EXHIBIT 10.28
SEVERANCE AGREEMENT
THIS AGREEMENT, dated March 18, 2002, is made by and between PIEDMONT
NATURAL GAS COMPANY, INC., a North Carolina corporation (the "Company"), and
XXXXXXXX X. XXXX (the "Executive").
WHEREAS, the Company considers it essential to the best interests of
its shareholders to xxxxxx the continued employment of key management
personnel; and
WHEREAS, the Board of the Company recognizes that, as is the case with
many publicly held corporations, the possibility of a Change in Control exists
and that such possibility, and the uncertainty and questions which it may raise
among management, may result in the departure or distraction of management
personnel to the detriment of the Company and its shareholders; and
WHEREAS, 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 the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control; and
WHEREAS, contemporaneous with this Agreement, the Company and the
Executive have entered into an Employment Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence
on the date hereof and shall continue in effect through March 31, 2003;
provided, however, that commencing on April 1, 2003 and each April 1
thereafter, the Term shall automatically be extended for one additional year
unless, not later than fifteen (15) months prior to the applicable April 1, the
Company or the Executive shall have given notice not to extend the Term; and
further provided, however, that if a Change in Control shall have occurred
during the Term, the Term shall expire at the end of the thirty-sixth (36th)
calendar month after the calendar month in which such Change in Control
occurred. For example, if a Change in Control were to occur on July 1, 2002,
the Term of this Agreement would expire on June 30, 2005, and if a Change in
Control were to occur on July 1, 2005, the Term of this Agreement would expire
on June 30, 2008 (regardless of whether on or before September 30, 2004 either
party had given notice to the other party not to extend the Term as provided
above).
3. Company's Covenants Summarized. In order to induce the
Executive to remain in
the employ of the Company and in consideration of the Executive's covenants set
forth in Section 4 hereof, the Company agrees, under the conditions described
herein, to pay the Executive the Severance Payments and the other payments and
benefits described herein. Except as provided in Section 9.1 hereof, no
Severance Payments shall be payable under this Agreement unless there shall
have been (or, under the terms of the second sentence of Section 6.1 hereof,
there shall be deemed to have been) a termination of the Executive's employment
with the Company following a Change in Control and during the Term. This
Agreement shall not be construed as creating an express or implied contract of
employment and, except as otherwise agreed in writing between the Executive and
the Company, the Executive shall not have any right to be retained in the
employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject
to the terms and conditions of this Agreement, in the event of a Potential
Change in Control during the Term, the Executive will remain in the employ of
the Company until the earliest of (i) a date which is twelve (12) months from
the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason or by reason of death, Disability or Retirement, or
(iv) the termination by the Company of the Executive's employment for any
reason. Should the Executive fail to comply with the provisions of this
paragraph 4, the Company's sole remedy shall be to deny the payment of any
Severance Payments to the Executive.
5. Compensation Other Than Severance Payments.
5.1 Following a Change in Control and during the Term,
during any period that the Executive fails to perform the Executive's full-time
duties with the Company as a result of incapacity due to physical or mental
illness, the Company shall pay the Executive's full salary to the Executive at
the rate in effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms of any
compensation, benefit or incentive plan, program or arrangement maintained by
the Company during such period, until the Executive's employment is terminated
by the Company for Disability.
5.2 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term, the Company
shall pay the Executive's full salary to the Executive through the Date of
Termination at the rate in effect immediately prior to the Date of Termination
or, if higher, the rate in effect immediately prior to the first occurrence of
an event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date of
Termination under the terms of the Company's executive compensation, benefit
and incentive plans, programs or arrangements as in effect immediately prior to
the Date of Termination or, if more favorable to the Executive, as in effect
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.
5.3 If the Executive's employment shall be terminated
for any reason following a Change in Control and during the Term, the Company
shall pay to the Executive the Executive's
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normal post-termination compensation and benefits as such payments become due,
including in a lump sum in cash that portion of the Executive's vacation pay
vested and accrued but not paid. Such post-termination compensation and
benefits shall be determined under, and paid in accordance with, the Company's
long-term incentive stock plan, pension, supplemental retirement, insurance and
other executive compensation, benefit or incentive plans, programs and
arrangements as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to the
occurrence of the first event or circumstance constituting Good Reason.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, if the Executive's
employment is terminated following a Change in Control and during the Term,
other than (A) by the Company for Cause, (B) by reason of death or Disability,
or (C) by the Executive without Good Reason (including Retirement by the
Executive), then the Company shall pay the Executive the amounts, and provide
the Executive the benefits, described in this Section 6.1 ("Severance
Payments"), in addition to any payments and benefits to which the Executive is
entitled under Section 5 hereof. For purposes of this Agreement, the
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason, if (i) the Executive's employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in Control ever
occurs) and such termination was at the request or direction of a Person who
has entered into an agreement with the Company the consummation of which would
constitute a Change in Control, (ii) the Executive terminates his employment
for Good Reason prior to a Change in Control (whether or not 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) the
Executive's employment is terminated by the Company without Cause or by the
Executive 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 (whether or not a Change in Control ever
occurs). For purposes of any determination regarding the applicability of the
immediately preceding sentence, any position taken by the Executive shall be
presumed to be correct unless the Company establishes by clear and convincing
evidence that such position is not correct.
(A) In lieu of any further salary payments to
the Executive for periods subsequent to the Date of Termination and in lieu of
any severance benefit otherwise payable to the Executive, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to 3.00 times the
sum of (i) the Executive's annual base salary as in effect immediately prior to
the Date of Termination or, if higher, in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason and (ii) an
amount equal to the average of the Executive's annual W-2 Compensation for the
three years ending on the last day of the month prior to the Date of
Termination.
(B) For the 36-month period immediately
following the Date of Termination, the Company shall arrange to provide the
Executive and his dependents life, disability, accident and health insurance
benefits substantially similar to those provided to the Executive and
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his dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his dependents
immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive than the cost to
the Executive immediately prior to such date or occurrence; provided, however,
that, unless the Executive consents to a different method (after taking into
account the effect of such method on the calculation of "parachute payments"
pursuant to Section 6.2 hereof), such health insurance benefits shall be
provided through a third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be reduced to the extent
benefits of the same type are received by or made available to the Executive
during the 36-month period following the Executive's termination of employment
(and any such benefits received by or made available to the Executive shall be
reported to the Company by the Executive); provided, however, that the Company
shall reimburse the Executive for the excess, if any, of the cost of such
benefits to the Executive over such cost immediately prior to the Date of
Termination or, if more favorable to the Executive, the first occurrence of an
event or circumstance constituting Good Reason. If the Severance Payments shall
be decreased pursuant to Section 6.2 hereof, and the Section 6.1(B) benefits
which remain payable after the application of Section 6.2 hereof are thereafter
reduced pursuant to the immediately preceding sentence, the Company shall, no
later than five (5) business days following such reduction, pay to the
Executive the least of (a) the amount of the decrease made in the Severance
Payments pursuant to Section 6.2 hereof, (b) the amount of the subsequent
reduction in these Section 6.1(B) benefits, or (c) the maximum amount which can
be paid to the Executive without being, or causing any other payment to be,
nondeductible by reason of section 280G of the Code.
6.2 (A) Notwithstanding any other provisions of this
Agreement, in the event that any payment or benefit received or to be received
by the Executive in connection with a Change in Control or the termination of
the Executive's 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 or any Person affiliated with the Company
or such Person) (all such payments and benefits, including the Severance
Payments, being hereinafter called "Total Payments") would not be deductible
(in whole or part), by the Company, an affiliate or Person making such payment
or providing such benefit as a result of section 280G of the Code, then, to the
extent necessary to make such portion of the Total Payments deductible (and
after taking into account any reduction in the Total Payments provided by
reason of section 280G of the Code in such other plan, arrangement or
agreement), the cash Severance Payments shall first be reduced (if necessary,
to zero), and all other Severance Payments shall thereafter be reduced (if
necessary, to zero); provided, however, that the Executive may elect to have
the noncash Severance Payments reduced (or eliminated) prior to any reduction
of the cash Severance Payments.
(B) For purposes of this limitation, (i) no
portion of the Total Payments the receipt or enjoyment of which the Executive
shall have waived at such time and in such manner as not to constitute a
"payment" within the meaning of section 280G(b) of the Code shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account
which, in the opinion of tax counsel ("Tax Counsel") reasonably acceptable to
the Executive and selected by the accounting firm which was, immediately prior
to the Change in Control, the Company's independent auditor (the
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"Auditor"), does not constitute a "parachute payment" within the meaning of
section 280G(b)(2) of the Code, including by reason of section 280G(b)(4)(A) of
the Code, (iii) the Severance Payments shall be reduced only to the extent
necessary so that the Total Payments (other than those referred to in clauses
(i) or (ii)) in their entirety constitute reasonable compensation for services
actually rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions by reason of section
280G of the Code, in the opinion of Tax Counsel, and (iv) the value of any
noncash benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the principles
of sections 280G(d)(3) and (4) of the Code.
(C) If it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding that,
notwithstanding the good faith of the Executive and the Company in applying the
terms of this Section 6.2, the Total Payments paid to or for the Executive's
benefit are in an amount that would result in any portion of such Total
Payments being subject to the Excise Tax, then, if such repayment would result
in (i) no portion of the remaining Total Payments being subject to the Excise
Tax and (ii) a dollar-for-dollar reduction in the Executive's taxable income
and wages for purposes of federal, state and local income and employment taxes,
the Executive shall have an obligation to pay the Company upon demand an amount
equal to the sum of (i) the excess of the Total Payments paid to or for the
Executive's benefit over the Total Payments that could have been paid to or for
the Executive's benefit without any portion of such Total Payments being
subject to the Excise Tax; and (ii) interest on the amount set forth in clause
(i) of this sentence at the rate provided in section 1274(b)(2)(B) of the Code
from the date of the Executive's receipt of such excess until the date of such
payment.
6.3 The payments provided in subsection (A) of Section
6.1 hereof shall be made not later than the fifth day following the Date of
Termination; provided, however, that if the amounts of such payments, and the
limitation on such payments set forth in Section 6.2 hereof, cannot be finally
determined on or before such day, the Company shall pay to the Executive on
such day an estimate, as determined in good faith by the Company of the minimum
amount of such payments to which the Executive is clearly entitled and shall
pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such
payments when due) at 120% of 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 (30th) 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 the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at 120% of the rate provided in section 1274(b)(2)(B)
of the Code). At the time that payments are made under this Agreement, the
Company shall provide the Executive with a written statement setting forth the
manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the
Company has received from Tax Counsel, the Auditor or other advisors or
consultants (and any such opinions or advice which are in writing shall be
attached to the statement).
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7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and
during the Term, any purported termination of the Executive's employment (other
than by reason of death) shall be communicated by written Notice of Termination
from one party hereto to the other party hereto in accordance with Section 10
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 the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include 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 that was called and held for the purpose
of considering such termination (after reasonable notice to the Executive and
an opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty of conduct set forth in clause (i) or (ii) of the
definition of Cause herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. "Date of Termination" with
respect to any purported termination of the Executive's employment after a
Change in Control and during the Term, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to
the full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of
a termination by the Company, shall not be less than thirty (30) days (except
in the case of a termination for Cause) and, in the case of a termination by
the Executive, shall not be less than fifteen (15) days nor more than sixty
(60) days, respectively, from the date such Notice of Termination is given).
7.3 Dispute Concerning Termination. 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 Section 7.3), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be
extended until the earlier of (i) the date on which the Term ends or (ii) the
date on which the dispute is finally resolved, either by mutual written
agreement of the parties or by a final judgment, order or decree of an
arbitrator or a court of competent jurisdiction (which is not appealable or
with respect to which the time for appeal therefrom has expired and no appeal
has been perfected); provided, however, that the Date of Termination shall be
extended by a notice of dispute given by the Executive only if such notice is
given in good faith and the Executive pursues the resolution of such dispute
with reasonable diligence.
7.4 Compensation During Dispute. If a purported
termination occurs following a Change in Control and during the Term and the
Date of Termination is extended in accordance with
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Section 7.3 hereof, the Company shall continue to pay the Executive the full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue the Executive as a
participant in all compensation, benefit and insurance plans in which the
Executive was participating when the notice giving rise to the dispute was
given, until the Date of Termination, as determined in accordance with Section
7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other
amounts due under this Agreement (other than those due under Section 5.2
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment with the Company terminates during the Term, the Executive is not
required to seek other employment or to attempt in any way to reduce any
amounts payable to the Executive by the Company pursuant to Section 6 hereof or
Section 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by
any compensation earned by the Executive as the result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.1 In addition to any obligations imposed by law upon
any successor to the Company, 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 the Executive to compensation from the Company in
the same amount and on the same terms as the Executive would be entitled to
hereunder if the Executive were to terminate the Executive's employment for
Good Reason after a Change in Control, except that, for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
9.2 This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amount would still be payable to the Executive
hereunder (other than amounts which, by their terms, terminate upon the death
of the Executive) if the Executive had continued to live, all such amounts,
unless otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the executors, personal representatives or administrators of
the Executive's estate.
10. Notices. 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,
if to the Executive, to the address inserted below the Executive's signature on
the final page hereof and, if to the Company, to the address set forth below,
or to such other address as either
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party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
To the Company:
Piedmont Natural Gas Company, Inc.
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Corporate Secretary
11. 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 the Executive 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 of any lack of 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. This Agreement
supersedes any other agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof which have been made by
either party; provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive's employment
with the Company only in the event that the Executive's employment with the
Company is terminated on or following a Change in Control (i) by the Company
other than for Cause or (ii) by the Executive for Good Reason. The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of North Carolina. 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
and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by
their nature may require either partial or total performance after the
expiration of the Term (including, without limitation, those under Sections 6
and 7 hereof) shall survive such expiration.
12. Validity. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. 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.
14. Settlement of Disputes; Arbitration.
14.1 All claims by the Executive for benefits under this
Agreement shall be directed to and determined by the Board and shall be in
writing. Any denial by the Board of a claim
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for benefits under this Agreement shall be delivered to the Executive in
writing and shall set forth the specific reasons for the denial and the
specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision
of the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied.
14.2 Any further dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration
in Charlotte, North Carolina in accordance with the rules of the American
Arbitration Association then in effect; provided, however, that the evidentiary
standards set forth in this Agreement shall apply. Judgment may be entered on
the arbitrator's award in any court having jurisdiction. Notwithstanding any
provision of this Agreement to the contrary, the Executive shall be entitled to
seek specific performance of the Executive's 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.
15. Definitions. For purposes of this Agreement, the following
terms shall have the meanings indicated below:
(A) "Affiliate" shall have the meaning set forth in Rule
12b-2 promulgated under Section 12 of the Exchange Act.
(B) "Auditor" shall have the meaning set forth in
Section 6.2 hereof.
(C) "Base Amount" shall have the meaning set forth in
section 280G(b)(3) of the Code.
(D) "Beneficial Owner" shall have the meaning set forth
in Rule 13d-3 under the Exchange Act.
(E) "Board" shall mean the Board of Directors of the
Company.
(F) "Cause" for termination by the Company of the
Executive's employment shall mean (i) the willful and continued failure by the
Executive to substantially perform the Executive's duties with the Company
(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant
to Section 7.1 hereof) which failure shall continue unabated for thirty (30)
days after a written demand for substantial performance is delivered to the
Executive by the Board, which demand specifically identifies the manner in
which the Board believes that the Executive has not substantially performed the
Executive's duties, or (ii) the willful engaging by the Executive in conduct
which is demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of
this definition, (x) no act, or failure to act, on the Executive's part shall
be deemed "willful" unless done, or omitted to be done, by the Executive not in
good faith and without reasonable belief that the
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Executive's act, or failure to act, was in the best interest of the Company and
(y) in the event of a dispute concerning the application of this provision, no
claim by the Company that Cause exists shall be given effect unless the Company
establishes by clear and convincing evidence that Cause exists.
(G) A "Change in Control" shall be deemed to have
occurred if the event set forth in any one of the following paragraphs shall
have occurred:
(I) any Person is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates) representing 20% or more of the combined
voting power of the Company's then outstanding securities, excluding any Person
who becomes such a Beneficial Owner in connection with a transaction described
in clause (i) of paragraph (III) below; or
(II) the following individuals cease for any reason
to constitute a majority of the number of directors then serving: individuals
who, on the date hereof, constitute the Board 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 or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were
directors on the date hereof or whose appointment, election or nomination for
election was previously so approved or recommended; or
(III) 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 which would result
in the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity or any parent thereof), in combination with the ownership of any trustee
or other fiduciary holding securities under an employee benefit plan of the
Company or any subsidiary of the Company, at least 50% of the combined voting
power of the 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 is or becomes the Beneficial Owner,
directly or indirectly, of securities of the Company (not including in the
securities Beneficially owned by such Person any securities acquired directly
from the Company or its Affiliates other than in connection with the
acquisition by the Company or its Affiliates of a business) representing 20% or
more of the combined voting power of the Company's then outstanding securities;
or
(IV) the shareholders of the Company approve a plan
of complete liquidation or dissolution of the Company or there is consummated
an agreement for the sale or disposition by the Company of all or substantially
all of the Company's assets, other than a sale or disposition by
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the Company of all or substantially all of the Company's assets to an entity,
at least 50% of the combined voting power of the voting securities of which are
owned by shareholders of the Company in substantially the same proportions as
their ownership of the Company immediately prior to such sale.
(H) "Code" shall mean the Internal Revenue Code of 1986,
as amended from time to time.
(I) "Company" shall mean Piedmont Natural Gas Company,
Inc. and, except in determining under Section 15(G) hereof whether or not any
Change in Control of the Company has occurred, shall include any successor to
its business and/or assets which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
(J) "Date of Termination" shall have the meaning set
forth in Section 7.2 hereof.
(K) "Disability" shall be deemed the reason for the
termination by the Company of the Executive's employment, if, as a result of
the Executive's incapacity due to physical or mental illness, the Executive
shall have been absent from the full-time performance of the Executive's duties
with the Company for a period of six (6) consecutive months, the Company shall
have given the Executive a Notice of Termination for Disability, and, within
thirty (30) days after such Notice of Termination is given, the Executive shall
not have returned to the full-time performance of the Executive's duties.
(L) "Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended from time to time.
(M) "Executive" shall mean the individual named in the
first paragraph of this Agreement.
(N) "Good Reason" for termination by the Executive of
the Executive's employment shall mean the occurrence (without the Executive's
express written consent) after any Change in Control, or prior to a Change in
Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs
(I) through (VII) below to a "Change in Control" as references to a "Potential
Change in Control"), of any one of the following acts by the Company, or
failures by the Company to act, unless, in the case of any act or failure to
act described in paragraph (I), (V), (VI) or (VII) below, such act or failure
to act is corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties
inconsistent with the Executive's status as a senior executive officer of the
Company, a change in the Executive's reporting responsibilities, titles or
offices, or a substantial adverse alteration in the nature or status of the
Executive's responsibilities from those in effect immediately prior to the
Change in Control other
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than any such alteration primarily attributable to the fact that the Company
may no longer be a public company;
(II) a reduction by the Company in the Executive's
annual base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary reductions (not
to exceed 10%) similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the Company including the Chief
Executive Officer;
(III) the relocation of the principal executive
offices to a location more than 35 miles from the Company's principal executive
offices immediately prior to the Change in Control or the Company's requiring
the Executive to be based anywhere other than the location of the Company's
executive offices except for required travel on the Company's business to an
extent substantially consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company to pay to the
Executive any portion of the Executive's current compensation or benefits
except pursuant to an across-the-board compensation or benefit deferral (not to
exceed 10%) similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the Company including the Chief
Executive Officer, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the Company,
within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect
any compensation plan in which the Executive participates immediately prior to
the Change in Control which is material to the Executive's total compensation,
including but not limited to the Company's long-term incentive plans or any
substitute plans adopted prior to the Change in Control, 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 the
Executive's participation therein (or in such substitute or alternative plan)
on a basis not less favorable, both in terms of the amount or timing of payment
of benefits provided and the level of the Executive's participation relative to
other participants, as existed immediately prior to the Change in Control;
(VI) the failure by the Company to continue to
provide the Executive with benefits substantially similar to those enjoyed by
the Executive under any of the Company's pension, supplement retirement,
savings, life insurance, supplemental life insurance, medical, health and
accident, or disability plans in which the Executive was participating
immediately prior to the Change in Control (except for across-the-board changes
similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company, including the Chief
Executive Officer, not to exceed 10%), the taking of any other action by the
Company which would directly or indirectly materially reduce any of such
benefits or deprive the Executive of any material fringe benefit enjoyed by the
Executive at the time of the Change in Control, or the failure by the Company
to provide the Executive with the number of paid vacation days to which the
Executive is entitled either by prior written agreements or on the basis of
years of service with the Company in
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accordance with the Company's normal vacation policy in effect at the time of
the Change in Control; or
(VII) any purported termination of the Executive's
employment which is not effected pursuant to a Notice of Termination satisfying
the requirements of Section 7.1 hereof; for purposes of this Agreement, no such
purported termination shall be effective.
The Executive's right to terminate the Executive's employment
for Good Reason shall not be affected by the Executive's incapacity due to
physical or mental illness. The Executive's continued employment shall not
constitute consent to, or a waiver of rights with respect to, any act or
failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of
Good Reason, any claim by the Executive that Good Reason exists shall be
presumed to be correct unless the Company establishes by clear and convincing
evidence that Good Reason does not exist.
(O) "Notice of Termination" shall have the meaning set
forth in Section 7.1 hereof.
(P) "Person" shall have the meaning given in Section
3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d)
thereof, except that such term shall not include (i) the Company or any of its
subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an
underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
shareholders of the Company in substantially the same proportions as their
ownership of stock of the Company.
(Q) "Potential Change in Control" shall be deemed to
have occurred if the event set forth in any one of the following paragraphs
shall have occurred:
(I) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in Control;
(II) the Company or any Person publicly announces an
intention to take or to consider taking actions which, if consummated, would
constitute a Change in Control;
(III) any Person becomes the Beneficial owner,
directly or indirectly, of securities of the Company representing 15% or more
of either the then outstanding shares of common stock of the Company or the
combined voting power of the Company's then outstanding securities (not
including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates); or
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(IV) the Board adopts a resolution to the effect
that, for purposes of this Agreement, a Potential Change in Control has
occurred.
(R) "Retirement" shall be deemed the reason for the
termination by the Executive of the Executive's employment if such employment
is terminated voluntarily by the Executive in accordance with the Company's
retirement policy, including early retirement, generally applicable to its
salaried employees.
(S) "Severance Payments" shall have the meaning set
forth in Section 6.1 hereof.
(T) "Tax Counsel" shall have the meaning set forth in
Section 6.2 hereof.
(U) "Term" shall mean the period of time described in
Section 2 hereof (including any extension, continuation or termination
described therein).
(V) "Total Payments" shall mean those payments so
described in Section 6.2 hereof.
(W) "W-2 Compensation" shall mean all amounts received
for services actually rendered in the course of employment with the Company to
the extent that such amounts are includible in gross income as wages for
federal income tax purposes plus all amounts that are contributed by the
Company pursuant to a salary reduction agreement and which are not includible
in the gross income of the Executive under Code Sections 125 or 401(k) and
minus all amounts includible in the gross income of the Executive for annual
base salary, expense reimbursements or allowances, moving expenses, club
initiation fees or special assessments, deferred compensation and welfare
benefits, or gross-ups for taxes.
PIEDMONT NATURAL GAS COMPANY
By: /s/ X. X. Xxxxxxxx
------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Executive Officer
XXXXXXXX X. XXXX
/s/ Xxxxxxxx X. Xxxx
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Address: 0000 Xxxxxxxxx Xxxxxx
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Xxxxxxxx, XX 00000
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