminated subsequent to a “change in control of the Company” (as defined
in Section 2(i) hereof) (or is deemed to be terminated subsequent to a change in control of the Company in accordance with the second sentence of Section 3 hereof) under the circumstances described below. 
  
 1. Term of Agreement. This Agreement shall commence on the date hereof
and shall continue in effect through June 30, 2006; provided, however, that commencing on July 1, 2005 and each July 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than March 31 of
such year, the Company shall have given notice that it does not wish to extend this Agreement (provided that no such notice may be given during the pendency of or within two years following a potential change in control of the Company, as defined in
Section 2(ii) hereof); provided, further, if a change in control of the Company shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of twenty-four (24) months beyond the
month in which such change in control occurred. 
  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 1 
  

 2. Change in Control; Potential Change in Control. (i) Except as provided in the second
sentence of Section 3 hereof, no benefits shall be payable hereunder unless there shall have been a change in control of the Company, as set forth below. For purposes of this Agreement, a “change in control of the Company” shall mean a
change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), whether or not the
Company is in fact required to comply therewith; provided, that, without limitation, such a change in control shall be deemed to have occurred if: 
  
 (A) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than the Company, any trustee or
other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company is
or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company’s then outstanding
securities; 
  
 (B) during any period of
twenty-four (24) consecutive months (not including any period prior to the date of this Agreement), individuals who at the beginning of such period constitute the Board and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in paragraphs (A), (C) or (D) of this Section 2(i)) whose election by the Board or nomination for election by the stockholders of the Company was approved by a vote of at
least two–thirds (2/3) of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority
thereof; or 
  
 (C) there is consummated a merger
or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation resulting in the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 65% of the combined voting securities of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no “person” (as hereinabove defined) acquires 30% or more of the
combined voting power of the Company’s then outstanding securities; or 
  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 2 
  

 (D) the stockholders of the Company approve a plan of complete liquidation of the
Company or there is consummated the sale or disposition by the Company of all or substantially all of the Company’s assets. 
  
 (ii) For purposes of this Agreement, a “potential change in control of the Company” shall be deemed to have occurred if:

  
 (A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a change in control of the Company; 
  
 (B) any person (as hereinabove defined), including the Company, publicly announces an intention to take or consider taking actions which
if consummated would constitute a change in control of the Company; 
  
 (C) any person (as hereinabove defined), other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company or a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their ownership of stock of the Company (a) is or becomes the beneficial owner, (b) discloses directly or indirectly to the Company or publicly a plan or intention to become the
beneficial owner, or (c) makes a filing under the Hart–Scott–Rodino Antitrust Improvements Act of 1976, as amended, with respect to securities to become the beneficial owner, directly or indirectly, of securities representing 9.9% or more
of the combined voting power of the outstanding voting securities of the Company; or 
  
 (D) the Board adopts a resolution to the effect that, for purposes of this Agreement, a potential change in control of the Company has
occurred. 
  
 (iii) You agree that, subject to
the terms and conditions of this Agreement, in the event of a potential change in control of the Company, you will remain in the employ of the Company until the earliest of (a) a date which is one (1) year from the occurrence of such potential
change in control of the Company, (b) the termination by you of your employment after you attain “normal retirement age” under the provisions of the TECO Energy Group Retirement Plan or any successor thereto (the “Retirement
Plan”) or by reason of Disability as defined in Section 3(i), or (c) the date of the occurrence of a change in control of the Company. 
  
 3. Termination Following Change in Control. If your employment is terminated following a change in control of the Company and during the term of
this Agreement (as determined under Section 1 hereof), other than (A) by the Company for Cause, (B) by reason of death or Disability, or (C) by you without Good Reason, then the Company shall pay you the amounts, and provide you the benefits,
described in Section 4(iii) hereof. For purposes of this Agreement, your employment shall be deemed to have been terminated following a change in control of the Company 

  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 3 
  

 
by the Company without Cause or by you with Good Reason, if (i) your employment is terminated by the Company without Cause prior to a change in control of
the Company (whether or not such a change in control ever occurs) and such termination was at the request or direction of a “person” (as hereinabove defined) who has entered into an agreement with the Company the consummation of which
would constitute a change in control of the Company, (ii) you terminate your employment for Good Reason prior to a change in control of the Company (whether or not such a change in control ever occurs) and the circumstance or event which constitutes
Good Reason occurs at the request or direction of such person, or (iii) your employment is terminated by the Company without Cause or by you for Good Reason and such termination or the circumstance or event which constitutes Good Reason is otherwise
in connection with or in anticipation of a change in control of the Company (whether or not such a change in control ever occurs). 
  
 (i) Disability. If, as a result of your incapacity due to physical or mental illness, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is given you shall not have returned to the full-time performance of your duties, your employment may be
terminated for “Disability”. 
  
 (ii)
Cause. Termination by the Company of your employment for “Cause” shall mean termination upon (A) the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting
from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination by you for Good Reason, as defined in Subsections 3(iv) and 3(iii), respectively) after a written demand
for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties, or (B) the willful engaging by you in conduct which is
demonstrably and materially injurious to the Company, monetarily or otherwise. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed “willful” unless done, or omitted to be done, by you not in good faith
and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a
copy of a resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice to you and an opportunity for
you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Subsection and specifying the particulars thereof in detail. 
  
 (iii) Good Reason. “Good Reason” for
termination by you of your employment shall mean the occurrence (without your express written consent) after any change in control of the Company, or prior to a change in control of the Company under the circumstances described in the second
sentence of Section 3 hereof (treating all references in paragraphs (A) through (H) below to a 

  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 4 
  

 
“change in control of the Company” as references to a “potential change in control of the Company”), of any one of the following acts by
the Company, or failures by the Company to act: 
  
 (A) the assignment to you of any duties inconsistent (except in the nature of a promotion) with the position in the Company that you held immediately prior to the change in control of the Company or a substantial adverse alteration in the
nature or status of your position or responsibilities or the conditions of your employment from those in effect immediately prior to the change in control of the Company; 
  
 (B) a reduction by the Company in your annual base salary as in effect on the date hereof or as the same may
be increased from time to time; 
  
 (C) the
Company’s requiring you to be based more than twenty-five (25) miles from the Company’s offices at which you were principally employed immediately prior to the date of the change in control of the Company except for required travel on the
Company’s business to an extent substantially consistent with your present business travel obligations; 
  
 (D) the failure by the Company to pay to you any portion of your current compensation or compensation under any deferred compensation
program of the Company, within seven (7) days of the date such compensation is due; 
  
 (E) the failure by the Company to continue in effect any material compensation or benefit plan in which you participate immediately prior
to the change in control of the Company unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue your participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, than existed at the time of the change in control;

  
 (F) the failure by the Company to continue to
provide you with benefits substantially similar to those enjoyed by you under any of the Company’s pension, life insurance, medical, health and accident, or disability plans in which you were participating at the time of the change in control
of the Company, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits or deprive you of any material fringe benefit enjoyed by you at the time of the change in control of the Company, or
the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of your years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of
the change in control of the Company; 
  

 Sherrill W. Hudson 
 July 6, 2004 
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 (G) 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 6 hereof; or 
  
 (H) any purported termination of your employment which is not effected pursuant to a Notice of Termination satisfying the requirements of
Subsection (iv) below (and, if applicable, the requirements of Subsection (ii) above), which purported termination shall not be effective for purposes of this Agreement. 
  
 Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental
illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. 
  

(iv) Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by
written Notice of Termination to the other party hereto in accordance with Section 7 hereof. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. 
  
 (v) Date of Termination, Etc. “Date of Termination” shall mean (A) if your employment is
terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), and (B) if your employment is terminated
pursuant to Subsection (ii) or (iii) above or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination pursuant to Subsection (ii) above shall not be less than thirty (30)
days, and in the case of a termination pursuant to Subsection (iii) above shall not be less than fifteen (15) nor more than sixty (60) days, respectively, from the date such Notice of Termination is given); provided that if within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the
termination, the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties or by a binding arbitration award; and provided further that the Date of Termination shall be
extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue
to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were
participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection 

  

 Sherrill W. Hudson 
 July 6, 2004 
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are in addition to all other amounts due under this Agreement and shall not be offset against or reduce any other amounts due under this Agreement.

  
 4. Compensation Upon Termination or During Disability.
Following a change in control of the Company, as defined by Subsection 2(i), or prior to a change in control of the Company under the circumstances described in the second sentence of Section 3 hereof, upon termination of your employment or during a
period of disability you shall be entitled to the following benefits: 
  
 i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness, you shall continue to receive your base salary at the rate in effect at
the commencement of any such period, together with all compensation payable to you under the Company’s disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 3(i) hereof.
Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Company’s retirement, insurance and other compensation programs then in effect in accordance with the terms of
such programs. 
  
 ii) If your employment shall
be terminated by the Company for Cause or by you other than for Good Reason, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to
which you are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. 
  
 iii) If your employment by the Company terminates in a manner entitling you to benefits under this Section
pursuant to Section 3 hereof, then you shall be entitled to the benefits provided below: 
  
 (A) the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of
Termination is given, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due, except as otherwise provided below; 
  
 (B) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the
Company shall pay as severance pay to you a lump sum severance payment (together with the payments provided in paragraphs (D), (E) and (F) below, the “Severance Payments”) equal to the sum of (1) the greater of (a) your annual rate of base
salary in effect on the Date of Termination or (b) your annual rate of base salary in effect immediately prior to the change in control of the Company and (2) the greatest of (a) the average of the last two annual bonuses (annualized in the case of
any bonus paid with respect to a partial year) paid to you preceding the Date of Termination, (b) the average of the last two annual bonuses (annualized in the case of any bonus paid with respect 

  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 7 
  

 
to a partial year) paid to you preceding such change in control, (c) the most recent annual bonus (annualized in the case of any bonus paid with respect to a
partial year) paid to you preceding the Date of Termination, or (d) the most recent annual bonus (annualized in the case of any bonus paid with respect to a partial year) paid to you preceding such change in control, or (e) in the event that on the
date of the change in control of the the Company you have been employed by the Company for less than two years and have not yet been considered for receipt of an annual bonus, your annual incentive target award in effect immediately prior to such
change in control; 
  
 (C) the Company shall also
pay to you, within five (5) days after any such fees or expenses are incurred, all legal fees and expenses incurred by you as a result of or in connection with such termination, including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement (other than any such fees or expenses incurred in connection with any such claim which is determined by arbitration, in accordance with
Section 11 of this Agreement, to be frivolous) or in connection with any tax audit or proceeding to the extent attributable to the application of Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”), to any payment or
benefit provided hereunder; 
  
 (D) for a twelve
(12) month period after such termination, the Company shall arrange to provide you with life, disability, accident and health insurance benefits substantially similar to those which you are receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this Subsection 4(iii)(D) shall be reduced to the extent comparable benefits are actually received by you from a subsequent employer during the twelve (12) month period following your termination, and
any such benefits actually received by you shall be reported to the Company; 
  
 (E) in addition to the retirement benefits to which you are entitled under the Retirement Plan, any supplemental retirement or excess benefit plan maintained by TECO or any of its subsidiaries or any successor plans
thereto (hereinafter collectively referred to as the “Pension Plans”), the Company shall pay you in cash a lump sum equal to the excess of (a) the actuarial equivalent (computed at your date of termination) of the retirement pension
(taking into account any early retirement subsidies and post-retirement surviving spouse benefits associated therewith and determined as an annuity payable in the normal form under the Pension Plans commencing at your normal retirement age under the
Retirement Plan or any earlier date, but in no event earlier than the second anniversary of the Date of 

  

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Termination, whichever annuity the actuarial equivalent of which is greatest) which you would have accrued under the terms of the Pension Plans (without
regard to the limitations imposed by Section 401(a)(17) of the Code, or any amendment to the Pension Plans made subsequent to a change in control of the Company and on or prior to the Date of Termination, which amendment adversely affects in any
manner the computation of retirement benefits thereunder), determined as if you were fully vested thereunder and had continued to be a participant in each of the Pension Plans for twelve (12) additional months and as if you had accumulated twelve
(12) additional months of compensation (for purposes of determining your pension benefits thereunder), each in an amount equal to the sum of the amounts determined under clauses (1) and (2) of Section 4(iii)(B) hereof over (b) the actuarial
equivalent (computed at your date of termination) of the vested retirement pension (taking into account any early retirement subsidies and post–retirement surviving spouse benefits associated therewith and determined as an annuity payable in
the normal form under the Pension Plans commencing at your normal retirement age under the Retirement Plan or any earlier date, but in no event earlier than the Date of Termination, whichever annuity the actuarial equivalent of which is greatest)
which you had then accrued pursuant to the provisions of the Pension Plans. For purposes of this Subsection, "actuarial equivalent" shall be determined using the same actuarial assumptions utilized in determining the amount of alternate forms of
benefits under the Retirement Plan immediately prior to the change in control of the Company; and 
  
 iv) Except as otherwise specifically provided in paragraph (C) thereof, the payments provided for in Subsection (iii) shall be made not
later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event
later than the thirtieth day after the Date of Termination. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to you payable on the
fifth day after demand therefor by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). 
  
 v) You shall not be required to mitigate the amount of any payment provided for in this Section 4 or Section 5 hereof by seeking other
employment or otherwise, nor, except as specifically provided in Sections 4 (iii)(D) above, shall the amount of any payment or benefit provided for in this Section 4 or Section 5 hereof be reduced by any compensation earned by you as the result of
employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise. 
  

 Sherrill W. Hudson 
 July 6, 2004 
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 5. Certain Additional Payments by the Company. 
  
 (i) Whether or not you become entitled to payments under
this Agreement, if any of the payments or benefits received or to be received by you in connection with a change in control of the Company or the termination of your employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with the Company, any person whose actions result in a change in control of the Company or any person affiliated with the Company or such person) (such payments or benefits, including the Severance Payments but excluding the
Gross–Up Payment, being hereinafter referred to as the “Total Payments”) will be subject to the excise tax imposed by section 4999 of the Code or any interest or penalties are incurred by you with respect to such excise tax (such
excise tax, together with any such interest and penalties, being hereinafter referred to as the “Excise Tax”), the Company shall pay to you an additional amount (the “Gross–Up Payment”) such that the net amount retained by
you, after paying any Excise Tax on the Total Payments and any federal, state and local income and employment taxes and Excise Tax on the Gross–Up Payment, shall be equal to the Total Payments. 
  
 (ii) For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax, (A) all of the Total Payments shall be treated as “parachute payments” (within the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel (“Tax Counsel”) acceptable to you and selected by the accounting firm which was, immediately prior to the change in control of the Company, the Company’s independent auditor (the “Auditor”), such payments or benefits
(in whole or in part) do not constitute parachute payments, including by reason of section 280G(b)(4)(A) of the Code, (B) all “excess parachute payments” (within the meaning of section 280G(b)(1) of the Code) shall be treated as subject to
the Excise Tax unless, in the opinion of Tax Counsel, such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered (within the meaning of section 280G(b)(4)(B) of the Code) in excess of the
“base amount” (within the meaning of section 280G(b)(3) of the Code) allocable to such reasonable compensation, or are otherwise not subject to the Excise Tax, and (C) the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount of the Gross–Up Payment, you shall be deemed to pay federal income tax at the highest
marginal rate of federal income taxation in the calendar year in which the Gross–Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of your residence on the Date of
Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. 
  
 (iii) In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of
the termination of your employment, you shall repay to the Company, at the time that the amount of such reduction in Excise Tax is finally determined, the portion of the Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up 

  

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Payment attributable to the Excise Tax and federal, state and local income and employment taxes imposed on the Gross–Up Payment being repaid by you to
the extent that such repayment results in a reduction in Excise Tax and/or a federal, state or local income or employment tax deduction) plus interest on the amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B) of the Code.
In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of your employment (including by reason of any payment the existence or amount of which cannot be determined at the time
of the Gross-Up Payment), the Company shall make an additional Gross-Up Payment in respect of such excess (plus any interest, penalties or additions payable by you with respect to such excess) at the time that the amount of such excess is finally
determined. You and the Company shall each reasonably cooperate with the other in connection with any administrative or judicial proceedings concerning the existence or amount of liability for Excise Tax with respect to the Total Payments.

  
 6. Successors; Binding Agreement. (i) 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 to expressly assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms as you would be entitled to hereunder if you terminate your employment for Good Reason following a change in control of the Company, except
that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any
successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
  
 (ii) This Agreement shall inure to the benefit of and be enforceable by your personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder if you had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 
  
 7. Notice. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to
the Company shall be directed to the attention of the Board with a copy to the Secretary of 

  

 Sherrill W. Hudson 
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the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt. 
  
 8.
Miscellaneous. 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 you and such officer as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach by the other party hereto of, or 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. 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 expressly set forth in this
Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of Florida, without giving effect to the conflicts of law principles thereof. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of
the Company under Sections 4 and 5 shall survive the expiration of the term of this Agreement. 
  
 9. Validity. The invalidity or unenforceability or 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. 
  
 10. Counterparts. This Agreement may be
executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 
  
 11. Arbitration. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration
conducted before a panel of three arbitrators in the State of Florida in accordance with the rules of the American Arbitration Association then in effect. Judgment may be entered on the arbitrator’s award in any court having jurisdiction;
provided, however, that you shall be entitled to seek specific performance of your right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement. 
  
 12. Entire Agreement. This Agreement sets forth the entire agreement
of the parties hereto in respect of the subject matter contained herein and during the term of the Agreement supersedes the provisions of all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether
oral or written, by any officer, employee or representative of any party hereto with respect to the subject matter hereof. 
  

 Sherrill W. Hudson 
 July 6, 2004 
 Page 12 
  

 13. Effective Date. This Agreement shall become effective as of the date set forth above. If
this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter which will then constitute our agreement on this subject. 
  

			
	 Sincerely,

	 TECO Energy, Inc.

		
	 By:
	 	 
	 Name:
	 	David E. Schwartz
	 Title:
	 	 Vice President, Assistant General
 Counsel and Corporate Secretary

  
 Agreed to this
                 day 
 of
                                        ,
2004. 
  

	
	
	  
	Sherrill W. HudsonSecond Amendment to Revolving Credit

 Exhibit 10.1 
  
 SECOND AMENDMENT TO 
 REVOLVING CREDIT AGREEMENT 
  
 Second Amendment to Revolving Credit Agreement, dated as of July 15, 2004 (the “Second Amendment”), by and among LIFELINE SYSTEMS, INC., a Massachusetts corporation (the “Borrower”),
CITIZENS BANK OF MASSACHUSETTS and the other lending institutions listed on Schedule 1 to the Credit Agreement (as hereinafter defined) (the “Lenders”), amending certain provisions of the Revolving Credit
Agreement, dated as of August 28, 2002 (as amended and in effect from time to time, the “Credit Agreement”) by and among the Borrower, the Lenders and CITIZENS BANK OF MASSACHUSETTS, as administrative agent for the
Lenders (in such capacity, the “Administrative Agent”) as more fully set forth herein. Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein.

  
 WHEREAS, the Borrower and the Lenders have agreed to
modify certain terms and conditions of the Credit Agreement as specifically set forth in this Second Amendment; 
  
 NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 
  
 §1. Amendment to §1 of the Credit Agreement. Section 1.1 of the Credit Agreement is
hereby amended as follows: 
  
 (a) The definition of
“Applicable Margin” is hereby amended by deleting such definition in its entirety and restating it as follows: 
  
 Applicable Margin. For each period commencing on an Adjustment Date through the date immediately preceding the next
Adjustment Date (each a “Rate Adjustment Period”), the Applicable Margin shall be the applicable margin set forth below with respect to the Leverage Ratio as determined on the last day of the fiscal quarter ended
immediately prior to the applicable Rate Adjustment Period. 
  

											
	Level

	  	 Leverage
 Ratio

	  	 Base
 Rate
 Loans

	  	 LIBOR
 Rate
 Loans

	  	 Letter of
 Credit
 Fees

	  	 Commitment
 Fees

						
	I	  	Greater than or equal to 1.50:1.00	  	0%	  	1.50%	  	1.50%	  	.25%
						
	II	  	Less than 1.50:1.00 but greater than or equal to 1.00:1.00	  	0%	  	1.25%	  	1.25%	  	.25%
						
	III	  	Less than 1.00:1.00 but greater than or equal to 0.75:1.00	  	0%	  	1.00%	  	1.00%	  	.25%
						
	IV	  	Less than 0.75:1.00	  	0%	  	.75%	  	.75%	  	.125%

 Notwithstanding the foregoing, (a) for the Revolving Credit Loans outstanding and the
Letter of Credit Fees payable during the period commencing on July 15, 2004 through the date immediately preceding the first Adjustment Date to occur after the fiscal quarter ending June 30, 2004, the Applicable Margin shall be the Applicable Margin
set forth in Level IV above, and (b) if the Borrower fails to deliver any Compliance Certificate pursuant to §8.4(c) hereof then, for the period commencing on the next Adjustment Date to occur subsequent to such failure through the date
immediately following the date on which such Compliance Certificate is delivered, the Applicable Margin shall be the highest Applicable Margin set forth above. 
  
 (b) The definition of “Hedging Agreement” is hereby amended by inserting immediately at the end of such definition
the following new sentence: “To the extent the Borrower requests Citizens to enter into a Hedging Agreement with the Borrower, Citizens will consider such a request (but is not obligated to honor such request), subject to its normal
underwriting and approval criteria in respect thereof.” 
  
 (c) The definition of “Revolving Credit Loan Maturity Date” is hereby amended by deleting the date “August 27, 2005” which appears in such definition and substituting in place thereof the words “The third
anniversary of the Second Amendment Effective Date”. 
  
 (d)
Section 1.1 of the Credit Agreement is further amended by inserting the following definitions in the appropriate alphabetical order: 
  
 Acquisition Loan. As such term is defined in §2.2 hereof. 
  
 Commitment Fee Calculation Amount. From (a) the Closing Date through and including July 15, 2004, an
amount equal to the Total Commitment; (b) from July 15, 2004 until the first date to occur on which the aggregate principal amount of all outstanding Revolving Credit Loans plus all Unpaid Reimbursement Obligations plus the Maximum Drawing Amount of
all issued and outstanding Letters of Credit exceeds $15,000,000 (such date being hereinafter referred to as the “Commitment Fee Increase Trigger Date”), an amount equal to $15,000,000; and (c) from and after the Commitment Fee Increase
Trigger Date, an amount equal to the Total Commitment. 
  

 -2- 

 Consolidated Total Funded Indebtedness. With respect to the Borrower and its
Subsidiaries, as at any date of determination, the sum, without duplication, of (a) the aggregate amount of Indebtedness of the Borrower and its Subsidiaries, on a consolidated basis, relating to (i) the borrowing of money or the obtaining of
credit, including the issuance of notes or bonds, (ii) the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business), (iii) in respect of any Synthetic Leases or any Capitalized Leases, and (iv)
the maximum drawing amount of all letters of credit outstanding and bankers acceptances plus (b) Indebtedness of the type referred to in clause (a) of another Person guaranteed by the Borrower or any of its Subsidiaries. 
  
 Consolidated US EBITDA. With respect to the
Borrower and its Domestic Subsidiaries for any fiscal period, an amount equal to Consolidated US Net Income for such period, plus to the extent deducted in the calculation of Consolidated US Net Income and without duplication, (a)
depreciation and amortization for such period, (b) other noncash charges for such period which are reasonably acceptable to the Administrative Agent, (c) income tax expense for such period, and (d) Consolidated US Total Interest Expense paid or
accrued during such period, and minus, to the extent added in computing Consolidated US Net Income and without duplication, all noncash gains (including income tax benefits) for such period, all as determined in accordance with GAAP.

  
 Consolidated US Net Income (or
Deficit). The consolidated net income (or deficit) of the Borrower and its Domestic Subsidiaries, after all deduction of expenses, taxes and other proper charges, determined in accordance with GAAP, after eliminating therefrom all extraordinary
nonrecurring items of income. 
  
 Consolidated
US Total Interest Expense. For any period, the aggregate amount of interest required to be paid or accrued by the Borrower and its Domestic Subsidiaries during such period on all Indebtedness of the Borrower and its Domestic Subsidiaries
outstanding during all or any part of such period, whether such interest was or is required to be reflected as an item of expense or capitalized, including any payments consisting of interest in respect of any Capitalized Lease or any Synthetic
Lease, and including commitment fees, agency fees, facility fees, balance deficiency fees and similar fees or expenses in connection with the borrowing of money. 
  
 Leverage Ratio. As at any date of determination, the ratio of (a) Consolidated Total Funded
Indebtedness outstanding on such date to (b) Consolidated US EBITDA for the Reference Period ending on such date. 
  
 Second Amendment Effective Date. July 15, 2004. 
  

 -3- 

 §2. Amendment to §2 of the Credit
Agreement. Section 2 of the Credit Agreement is hereby amended as follows: 
  
 (a) Section 2.2 of the Credit Agreement is hereby amended by deleting the words “at the rate of one eighth of one percent (1/8%) per annum on the average daily amount during each calendar or portion thereof from
the date hereof to the Revolving Credit Loan Maturity Date by which the Total Commitment” which appear in the first sentence thereof and substituting in place thereof the words “at the rate per annum of the Applicable Margin with respect
to the Commitment Fee as in effect from time to time on the average daily amount during each calendar or portion thereof from the date hereof to the Revolving Credit Loan Maturity Date by which the Commitment Fee Calculation Amount”.

  
 (b) Section 2.6 of the Credit Agreement is hereby amended by
deleting the words “(iii) the Interest Period for such Revolving Credit Loan and (iv) the type of such Revolving Credit Loan” which appear in the second sentence of §2.6 and substituting in place thereof the words “(iii) the
Interest Period for such Revolving Credit Loan, (iv) the portion being used to finance all or any portion of a Permitted Acquisition (such portion being hereinafter referred to as the “Acquisition Loan”), and (v) the Type of
such Revolving Credit Loan”. 
  
 §3. Amendment
to §3 of the Credit Agreement. Section 3.2 of the Credit Agreement is hereby amended by deleting §3.2 in its entirety and restating it as follows: 
  
 3.2. Mandatory Repayments of Revolving Credit
Loans. 
  
 3.2.1. General.
If at any time the sum of the outstanding amount of the Revolving Credit Loans, the Maximum Drawing Amount and all Unpaid Reimbursement Obligations exceeds the Total Commitment at such time, then the Borrower shall immediately repay the amount
of such excess to the Administrative Agent for the respective accounts of the Lenders for application: first, to any Unpaid Reimbursement Obligations; second, to the Revolving Credit Loans; and third, to provide to the Administrative Agent cash
collateral for Reimbursement Obligations as contemplated by §4.2(b) and (c). Each payment of any Unpaid Reimbursement Obligations or prepayment of Revolving Credit Loans shall be allocated among the Lenders, in proportion, as nearly as
practicable, to each Reimbursement Obligation or (as the case may be) the respective unpaid principal amount of each Lender’s Revolving Credit Note, with adjustments to the extent practicable to equalize any prior payments or repayments not
exactly in proportion. 
  
 3.2.2.
Acquisition Loan Amortization. The Borrower promises to pay to the Administrative Agent for the account of the Lenders the principal amount of each Acquisition Loan in consecutive quarterly payments, with each such quarterly payment being
in an amount which would equal that which would be required to be paid on a five year amortization schedule, with each such installments to be due and payable on the last day of each calendar quarter of each calendar year, commencing on the first
such date which occurs after the date such Acquisition Loan is made to the Borrower, with a final payment on the Revolving Credit Loan Maturity Date in an amount equal to the unpaid balance of each such Acquisition Loan. 
  

 -4- 

 §4. Amendment to §9 of the Credit
Agreement. Section 9.5.1(c)(viii) of the Credit Agreement is hereby amended by deleting §9.5.1(c)(viii) in its entirety and restating it as follows: 
  
 (viii) the Borrower shall have provided the Lenders with evidence satisfactory to the Lenders that the
aggregate amount of the consideration paid by the Borrower or any Subsidiary in connection with any Permitted Acquisition represents a comparable multiple to other recent transaction and, in addition, (1) the aggregate amount of the purchase price
for any single acquisition or series of related acquisitions shall not exceed $7,500,000 without the Administrative Agent’s and the Required Lenders’ prior written approval; and (2) the aggregate amount of the purchase price for all
Permitted Acquisitions consummated over the life of this Credit Agreement shall not exceed $15,000,000 without the Administrative Agent’s and the Required Lenders’ prior written approval; 
  
 §5. Amendment to Schedule 1 to
the Credit Agreement. Schedule 1 to the Credit Agreement is hereby amended by deleting Schedule 1 to the Credit Agreement and substituting in place thereof the Schedule 1 attached hereto.

  
 §6. Conditions to
Effectiveness. This Second Amendment shall not become effective until the Administrative Agent receives a counterpart of this Second Amendment, executed by the Borrower, the Guarantor and the Lenders. 
  
 §7. Representations and Warranties. The
Borrower hereby repeats, on and as of the date hereof, each of the representations and warranties made by the Borrower in §7 of the Credit Agreement (except to the extent of changes resulting from transactions contemplated or permitted by this
Second Amendment, the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties
relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and
delivery by the Borrower and each of its Subsidiaries of this Second Amendment and the performance by the Borrower and each of its Subsidiaries of all of its agreements and obligations under the Credit Agreement as amended hereby are within the
corporate authority of the Borrower and each such Subsidiary and have been duly authorized by all necessary corporate or similar action on the part of the Borrower and each such Subsidiary. 
  
 §8. Ratification, Etc. Except as expressly amended
hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Guaranty, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit
Agreement and this Second Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended
hereby. 
  

 -5- 

 §9. No Waiver. Nothing contained herein shall constitute a waiver of, impair or
otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Administrative Agent or the Lenders consequent thereon. 
  
 §10. Counterparts. This Second Amendment may be executed in one or more counterparts, each of which shall be deemed an original but
which together shall constitute one and the same instrument. 
  
 §11. Governing Law. THIS SECOND AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF LAWS). 
  

 -6- 

 IN WITNESS WHEREOF, the parties hereto have executed this Second Amendment as a document under
seal as of the date first above written. 
  

			
	LIFELINE SYSTEMS, INC.
		
	By:	 	 /s/ Mark G. Beucler

	Title:	 	CFO
	
	CITIZENS BANK OF MASSACHUSETTS
		
	By:	 	 /s/ Victoria Lazzell

	Title:	 	Vice President

 RATIFICATION OF GUARANTY 
  
 The undersigned guarantor (the “Guarantor”) hereby acknowledges and consents to the foregoing Second
Amendment as of July 15, 2004, and agrees that the Guaranty from the Guarantor dated as of August 28, 2002 in favor of the Administrative Agent and the Lenders and all other Loan Documents to which the Guarantor is a party remains in full force and
effect, and the Guarantor confirms and ratifies all of its obligations thereunder. 
  

			
	LIFELINE SYSTEMS SECURITIES CORPORATION
		
	By:	 	 /s/ Mark G. Beucler

	Title:	 	CFO

 SCHEDULE 1 
 Lenders; Commitment 
  

							
	 Lender

	  	Commitment

	  	 Commitment
 Percentage

	 
	 Citizens Bank of Massachusetts
 Domestic Lending Office:
 28 State Street
 Boston, Massachusetts 02109
 LIBOR Lending Office:
 same
 Attn: Victoria P. Lazzell, Vice President
	  	$	30,000,000	  	100	%
	 Totals:
	  	$	30,000,000	  	100	%

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