NISOURCE INC. FORM OF CHANGE IN CONTROL AND TERMINATION AGREEMENT
Exhibit 10.7
NiSource Inc., a Delaware corporation (“Employer”), which as used herein shall mean NiSource
Inc. and all of its Affiliates, and
(“Executive”) hereby enter into a Change in
Control and Termination Agreement as of , (the “Effective Date”), which
Agreement is hereinafter set forth (“Agreement”).
WITNESSETH
WHEREAS, Employer considers the ability to attract and retain talented management to be part
of its corporate strategy and necessary in protecting and enhancing the interests of the Employer
and its shareholders. As part of this strategy, Employer desires to retain Executive in its
employment notwithstanding any actual or threatened Change in Control; and
WHEREAS, Executive and Employer desire to enter into this Agreement pertaining to the terms of
Executive’s employment in the event of any actual or threatened Change in Control;
NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, and
other good and valuable consideration, the receipt of which is hereby acknowledged, the parties
agree as follows:
1. Term. This Agreement shall begin on the Effective Date and shall continue in
effect until the date which is 24 months after the date on which either Employer or Executive has
given written notice to the other party of its or his election to have this Agreement terminate
(“Term”).
2. Definitions. For purposes of this Agreement:
(a) “Affiliate” or “Associate” shall have the meaning set forth in Rule 12b-2 under the
Securities Exchange Act of 1934.
(b) “Base Salary” shall mean Executive’s monthly base salary at the rate in effect on the date
of a reduction for purposes of paragraph (g) of this Section, or on the date of a termination of
employment under circumstances described in subsections 3(a) or (b) below, whichever is higher;
provided, however, that such rate shall in no event be less than the highest rate in effect for
Executive at any time during the Term.
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(c) “Beneficiary” shall mean the person or entity designated by Executive, by written
instrument delivered to Employer, to receive the benefits payable under this Agreement in the event
of his death. If Executive fails to designate a Beneficiary, or if no Beneficiary survives
Executive, such death benefits shall be paid:
(i) to his surviving spouse; or
(ii) if there is no surviving spouse, to his living descendants per stirpes; or
(iii) if there is neither a surviving spouse nor descendants, to his duly appointed and
qualified executor or personal representative.
(d) “Bonus” shall mean Executive’s target annual incentive bonus compensation for the calendar
year in which the date of a termination of employment under circumstances described in subsection
3(a) below occurs, under the NiSource Inc. Corporate Incentive Plan or such other incentive bonus
compensation plan then maintained by Employer (“Annual Incentive Plan”); provided, however, that
such target annual incentive bonus compensation shall in no event be less than the highest target
annual incentive bonus compensation of Executive under any such Annual Incentive Plan for any
calendar year commencing during the Term.
(e) A “Change in Control” shall be deemed to take place on the occurrence of any of the
following events:
(1) The acquisition by an entity, person or group (including all Affiliates or
Associates of such entity, person or group) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of
NiSource Inc. entitled to exercise more than 30% of the outstanding voting power of all
capital stock of NiSource Inc. entitled to vote in elections of directors (“Voting
Power”);
(2) The effective time of (i) a merger or consolidation of NiSource Inc. with one
or more other corporations unless the holders of the outstanding Voting Power of
NiSource Inc. immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate or Associate thereof) hold at least
50% of the Voting Power of the surviving or resulting corporation (in substantially the
same proportion as the Voting Power of NiSource Inc. immediately prior to such merger or
consolidation), or (ii) a transfer of a
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Substantial Portion of the Property, of NiSource Inc. other than to an entity of which
NiSource Inc. owns at least 50% of the Voting Power; or
(3) The election to the Board of Directors of NiSource Inc. (the “Board”) of
candidates who were not recommended for election by the Board, if such candidates
constitute a majority of those elected in that particular election (for this purpose,
recommended directors will not include any candidate who becomes a member of the Board
as a result of an actual or threatened election contest or proxy or consent solicitation
on behalf of anyone other than the Board or as a result of any appointment, nomination,
or other agreement intended to avoid or settle a contest or solicitation).
Notwithstanding the foregoing, a Change in Control shall not be deemed to take place by
virtue of any transaction in which Executive is a participant in a group effecting an
acquisition of NiSource Inc. and, after such acquisition, Executive holds an equity
interest in the entity that has acquired NiSource Inc.
(f) “Good Cause” shall be deemed to exist if, and only if Employer notifies Executive, in
writing, within 60 days of its knowledge that one of the following events occurred:
(1) Executive engages in acts or omissions constituting dishonesty, intentional
breach of fiduciary obligation or intentional wrongdoing or malfeasance, in each case
that results in substantial harm to Employer; or
(2) Executive is convicted of a criminal violation involving fraud or dishonesty.
(g) “Good Reason” shall be deemed to exist if, and only if:
(1) there is a significant diminution in the nature or the scope of Executive’s
authorities or duties;
(2) there is a significant reduction in Executive’s monthly rate of Base Salary and
his opportunity to earn a bonus under an incentive bonus compensation plan maintained by
Employer or his benefits; or
(3) Employer changes by 50 miles or more the principal location at which Executive
is required to perform services as of the date of a Change in Control.
(h) “Pension Plan” shall mean any Retirement Plan that is a defined benefit plan as defined in
Section 3(35) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).
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(i) “Retirement Plan” shall mean any qualified or nonqualified supplemental employee pension
benefit plan, as defined in Section 3(2) of ERISA, currently or hereinafter made available by
Employer in which Executive is eligible to participate.
(j) “Severance Period” shall mean the period beginning on the date Executive’s employment with
Employer terminates under circumstances described in subsection 3(a) and ending on the date
241 months thereafter.
(k) “Substantial Portion of the Property of NiSource Inc.” shall mean 50% of the aggregate
book value of the assets of NiSource Inc. and its Affiliates and Associates as set forth on the
most recent balance sheet of NiSource Inc., prepared on a consolidated basis, by its regularly
employed, independent, certified public accountants.
(l) “Welfare Plan” shall mean any health and dental plan, disability plan, survivor income
plan or life insurance plan, as defined in Section 3(1) of ERISA, currently or hereafter made
available by Employer in which Executive is eligible to participate.
3. Benefits Upon Termination of Employment.
(a) The following provisions will apply if a Change in Control occurs during the Term, and at
any time during the 24 months after the Change in Control occurs (whether during or after the
expiration of the Term), the employment of Executive with Employer is terminated by Employer for
any reason other than Good Cause, or Executive terminates his employment with Employer for Good
Reason. In addition, the following provisions also will apply if (i) a Change in Control occurs
during the Term, (ii) Employer has terminated Executive’s employment other than for Good Cause
during the year prior to the Change in Control but after a third party and/or Employer had taken
steps reasonably calculated to effect a Change in Control and (iii) it is reasonably demonstrated
by Executive that such termination of employment was in connection with or in anticipation of a
Change in Control.
(1) Employer shall pay Executive an amount equal to 242 times the sum of
(a) Executive’s Base Salary plus (b) one-twelfth of his Bonus. Such amount shall be
paid to Executive in a lump sum within 60 days following Executive’s
| 1 | With respect to the agreement with Xx. Xxxxxx, the Xxxxxxxxx Period will end 36 months following termination. | |
| 2 | With respect to the agreement with Xx. Xxxxxx, the agreement provides that Xx. Xxxxxx would receive a payment equal to 36 times his times the sum of (a) his Base Salary plus (b) one-twelfth of his Bonus. |
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termination of employment.
(2) Employer shall pay Executive an amount equal to the pro rata portion of
Executive’s target annual incentive bonus compensation for the calendar year under the
Annual Incentive Plan then maintained by Employer, that is applicable to the period
commencing on the first day of such calendar year and ending on the date of termination.
Such bonus amount shall be paid to Executive in a lump sum within 30 days after his
date of termination of employment.
(3) Executive shall receive any and all benefits accrued through the date of
termination of employment under any Retirement Plan, Welfare Plan or other plan or
program in which he participates at the date of termination of employment. The amount,
form and time of payment of such benefits will be determined by the terms of such
Retirement Plan, Welfare Plan and other plan or program. Further, Executive’s
employment shall be deemed to have terminated by reason of retirement without regard to
vesting limitations in all such plans and other plans or programs not subject to the
qualification requirements of Section 401(a) of the Internal Revenue Code of 1986 as
amended (“Code”), under circumstances that have the most favorable result for Executive
thereunder for all purposes of such Plans and other plans or programs. Payment shall be
made at the earliest date permitted under any such Plan or other plan or program that is
not funded with a trust agreement.
(4) If upon the date of termination of Executive’s employment Executive holds any
options with respect to stock of Employer, all such options will immediately become
exercisable upon such date and will be exercisable for 200 days thereafter (but not
longer than the regularly scheduled term of such options). Any restrictions on stock of
Employer owned by Executive on the date of termination of his employment will lapse on
such date.
(5) In lieu of a contribution by Employer to, or a reimbursement to Executive for,
any coverage premiums and any other expenses payable by Executive during the Severance
Period under all Welfare Plans maintained by Employer in which he and his spouse and
other dependents were participating immediately prior to the date of his termination,
Employer will pay to
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Executive an amount equal to 130% of such coverage premiums and expenses otherwise
payable during the Severance Period. Such amount shall be paid to Executive in a lump
sum within 60 days following Executive’s termination of employment.
(6) Executive shall receive outplacement services for a period commencing on the
date of termination of employment and continuing until the earlier to occur of the
Executive accepting other employment or 12 months after the date of termination, in an
amount not to exceed $25,000.
(7) During the Severance Period, Executive shall not be entitled to reimbursement
for fringe benefits, including without limitation, dues and expenses related to club
memberships, automobile expenses, expenses for professional services and other similar
perquisites.
(b) If the employment of Executive with Employer is terminated by Employer or Executive other
than under circumstances set forth in subsection 3(a), Executive’s Base Salary shall be paid
through the date of his termination, and Employer shall have no further obligation to Executive or
any other person under this Agreement. Such termination shall have no effect upon Executive’s
other rights, including but not limited to, rights under the Retirement Plans and the Welfare
Plans.
(c) Notwithstanding anything herein to the contrary, (1) in the event Employer shall terminate
the employment of Executive for Good Cause hereunder, Employer shall give Executive at least thirty
(30) days prior written notice specifying in detail the reason or reasons for Executive’s
termination, and (2) in the event Executive terminates his employment for Good Reason hereunder,
Executive shall give Employer at least 30 days prior written notice specifying in detail the Good
Reason conditions. If Employer cures such conditions, any subsequent termination of employment by
Executive will not be considered to be made for Good Reason.
(d) This Agreement shall have no effect, and Employer shall have no obligations hereunder, if
Executive’s employment terminates for any reason at any time other than during the 24 months
following a Change in Control.
4. Excise Tax.
(a) In the event that a Change in Control shall occur, and a final
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determination is made by legislation, regulation, ruling directed to Executive or Employer, by
court decision, or by independent tax counsel described in subsection (b) next below, that the
aggregate amount of any payment made to Executive (1) hereunder, and (2) pursuant to any plan,
program or policy of Employer in connection with, on account of, or as a result of, such Change in
Control (“Total Payments”) will be subject to the excise tax provisions of Section 4999 of the Code
(“Excise Tax”), or any successor section thereof, Executive shall be entitled to receive from
Employer, in addition to any other amounts payable hereunder, a lump sum payment (the “Gross-Up
Payment”), sufficient to cover the full cost of such excise taxes and Executive’s federal, state
and local income and employment taxes on this additional payment so that the net amount retained by
Executive, after the payment of all such excise taxes on the Total Payments, and all federal, state
and local income and employment taxes and excise taxes on the Gross-Up Payment, shall be equal to
the Total Payments. The Total Payments, however, shall be subject to any federal, state and local
income and employment taxes thereon. For this purpose, Executive shall be deemed to be in the
highest marginal rate of federal, state and local taxes. The Gross-Up Payment shall be made at the
same time as the payments described in subsections 3(a)(1) above. Notwithstanding the foregoing
provisions of this Section 4(a), if it shall be determined that Executive is entitled to the
Gross-Up Payment, but that the Total Payments do not exceed 110% of the greatest amount that could
be paid to Executive such that the receipt of the Total Payments will not give rise to any Excise
Tax (the “Reduced Amount”), then no Gross-Up Payment shall be made to Executive and the Total
Payments shall be reduced to the Reduced Amount. In the event that the Total Payments would be
reduced as provided in the previous sentence, then such reduction shall be determined in a manner
which has the least economic cost to Executive and, to the extent the economic cost is equivalent,
the Total Payments will be reduced in the inverse order of when the Total Payments would have been
made to Executive until the reduction specified is achieved.
(b) Employer and Executive shall mutually and reasonably determine the amount of the Gross-Up
Payment to be made to Executive pursuant to the preceding subsection. Prior to the making of any
such Gross-Up Payment, either party may request a determination as to the amount of such Gross-Up
Payment. If such a determination is requested, it shall be made promptly, at Employer’s expense,
by independent tax
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counsel selected by Executive and approved by Employer (which approval shall not unreasonably be
withheld), and such determination shall be conclusive and binding on the parties. Employer shall
provide such information as such counsel may reasonably request, and such counsel may engage
accountants or other experts at Employer’s expense to the extent that they deem necessary or
advisable to enable them to reach a determination. The term “independent tax counsel,” as used
herein, shall mean a law firm of recognized expertise in federal income tax matters that has not
previously advised or represented either party.
(c) In the event the Internal Revenue Service subsequently adjusts the excise tax computation
made pursuant to subsections 4(a) and (b) above, Employer shall pay to Executive, or Executive
shall pay to Employer, as the case may be, the full amount necessary to make either Executive or
Employer whole had the excise tax initially been computed as subsequently adjusted, including the
amount of any underpaid or overpaid excise tax, and any related interest and/or penalties due to
the Internal Revenue Service. Any payment by Employer or reimbursement made by Executive pursuant
to this Section 4(c) shall be paid or reimbursed by the end of the taxable year next following the
taxable year in which the payment or reimbursement of taxes is made or received, as the case may
be.
5. Setoff. No payments or benefits payable to or with respect to Executive pursuant
to this Agreement shall be reduced by any amount Executive or his spouse or Beneficiary, or any
other beneficiary under the Pension Plans, may earn or receive from employment with another
employer or from any other source, except as expressly provided in subsection 3(a)(6).
6. Death. If Executive’s employment with Employer terminates under circumstances
described in subsections 3(a) or (b), then upon Executive’s subsequent death, all unpaid amounts
payable to Executive under subsections 3(a)(1), (2) or (3) or 3(b), or Section 4, if any, shall be
paid to his Beneficiary.
7. No Solicitation of Representatives and Employees. Executive agrees that he shall
not, during the Term or the Severance Period, directly or indirectly, in his individual capacity or
otherwise, induce, cause, persuade, or attempt to do any of the foregoing in order to cause, any
representative, agent or employee of Employer to terminate such person’s employment relationship
with Employer, or to violate the terms of any agreement between said representative, agent or
employee and Employer.
8. Confidentiality.
Executive acknowledges that preservation of a continuing
business
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relationship between Employer and their respective customers, representatives, and employees is of
critical importance to the continued business success of Employer and that it is the active policy
of Employer to guard as confidential certain information not available to the public and relating
to the business affairs of Employer. In view of the foregoing, Executive agrees that he shall not
during the Term and at any time thereafter, without the prior written consent of Employer, disclose
to any person or entity any such confidential information that was obtained by Executive in the
course of his employment by Employer. This section shall not be applicable if and to the extent
Executive is required to testify in a legislative, judicial or regulatory proceeding pursuant to an
order of Congress, any state or local legislature, a judge, or an administrative law judge or is
otherwise required by law to disclose such information.
9. Forfeiture. If Executive shall at any time violate any obligation of his under
Sections 7 or 8 in a manner that results in significant damage to the Employer or its business, he
shall immediately forfeit his right to any benefits under this Agreement, and Employer shall
thereafter have no further obligation hereunder to Executive or his spouse, Beneficiary or any
other person.
10. Executive Assignment. No interest of Executive, his spouse or any Beneficiary, or
any other beneficiary under the Pension Plans, under this Agreement, or any right to receive any
payment or distribution hereunder, shall be subject in any manner to sale, transfer, assignment,
pledge, attachment, garnishment, or other alienation or encumbrance of any kind, nor may such
interest or right to receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against, Executive or his spouse,
Beneficiary or other beneficiary, including claims for alimony, support, separate maintenance, and
claims in bankruptcy proceedings.
11. Benefits Unfunded. All rights under this Agreement of Executive and his spouse,
Beneficiary or other beneficiary under the Pension Plans, shall at all times be entirely unfunded,
and no provision shall at any time be made with respect to segregating any assets of Employer for
payment of any amounts due hereunder. None of Executive, his spouse, Beneficiary or any other
beneficiary under the Pension Plans shall have any interest in or rights against any specific
assets of Employer, and Executive and his spouse, Beneficiary or other beneficiary shall have only
the rights of a general unsecured
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creditor of Employer.
12. Waiver. No waiver by any party at any time of any breach by the other party of,
or compliance with, any condition or provision of this Agreement to be performed by such other
party shall be deemed a waiver of any other provisions or conditions at the same time or at any
prior or subsequent time.
13. Litigation Expenses. Following the occurrence of Change in Control, Employer
shall pay Executive’s reasonable attorneys’ fees and legal expenses in connection with any judicial
proceeding to enforce this Agreement, or to construe or determine the validity of this Agreement or
otherwise in the event Executive is successful in one material claim in such litigation. Such
reimbursement shall occur by March 15 of the calendar year after the calendar year in which such
reimbursement obligation was finally determined.
14. Continuing Indemnification and Advancement of Expenses. Following the occurrence
of a Change in Control, to the full extent permitted by law, Employer shall indemnify Executive
against any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative, arising by reason of Executive’s status as a director, officer,
employee and/or agent of Employer. In addition, to the extent permitted by law, Employer shall
advance or reimburse any expenses, including reasonable attorney’s fees, Executive incurs in
investigating and defending any actual or threatened action, suit or proceeding for which Executive
may be entitled to indemnification under this Section 14. Executive agrees to repay any expenses
paid or reimbursed by Employer if it is ultimately determined that Executive is not legally
entitled to be indemnified by Employer.
15. Applicable Law. This Agreement shall be construed and interpreted pursuant to the
laws of Indiana.
16. Entire Agreement. This Agreement contains the entire Agreement between the
Employer and Executive and supersedes any and all previous agreements; written or oral; between the
parties relating to the subject matter hereof. For the avoidance of doubt, if Executive becomes
entitled to the benefits under this Agreement, Executive shall not be eligible for any duplicative
benefits under any other agreement, offer letter, plan, program or policy. No amendment or
modification of the terms of this Agreement shall be binding upon the parties hereto unless reduced
to writing and signed by Employer and Executive.
17. No
Employment Contract. Nothing contained in this Agreement shall be
construed to
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be an employment contract between Executive and Employer or provide Executive with the right to
continued Employment with Employer.
18. Counterparts. This Agreement may be executed in counterparts, each of which shall
be deemed an original.
19. Severability. In the event any provision of this Agreement is held illegal or
invalid, the remaining provisions of this Agreement shall not be affected thereby.
20. Successors. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, representatives and successors.
21. Employment with an Affiliate. For purposes of this Agreement, (A) employment or
termination of employment of Executive shall mean employment or termination of employment with
Employer and all Affiliates, (B) Base Salary and Bonus shall include remuneration received by
Executive from Employer and all Affiliates, and (C) the terms Pension Plan, Retirement Plan and
Welfare Plan maintained or made available by Employer shall include any such plans of any Affiliate
of Employer.
22. Notice. Notices required under this Agreement shall be in writing and sent by
registered mail, return receipt requested, to the following addresses or to such other address as
the party being notified may have previously furnished to the other party by written notice:
| If to Employer: | NiSource Inc. | |||||
| 000 X. 00xx Xxxxxx | ||||||
| Xxxxxxxxxxxx, Xxxxxxx 00000 | ||||||
| Attention: Xxxxxx X. Xxxxxxxx | ||||||
| If to Executive: | ||||||
23. 409A Savings Clause. Employer and Executive intend that this Agreement be
interpreted in a manner that is compliant with Code Section 409A so that Executive does not incur
additional taxes or penalties under Code Section 409A. If and to the extent that any payment or
benefit under this Agreement is determined by Employer to constitute “non-qualified deferred
compensation” subject to Code Section 409A and is payable to Executive by reason of Executive’s
termination of employment, then (a) such payment or benefit shall be made or provided to Executive
only upon a “separation from service” as defined for purposes of Code Section 409A under applicable
regulations and (b) if Executive is a “specified employee” (within
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the meaning of Code Section 409A and as determined by Employer), such payment or benefit shall not
be made or provided before the date that is six months after the date of Executive’s separation
from service (or Executive’s earlier death). Any amount not paid in respect of the six month
period specified in the preceding sentence will be paid to Executive in a lump sum after the
expiration of such six month period. Any such payment or benefit shall be treated as a separate
payment for purposes of Section Code 409A to the extent Code Section 409A applies to such payments.
IN WITNESS WHEREOF, Executive has hereunto set his hand, and Employer has caused these
presents to be executed in its name on its behalf, all on the
___ day of ____, 20___.
| NISOURCE INC. | ||||||
| By: Title: |
|
|||||
| EXECUTIVE | ||||||
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