Nicor Inc.
Form 10-K
Exhibit 10.31
CHANGE-IN-CONTROL AGREEMENT
THIS AGREEMENT dated as of November 25, 2002 (the "Agreement Date") is
made by and among Nicor Inc. (the "Company"), an Illinois corporation, and Xxxx
X. Xxxxxx, Xx. (the "Executive").
ARTICLE I
PURPOSES
The Board of Directors of the Company (the "Board") has determined that
it is in the best interests of the Company and its shareholders to assure that
the Company and Nicor Gas will have the continued services of the Executive,
despite the possibility or occurrence of a Change in Control of the Company. The
Board believes it is imperative to reduce the distraction of the Executive that
would result from the personal uncertainties caused by a pending or threatened
Change in Control, to encourage the Executive's full attention and dedication to
the Company and Nicor Gas, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which are competitive with those
of similarly-situated corporations. This Agreement is intended to accomplish
these objectives.
ARTICLE II
CERTAIN DEFINITIONS
When used in this Agreement, the terms specified below shall have the
following meanings:
2.1 The "Agreement Term" shall begin on the Agreement Date and
shall continue through December 31, 2003. As of December 31, 2003, and on each
December 31 thereafter, the Agreement Term shall automatically be extended for
one additional year unless, not later than the preceding June 30, either party
shall have given notice that such party does not wish to extend the Agreement
Term. If a Change in Control shall have occurred during the Agreement Term (as
it may be extended from time to time), the Agreement Term shall continue for a
period ending on the two-year anniversary of the date of the Change in Control,
but if the Termination Date (as defined below) occurs during that two-year
period, then the Agreement Term shall continue until the end of the Severance
Period (as defined below). Unless the Termination Date occurs during the
two-year period after a Change in Control so that the Agreement Term is extended
to include the Severance Period, as provided in the immediately preceding
sentence, the Agreement Term shall not extend beyond the two-year anniversary of
the Change in Control.
2.2 "Effective Date" means the first date during the Agreement
Term on which a Change in Control occurs.
2.3 "Change in Control" means:
2.3.1 The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") (a "Person") of
beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of any shares of Common Stock of the Company or
any voting securities of the Company entitled to vote generally in the
election of directors if, as a result of such acquisition, such person
owns 20% or more of either (i) the outstanding shares of common stock
of the Company (the "Outstanding Company Common Stock"), or (ii) the
combined voting power of the outstanding voting securities of the
Company entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, however, that for
purposes of this subsection 2.3.1, the following acquisitions shall not
constitute a Change in Control: (A) any acquisition by the Company, (B)
any acquisition by an employee benefit plan (or related trust)
sponsored or maintained by the Company or any corporation controlled by
the Company (a "Company Plan"), or (C) any acquisition by any
corporation pursuant to a transaction which complies with subsections
2.3.3.1, 2.3.3.2 and 2.3.3.3 of this definition; provided further, that
for purposes of clause (A), if any Person (other than the Company or
any Company Plan) shall become the beneficial owner of 20% or more of
the Outstanding Company Common Stock or 20% or more of the Outstanding
Company Voting Securities by reason of an acquisition by the Company,
and such Person shall, after such acquisition by the Company, become
the beneficial owner of any additional shares of the Outstanding
Company Common Stock or any additional Outstanding Company Voting
Securities (other than pursuant to any dividend reinvestment plan or
arrangement maintained by the Company) and such beneficial ownership is
publicly announced, such additional beneficial ownership shall
constitute a Change in Control; or
2.3.2 Individuals who, as of the date hereof, constitute
the Board of Directors of the Company (for purposes of this Section
2.3, the "Incumbent Board") cease for any reason to constitute at least
a majority of the Incumbent Board; provided, however, that any
individual becoming a director subsequent to the date hereof whose
election, or nomination for election by the Company shareholders, was
approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of an actual or publicly threatened election contest
(as such terms are used in Rule 14a-11 promulgated under the Exchange
Act) or other actual or publicly threatened solicitation of proxies or
consents by or on behalf of a Person other than the Board of Directors
of the Company; or
2.3.3 Consummation, including receipt of any necessary
regulatory approval, of (i) a reorganization, merger, consolidation or
other business combination involving the Company or (ii) the sale or
other disposition of more than 50% of the operating assets of the
Company (determined on a consolidated basis), other than in connection
with a
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sale-leaseback or other arrangement resulting in the continued
utilization of such assets (or the operating products of such assets)
by the Company (any transaction described in part (i) or (ii) being
referred to as a "Corporate Transaction"); excluding, however, a
Corporate Transaction pursuant to which:
2.3.3.1 all or substantially all of the individuals
and entities who are the beneficial owners, respectively, of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Corporate
Transaction beneficially own, directly or indirectly, more
than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then
outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the ultimate
parent entity resulting from such Corporate Transaction
(including, without limitation, an entity which, as a result
of such transaction, owns the Company or all or substantially
all of the assets of the Company either directly or through
one or more subsidiaries) in substantially the same
proportions as their ownership, immediately prior to such
Corporate Transaction of the Outstanding Company Common Stock
and Outstanding Company Voting Securities, as the case may be;
2.3.3.2 no Person (other than the Company, any
Company Plan or related trust, the corporation resulting from
such Corporate Transaction, and any Person which beneficially
owned, immediately prior to such Corporate Transaction,
directly or indirectly, 20% or more of the Outstanding Company
Common Stock or the Outstanding Company Voting Securities, as
the case may be) will beneficially own, directly or
indirectly, 20% or more of, respectively, the then outstanding
common stock of the ultimate parent entity resulting from such
Corporate Transaction or the combined voting power of the then
outstanding voting securities of such entity; and
2.3.3.3 individuals who were members of the
Incumbent Board will constitute at least a majority of the
members of the board of directors of the ultimate parent
entity resulting from such Corporate Transaction; or
2.3.4 A tender offer (for which a filing has been made with
the Securities and Exchange Commission (the "SEC") which purports to
comply with the requirements of Section 14(d) of the Exchange Act and
the corresponding SEC rules) is made for the stock of the Company,
which has not been negotiated and approved by the Board, provided that
in case of a tender offer described in this subsection 2.3.4, the
Change in Control will be deemed to have occurred at the first time
during the offer period when the Person (as defined in subsection
2.3.1, above) making the offer beneficially owns or has accepted for
payment stock of the Company with 20% or more of the combined voting
power of the then Outstanding Company Voting Securities; or
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2.3.5 Approval by the shareholders of the Company of a plan
of complete liquidation or dissolution of the Company.
2.3.6 For purposes of this Section 2.3, (i) the term
"Company" shall mean Nicor Inc. and shall include any Successor to
Nicor Inc.; and (ii) the term "Successor to Nicor Inc." shall mean any
corporation, partnership, joint venture or other entity that succeeds
to the interests of Nicor Inc. by means of a merger, consolidation, or
other restructuring that does not constitute a Change in Control under
paragraphs 2.3.1, 2.3.3 or 2.3.4 above.
2.3.7 By entering into this Agreement, the Executive
irrevocably consents to the modification of the definition of "Change
in Control" (including "change in control") in all Employee Benefit
Arrangements (as defined below), by substituting for such definition in
each such Employee Benefit Arrangement the definition of "Change in
Control" set forth above, with such substitution to be effective on the
first date this Agreement has been signed by both the Company and the
Executive. For purposes of the preceding sentence, the term "Employee
Benefit Arrangement" shall mean each agreement with the Executive to
which the Company or any Subsidiary is a party, and each plan or
arrangement maintained by the Company or any Subsidiary, and including
any awards outstanding under any such agreement, plan, or arrangement,
to the extent that such award, agreement, plan, or arrangement contains
a definition of "Change in Control." However, to the extent that the
Employee Benefit Arrangement provides for an award based on common
stock of the Company (including, without limitation, an award of stock
options or shares of restricted stock), and such Employee Benefit
Arrangement provides that vesting or exercisability of such award will
occur at the time of the Change in Control (rather than the occurrence
of a subsequent event, such as termination of employment), the
definition of "Change in Control" that is substituted for the
definition in such Employee Benefit Arrangement shall be the definition
of "Change in Control" set forth above, except that Section 2.3.4 shall
be modified by adding, at the end of such Section, immediately prior to
the word "or," the following: "provided, however, that the Change in
Control shall occur three (3) business days before such tender offer is
to terminate, unless the offer is withdrawn first, if the Person making
the offer could own, by the terms of the offer plus any shares
beneficially owned by that Person, stock with 50% or more of the
combined voting power of the then Outstanding Company Voting Securities
when the offer (and any subsequent offering period) terminates;"
2.3.8 By entering into this Agreement, the Executive
irrevocably consents to the amendment of the Nicor Inc. Stock Deferral
Plan to provide for distribution, as soon as practicable following a
Change in Control, of any amounts which may then be deferred for the
Executive under such plan.
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Employment Period" means the period commencing on the
Effective Date and ending on the two-year anniversary of that date.
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2.6 "Incentive Plan" shall have the meaning set forth in Section
3.2.2.
2.7 "Notice of Termination" means a written notice given in
accordance with Section 11.8 which sets forth (a) the specific termination
provision in this Agreement relied upon by the party giving such notice, (b) in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under such termination provision, and
(c) if the Termination Date is other than the date of receipt of such Notice of
Termination, the Termination Date.
2.8 "Plans" shall have the meaning set forth in Section 3.2.3.
2.9 A "Potential Change in Control" shall exist during any period
in which the circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist
(provided, however, that a Potential Change in Control shall cease to exist not
later than the occurrence of a Change in Control):
2.9.1 The Company enters into an agreement, the
consummation of which would result in the occurrence of a Change in
Control, provided that a Potential Change in Control described in this
Section 2.9.1 shall cease to exist upon the expiration or other
termination of all such agreements.
2.9.2 Any person (including the Company) publicly announces
an intention to take or to consider taking actions the consummation of
which would constitute a Change in Control; provided that a Potential
Change in Control described in this Section 2.9.2 shall cease to exist
upon the withdrawal of such intention, or upon a reasonable
determination by the Board that there is no reasonable chance that such
actions would be consummated.
2.9.3 The Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control exists;
provided that a Potential Change in Control described in this Section
2.9.3 shall cease to exist upon a reasonable determination by the Board
that the reasons that gave rise to the resolution providing for the
existence of a Potential Change in Control have expired or no longer
exist.
2.10 "Severance Incentive" means the greater of (i) the target
annual incentive under an Incentive Plan applicable to the Executive for the
Performance Period in which the Termination Date occurs, or (ii) the average of
the actual annual incentives paid (or payable, to the extent not previously
paid) to the Executive under the applicable Incentive Plan for each of the two
calendar years preceding the calendar year in which the Termination Date occurs.
2.11 "Severance Period" means the period beginning on the
Executive's Termination Date and ending on the second anniversary thereof;
provided, however, that no Severance Period will occur unless the Executive's
Termination Date occurs under circumstances described in
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Section 5.1 (relating to termination by the Executive for Good Reason or by the
Company and Nicor Gas other than for Cause or Permanent Disability).
2.12 "Subsidiary" shall mean any corporation, partnership, joint
venture or other entity during any period in which at least a fifty percent
interest in such entity is owned, directly or indirectly, by the Company (or a
successor to the Company).
2.13 "Termination Date" means the first day on or after which the
Executive is not employed by the Company or Nicor Gas; provided, however, that
(a) if the Company and Nicor Gas terminate the Executive's employment other than
for Cause or Disability (as defined in Section 4.1.2), then the Termination Date
shall be the date of receipt of the Notice of Termination and (b) if the
Executive's employment is terminated by reason of death or Disability, then the
Termination Date shall be the date of death of the Executive or the Disability
Effective Date (as defined in Section 4.1.1), as the case may be.
2.14 "Welfare Plans" shall have the meaning set forth in Section
3.2.4.
ARTICLE III
TERMS OF EMPLOYMENT
3.1 Position and Duties.
3.1.1 The Company hereby agrees to cause the Company and/or
Nicor Gas to continue the Executive's employment during the Employment
Period and, subject to Article IV of this Agreement, the Executive
agrees to remain in the employ of the Company and Nicor Gas, as
applicable, subject to the terms and conditions hereof. During the
Employment Period, (i) the Executive's position (including status,
offices, titles and reporting requirements), authority, duties and
responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and
assigned to the Executive at any time during the 90-day period
immediately preceding the Effective Date, and (ii) the Executive's
services shall be performed at the location where the Executive was
employed immediately preceding the Effective Date or any office or
location less than 25 miles from such location.
3.1.2 During the Employment Period, and excluding any
periods of vacation and sick leave to which the Executive is entitled,
the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and
Nicor Gas, as applicable, and, to the extent necessary to discharge the
responsibilities assigned to the Executive hereunder, to use the
Executive's reasonable best efforts to perform faithfully and
efficiently such responsibilities. During the Employment Period it
shall not be a violation of this Agreement for the Executive (i) to
serve on corporate, civic or charitable boards or committees, (ii) to
deliver lectures, fulfill speaking engagements or teach at educational
institutions and (iii) to manage personal investments, to the extent
that such other activities do not, in the reasonable judgment of
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the Chief Executive Officer of the Company (the "CEO"), inhibit or
prohibit the performance of the Executive's duties under this
Agreement, or conflict in any material way with the business of the
Company or any Subsidiary; provided, however, that the Executive shall
not serve on the board of any business, or hold any other position with
any business, without the consent of the CEO.
3.2 Compensation.
3.2.1 Base Salary. During the Employment Period, the
Executive shall receive an annual base salary ("Annual Base Salary"),
which shall be paid at an annual rate at least equal to twelve times
the highest monthly base salary paid or payable, including any base
salary which has been earned but deferred, to the Executive by the
Company in respect of the twelve-month period immediately preceding the
month in which the Effective Date occurs. During the Employment Period,
the Annual Base Salary shall be reviewed no more than twelve months
after the last salary increase awarded to the Executive prior to the
Effective Date and, thereafter, at least annually, and shall be
increased at any time and from time to time as shall be substantially
consistent with increases in base salary awarded to other senior
executives of the Company. Annual Base Salary shall not be reduced
after any such increase unless such reduction is part of a policy,
program or arrangement applicable to senior executives of the Company
and of any successor entity, and the term Annual Base Salary as used in
this Agreement shall refer to Annual Base Salary as so increased. Any
increase in Annual Base Salary shall not limit or reduce any other
obligation of the Company to the Executive under this Agreement.
3.2.2 Annual Incentive. In addition to Annual Base Salary,
the Company shall pay or cause to be paid to the Executive an incentive
award (the "Annual Incentive") for each Performance Period or portion
thereof which falls within the Employment Period. "Performance Period"
means each period of time designated in accordance with any annual
incentive award arrangement ("Incentive Plan") which is based upon
performance and approved by the Board or any committee of the Board, or
in the absence of any Incentive Plan or any such designated period of
time, Performance Period shall mean each calendar year. The Executive's
target and maximum Annual Incentive with respect to any Performance
Period shall not be less than the target and maximum annual incentive
award payable with respect to the Executive under the Company's annual
incentive program as in effect immediately preceding the Effective
Date.
3.2.3 Incentive, Savings and Retirement Plans. During the
Employment Period, the Executive shall be entitled to participate in
all incentive, savings and retirement plans, practices, policies and
programs ("Plans") applicable generally to other senior executives of
the Company, but in no event shall such Plans provide the Executive
with incentive opportunities (measured with respect to long-term and
special incentives, to the extent, if any, that such distinctions are
applicable) or savings and retirement benefits which are less
favorable, in the aggregate, than the greater of (i) those provided by
the Company for
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the Executive under such Plans as in effect at any time during the
90-day period immediately preceding the Effective Date, or (ii) those
provided generally at any time after the Effective Date to other senior
executives of the Company.
3.2.4 Welfare Benefit Plans. During the Employment Period,
the Executive and/or the Executive's family, as the case may be, shall
be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs ("Welfare
Plans") provided by the Company (including, without limitation,
medical, prescription, dental, disability, salary continuance, employee
life, group life, accidental death and travel accident insurance
benefits), but in no event shall such Welfare Plans provide the
Executive with benefits which are less favorable, in the aggregate,
than the greater of (i) those provided by the Company for the Executive
under such Welfare Plans as were in effect at any time during the
90-day period immediately preceding the Effective Date, or (ii) those
provided generally at any time after the Effective Date to other senior
executives of the Company.
3.2.5 Other Employee Benefits. During the Employment
Period, the Executive shall be entitled to other employee benefits and
perquisites in accordance with the most favorable plans, practices,
programs and policies of the Company, as in effect with respect to the
Executive at any time during the 90-day period immediately preceding
the Effective Date, or if more favorable, as in effect generally with
respect to other senior executives of the Company.
3.2.6 Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable
expenses incurred by the Executive in accordance with the policies,
practices and procedures of the Company as in effect with respect to
the Executive at any time during the 90-day period immediately
preceding the Effective Date, or if more favorable, as in effect
generally with respect to other senior executives of the Company.
3.2.7 Office and Support Staff. During the Employment
Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive
personal secretarial and other assistance, as in effect with respect to
the Executive at any time during the 90-day period immediately
preceding the Effective Date, or if more favorable, as provided
generally with respect to other senior executives of the Company.
3.2.8 Paid Time Off. During the Employment Period, the
Executive shall be entitled to paid time off in accordance with the
plans, policies, programs and practices of the Company as in effect
with respect to the Executive at any time during the 90-day period
immediately preceding the Effective Date, or if more favorable, as
provided generally with respect to other senior executives of the
Company.
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3.2.9 Subsidiaries. To the extent that immediately prior to
the Effective Date, the Executive has been on the payroll of, and
participated in the incentive or employee benefit plans of, a
Subsidiary of the Company, the references to the Company contained in
Sections 3.2.1 through 3.2.8 and the other sections of this Agreement
referring to benefits to which the Executive may be entitled shall be
read to refer to such Subsidiary.
ARTICLE IV
TERMINATION OF EMPLOYMENT
4.1 Disability.
4.1.1 During the Agreement Term, the Company and Nicor Gas
may terminate the Executive's employment upon the Executive's Permanent
Disability (as defined in Section 4.1.2) by giving the Executive or his
legal representative, as applicable, (1) written notice in accordance
with Section 11.8 of the Company's or Nicor Gas', as applicable,
intention to terminate the Executive's employment pursuant to this
section, and (2) a certification of the Executive's Permanent
Disability by a physician selected by the Company or Nicor Gas or its
insurers and reasonably acceptable to the Executive or the Executive's
legal representative. The Executive's employment shall terminate
effective on the 30th day (the "Permanent Disability Effective Date")
after the Executive's receipt of such notice unless, before the
Permanent Disability Effective Date, the Executive shall have resumed
the full-time performance of the Executive's duties. During the period
in which the Executive has a Disability, the Company or Nicor Gas, as
applicable, may appoint a temporary replacement to assume the
Executive's responsibilities.
4.1.2 The Executive shall be considered to have a
"Permanent Disability" during any period in which he has a Disability
(as defined below); provided, however, that the Executive shall not be
considered to have "Permanent Disability" until (i) for a period of 180
consecutive days, the Executive, as a result of a Disability, is
incapable, after reasonable accommodation, of performing his duties
under this Agreement on a full-time basis; (ii) such Disability is
reasonably expected to continue for at least another 90 days; and (iii)
at the Executive's Termination Date, he is eligible for income
replacement benefits under the Company's or Nicor Gas' long-term
disability plan. The Executive shall be considered to have a
"Disability" during any period in which he has a physical or mental
disability which renders him incapable, after reasonable accommodation,
of performing his duties under this Agreement.
4.2 Death. The Executive's employment shall terminate
automatically upon the Executive's death during the Agreement Term.
4.3 Cause. The Company or Nicor Gas, as applicable, may terminate
the Executive's employment during the Employment Period for Cause. For purposes
of this Agreement, "Cause" means:
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4.3.1 the Executive's willful commission of acts or
omissions which have, have had, or are likely to have a material
adverse effect on the business, operations, financial condition or
reputation of the Company or Nicor Gas;
4.3.2 the Executive's conviction (including a plea of
guilty or nolo contendere) of a felony or any crime of fraud, theft,
dishonesty or moral turpitude; or
4.3.3 the Executive's material violation of any statutory
or common law duty of loyalty to the Company or Nicor Gas.
For purposes of this Agreement, no act, or failure to act, on the part
of the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the best
interests of the Company or Nicor Gas. Any act, or failure to act,
pursuant to direction provided by the person to whom the Executive
reports, or provided by a resolution duly adopted by the Board, or
pursuant to advice of counsel for the Company or Nicor Gas, shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company or
Nicor Gas.
4.4 Good Reason. During the Employment Period, the Executive's
employment may be terminated by the Executive for Good Reason. For purposes of
this Agreement, "Good Reason" means any material breach of this Agreement by the
Company or Nicor Gas, including:
4.4.1 the failure to maintain the Executive in the office
or position, or in a substantially equivalent office or position, held
by the Executive immediately prior to the Change in Control;
4.4.2 a material adverse alteration in the nature or scope
of the Executive's position, duties, functions, responsibilities or
authority;
4.4.3 a material reduction of the Executive's salary,
incentive compensation or benefits;
4.4.4 the failure of any successor to the Company to assume
this Agreement, or a material breach of the Agreement by the Company or
its successor;
4.4.5 a relocation of more than 25 miles of (i) the
Executive's principal workplace, or (ii) the principal offices of the
Company or Nicor Gas, as applicable, (if such offices are the
Executive's principal workplace), in each case without the consent of
the Executive;
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4.4.6 the Company or Nicor Gas, as applicable, requiring
the Executive to engage in travel that is materially greater than the
Executive's travel obligations during the one-year period immediately
prior to the Change in Control; or
4.4.7 any failure by the Company or Nicor Gas, as
applicable, to comply with any of the provisions of Section 3.2 of this
Agreement, other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and which is remedied by the Company
or Nicor Gas, as applicable, promptly after receipt of notice thereof
given by the Executive;
provided, however, that an act or omission of the Company or Nicor Gas, as
applicable, shall not constitute Good Reason: (i) unless the Executive gives the
Company or Nicor Gas, as applicable, written notice of such act or omission and
the Company or Nicor Gas, as applicable, fails to cure such act or omission
within the 30-day period after such notice, or (ii) if the Executive first
acquired knowledge of such act or omission more than 6 months before the
Executive gives the Company or Nicor Gas, as applicable, such notice, or (iii)
if the Executive has consented in writing to such act or omission in a document
that makes specific reference to this Section 4.4.
4.5 Without Cause During a Potential Change in Control. If the
Executive's employment is terminated by the Company and Nicor Gas, as
applicable, without Cause during a Potential Change in Control, and such date of
termination occurs not more than 180 days prior to the occurrence of a Change in
Control and the Executive establishes by reasonable evidence that such
termination of employment was materially connected with and in anticipation of
the Change in Control, then the Executive shall be entitled to receive the
benefits that would have been provided under Section 5.1, determined as though:
4.5.1 the Executive were rehired by the Company and Nicor
Gas, as applicable, immediately prior to the Change in Control at the
salary rate equal to the Executive's highest salary rate during the
one-year period prior to the date of the Change in Control, and with
other Company and Nicor Gas compensation and benefit arrangements
comparable to those provided to comparable executives of the Company
and Nicor Gas;
4.5.2 the Executive's employment were terminated by the
Company and Nicor Gas without Cause immediately after the Change in
Control; and
4.5.3 this Agreement were in full force and effect at the
time of the Change in Control, and at the time of the Executive's
deemed termination of employment.
4.6 Right of Resignation and Termination. This Agreement does not
constitute a guarantee of continued employment at any time, but instead provides
for certain rights and benefits for the Executive during his employment
following the occurrence of a Change in Control, and in the event his employment
with the Company and Nicor Gas, as applicable, terminates under the
circumstances described herein. The Company and Nicor Gas, as applicable, may
terminate the employment of the Executive at any time for any reason, without
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breach of this Agreement, subject to its obligations set forth in Article V and
elsewhere in this Agreement. The Executive may resign from the Company and Nicor
Gas, as applicable, for Good Reason, or for any other reason, without breach of
this Agreement, subject to the Executive's obligations set forth in this
Agreement; provided that, in the event of a resignation without Good Reason, the
Executive shall provide at least four weeks advance notice of such resignation
to the Company and Nicor Gas, as applicable. Notwithstanding the foregoing
provisions in this Section 4.6, the Company and Nicor Gas, as applicable, may
suspend the Executive from performing his duties under this Agreement following
the delivery of a Notice of Termination by the Executive without Good Reason;
provided, however, that during the period of suspension (which shall end on the
Termination Date), the Executive shall continue to be treated as employed by the
Company and Nicor Gas, as applicable, for other purposes, and his rights to
compensation or benefits shall not be reduced by reason of the suspension.
ARTICLE V
OBLIGATIONS OF THE COMPANY UPON TERMINATION
5.1 If by the Executive for Good Reason or by the Company and
Nicor Gas, as Applicable, Other Than for Cause or Permanent Disability. If,
during the Employment Period, the Company and Nicor Gas, as applicable, shall
terminate the Executive's employment other than for Cause or Permanent
Disability, or if the Executive shall terminate employment for Good Reason, the
Company's and Nicor Gas' obligations to the Executive shall be as set forth in
this Section 5.1. As a precondition to fulfilling such obligations, the Company
shall require the Executive to execute and deliver a release prepared by the
Company and providing for the Executive's release of any and all claims against
the Company and its Subsidiaries (and those acting on behalf of them) that may
have arisen on or before the date of the release, which release shall contain
such other reasonable and customary terms as are specified by the Company.
Notwithstanding any other provision of this section to the contrary, to the
extent any portion of such release is subject to the seven-day revocation period
prescribed by the Age Discrimination in Employment Act, as amended, or to any
similar revocation period in effect on the Termination Date, no payment shall be
due under this Section 5.1 until such revocation period has expired without such
revocation occurring.
5.1.1 The Company shall, within five business days of such
termination of employment, pay the Executive a cash payment equal to
the sum of the following amounts:
5.1.1.1 to the extent not previously paid, the
Annual Base Salary and any accrued paid time off through the
Termination Date;
5.1.1.2 an amount equal to the product of (i) the
Annual Incentive (as defined in Section 3.2.2) at target for
any Performance Period in which the Termination Date occurs
multiplied by (ii) a fraction, the numerator of which is the
number of days the Executive was actually employed by the
Company during such Performance Period, and the denominator of
which is the number of days in
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the Performance Period; or, if greater, the amount of any
Annual Incentive otherwise payable to the Executive with
respect to a Performance Period in which the Termination Date
occurs, which payment shall be in full settlement of Annual
Incentive amounts due with respect to any such Performance
Period; and
5.1.1.3 all amounts previously deferred by or
accrued to the benefit of the Executive under any nonqualified
deferred compensation plan sponsored by the Company
(including, without limitation, any vested amounts deferred
under incentive plans), together with any accrued earnings
thereon, and not yet paid by the Company; and
5.1.1.4 an amount equal to the product of (A) two
(2) multiplied by (B) the sum of (i) the Executive's Annual
Base Salary, and (ii) the Severance Incentive.
5.1.2 For purposes of each of the Executive's stock options
granted under the Company's Long Term Incentive Plan (the "LTIP"), any
successor plan, or otherwise, that is or becomes exercisable on the
Termination Date, the Executive's termination of employment shall be
disregarded, and each such option shall continue to be exercisable as
though the Executive's employment had continued through the last day on
which such option would be exercisable in the absence of such
employment termination (such earlier date being referred to herein as
the "Applicable Expiration Date"). This Section 5.1.2 shall be
applicable notwithstanding any term of any plan, arrangement, or
agreement providing for early expiration of the option because of the
Executive's termination of employment, except for an amendment adopted
in accordance with Section 11.7 of this Agreement and that by its
specific terms amends this Agreement.
5.1.3 On the Termination Date (i) the Executive shall
become fully vested in, and may thereupon and until the Applicable
Expiration Date of such stock incentive awards exercise in whole or in
part, any and all stock incentive awards granted to the Executive under
the LTIP, any successor plan or otherwise which have not become
exercisable as of the Termination Date; (ii) all performance units
previously awarded to the Executive shall become fully vested, and a
prorated calculation of the target value of all such units shall be
done as of the Termination Date and full payment of such prorated
target value shall be made by the Company within 30 days after the
Termination Date; and (iii) the Executive shall become fully vested at
the prorated target level in any other cash incentive awards granted
for the performance period in which the Termination Date occurs under
the LTIP, a successor plan or otherwise which have not, as of the
Termination Date, become fully vested.
5.1.4 All forfeiture conditions that as of the Termination
Date are applicable to any deferred stock unit, restricted stock or
restricted share units awarded to the Executive by the Company pursuant
to the LTIP, a successor plan or otherwise shall lapse
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immediately (to the extent such awards are outstanding immediately
prior to the Termination Date).
5.1.5 During the Severance Period (or until such later date
as any Welfare Plan of the Company may specify), the Company shall
continue to provide to the Executive and the Executive's family welfare
benefits (including, without limitation, medical, prescription, dental,
disability, individual life and group life insurance benefits) which
are at least as favorable as those provided under the most favorable
Welfare Plans of the Company applicable (i) with respect to the
Executive and his family during the 90-day period immediately preceding
the Termination Date, or (ii) with respect to other senior executives
and their families during the Severance Period. In determining benefits
under such Welfare Plans, the Executive's annual compensation
attributable to base salary and incentives for any plan year or
calendar year, as applicable, shall be deemed to be not less than the
Executive's Annual Base Salary and Target Annual Incentive. The cost of
the welfare benefits provided under this Section 5.1.5 shall not exceed
the cost of such benefits to the Executive immediately before the
Termination Date or, if less, the Effective Date. Notwithstanding the
foregoing, if the Executive obtains comparable coverage under any
Welfare Plans sponsored by another employer, then the amount of
coverage required to be provided by the Company hereunder shall be
reduced by the amount of coverage provided by such other employer's
Welfare Plans. The Executive's rights under this Section shall be in
addition to and not in lieu of any post-termination continuation
coverage or conversion rights the Executive may have pursuant to
applicable law, including, without limitation, continuation coverage
required by Section 4980B of the Code. For purposes of determining
eligibility for (but not the time of commencement of) retiree benefits
under any Welfare Plans of the Company, the Executive shall be
considered (i) to have remained employed until the last day of the
Severance Period and to have retired on the last day of such period,
and (ii) to have attained the age the Executive would have attained on
the last day of the Severance Period.
5.1.6 If the Executive participates in the Company's
nonqualified supplemental executive retirement plan ("SERP"), the
amount payable under subsection 5.1.1.4 of this Agreement shall be
taken into account for purposes of determining the amount of benefits
to which the Executive is entitled under the SERP; provided that such
amount shall be taken into account as though it was earned equally over
the Severance Period, and further provided that the Executive shall be
deemed to have attained the age he or she would have attained as of the
last day of the Severance Period, and completed the number of years of
service he or she would have completed as of the last day of the
Severance Period. The Severance Period shall be taken into account for
purposes of determining the amount of and eligibility to begin to
receive benefits under the SERP. If the Executive participates in the
Company's nonqualified Supplemental Senior Officer Retirement Plan
("SSORP"), on the Termination Date (i) the Executive shall become fully
vested in all contributions (and in any earnings applied to such
contributions) made by the Company on behalf of the Executive under the
SSORP or any successor plan, if applicable, and (ii) the Company shall
immediately make an additional contribution to the SSORP of an
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amount equal to the product of (x) the Annual Deferral Percentage (as
defined in the SSORP) used for the most recently completed SSORP Plan
Year, times (y) the amount payable under subsection 5.1.1.4 of this
Agreement.
5.1.7 On the Termination Date (i) the Executive shall
become fully vested in all contributions made by the Company on behalf
of the Executive under the Company's Savings Investment Plan (the
"SIP") or any supplemental or successor plan, if applicable, and (ii)
the Company shall immediately make an additional contribution to the
SIP (or, if such contribution is not permitted under the terms of the
SIP, to a non-qualified plan providing benefits comparable to the
benefits provided under the SIP) or any supplemental or successor plan,
if applicable, equal to the aggregate maximum matching contributions
which the Company would have made on behalf of the Executive to the SIP
or any supplemental or successor plan, if applicable, for the Severance
Period, calculated as if the amount payable under subsection 5.1.1.4 of
this Agreement had been earned equally over the Severance Period and
the Executive had made the maximum allowable voluntary contributions to
the SIP or any supplemental or successor plan, if applicable. In
addition, if the Executive is not eligible to participate in the
Company's defined benefit retirement plan, the Company shall also
contribute to the SIP or any supplemental or successor plan, if
applicable, on the Termination Date an amount equal to the aggregate
additional "retirement growth" contributions which the Company would
have made on behalf of the Executive for the Severance Period if the
amount payable under subsection 5.1.1.4 of this Agreement had been
earned equally over the Severance Period.
5.1.8 The Company shall, at its sole expense, as incurred,
pay on behalf of Executive all fees and costs charged by a nationally
recognized outplacement firm selected by the Company (subject to
approval by the Executive, which shall not be withheld unreasonably) to
provide outplacement service.
5.2 If by the Company and Nicor Gas for Cause. If the Company and
Nicor Gas, as applicable, terminates the Executive's employment for Cause during
the Employment Period, this Agreement shall terminate without further obligation
by the Company and Nicor Gas, as applicable, to the Executive, other than the
obligation immediately to pay the Executive in cash the Executive's Annual Base
Salary through the Termination Date, plus any accrued paid time off, in each
case to the extent not previously paid.
5.3 If by the Executive Other Than for Good Reason. If the
Executive terminates employment during the Employment Period other than for Good
Reason (including, but not by way of limitation, voluntary retirement other than
for Good Reason), and other than for Disability or death, this Agreement shall
terminate without further obligation by the Executive or by the Company, other
than the obligation of the Company immediately to pay the Executive in cash the
Executive's Annual Base Salary through the Termination Date, plus any accrued
paid time off, in each case to the extent not previously paid.
15
5.4 If by the Company and Nicor Gas, as applicable, for Permanent
Disability. If the Company and Nicor Gas, as applicable, and Nicor Gas, as
applicable, terminates the Executive's employment by reason of the Executive's
Permanent Disability during the Employment Period, this Agreement shall
terminate without further obligation to the Executive, other than:
5.4.1 the Company's obligation immediately to pay the
Executive in cash all amounts specified in Sections 5.1.1.1, 5.1.1.2
and 5.1.1.3, in each case, to the extent unpaid as of the Termination
Date (such amounts collectively, the "Accrued Obligations"), and
5.4.2 the Executive's right after the Permanent Disability
Effective Date to receive disability and other benefits at least equal
to the greater of (i) those provided under the most favorable
disability Plans applicable to disabled senior executives of the
Company in effect immediately before the Termination Date, or (ii)
those provided under the most favorable disability Plans of the Company
in effect at any time during the 90-day period immediately before the
Effective Date.
5.5 If upon Death. If the Executive's employment is terminated by
reason of the Executive's death during the Employment Period, this Agreement
shall terminate without further obligation to the Executive's legal
representatives under this Agreement, other than the obligation immediately to
pay the Executive's estate or beneficiary in cash all Accrued Obligations.
Notwithstanding anything in this Agreement to the contrary, the Executive's
family shall be entitled to receive benefits at least equal to the most
favorable benefits provided under Plans of the Company to the surviving families
of senior executives of the Company, but in no event shall such Plans provide
benefits which in each case are less favorable, in the aggregate, than the most
favorable of those provided by the Company to the Executive under such Plans in
effect at any time during the 90-day period immediately before the Effective
Date.
ARTICLE VI
CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY
6.1 Gross-up for Certain Taxes.
6.1.1 If it is determined by the Company's independent
auditors that any benefit received or deemed received by the Executive
from the Company pursuant to this Agreement or otherwise, whether or
not in connection with a Change in Control (such monetary or other
benefits collectively, the "Potential Parachute Payments") is or will
become subject to any excise tax under Section 4999 of the Code or any
similar tax payable under any United States federal, state, local or
other law (such excise tax and all such similar taxes collectively,
"Excise Taxes"), then the Company shall, subject to Sections 6.6 and
6.7, within five business days after such determination, pay the
Executive an amount (the "Gross-up Payment") equal to the product of:
(a) the amount of such Excise Taxes multiplied
by
16
(b) the Gross-up Multiple (as defined in Section
6.4). The Gross-up Payment is intended to
compensate the Executive for all Excise
Taxes payable by the Executive with respect
to the Potential Parachute Payments and any
federal, state, local or other income or
other taxes or Excise Taxes payable by the
Executive with respect to the Gross-up
Payment.
6.1.2 The determination of the Company's independent
auditors described in Section 6.1.1, including the detailed
calculations of the amounts of the Potential Parachute Payments, Excise
Taxes and Gross-Up Payment and the assumptions relating thereto, shall
be set forth in a written certificate of such auditors (the "Company
Certificate") delivered to the Executive. The Executive or the Company
may at any time request the preparation and delivery to the Executive
of a Company Certificate. The Company shall cause the Company
Certificate to be delivered to the Executive as soon as reasonably
possible after such request.
6.2 Determination by the Executive.
6.2.1 If (i) the Company shall fail to deliver a Company
Certificate to the Executive within 30 days after its receipt of his
written request therefor, or (ii) at any time after the Executive's
receipt of a Company Certificate, the Executive disputes either (x) the
amount of the Gross-Up Payment set forth therein, or (y) the
determination set forth therein to the effect that no Gross-Up Payment
is due (whether by reason of Section 6.7 or otherwise), then the
Executive may elect to require the Company to pay a Gross-Up Payment in
the amount determined by the Executive as set forth in an Executive
Counsel Opinion (as defined in Section 6.5). Any such demand by the
Executive shall be made by delivery to the Company of a written notice
which specifies the Gross-Up Payment determined by the Executive
(together with the detailed calculations of the amounts of Potential
Parachute Payments, Excise Taxes and Gross-Up Payment and the
assumptions relating thereto) and an Executive Counsel Opinion
regarding such Gross-Up Payment (such written notice and opinion
collectively, the "Executive's Determination"). Within 30 days after
delivery of an Executive's Determination to the Company, the Company
shall either (i) pay the Executive the Gross-Up Payment set forth in
Executive's Determination (less the portion thereof, if any, previously
paid to Executive by the Company) or (ii) deliver to the Executive a
Company Certificate and a Company Counsel Opinion (as defined in
Section 6.5), and pay the Executive the Gross-Up Payment specified in
such Company Certificate. If for any reason the Company fails to comply
with the preceding sentence, the Gross-Up Payment specified in the
Executive's Determination shall be controlling for all purposes.
6.2.2 If the Executive does not request a Company
Certificate, and the Company does not deliver a Company Certificate to
the Executive, then (i) the Company shall, for purposes of Section 6.7,
be deemed to have determined that no Gross-up Payment is due,
17
and (ii) the Executive shall not pay any Excise Taxes in respect of
Potential Parachute Payments, except in accordance with Sections 6.6.1
or 6.6.4.
6.3 Additional Gross-up Amounts. If for any reason it is later
determined (whether pursuant to the subsequently-enacted provisions of the Code,
final regulations or published rulings of the IRS, a final judgment of a court
of competent jurisdiction, a determination of the Company's independent auditors
set forth in a Company Certificate or, subject to the last two sentences of
Section 6.2.1, an Executive's Determination) that the amount of Excise Taxes
payable by the Executive is greater than the amount determined by the Company or
the Executive pursuant to Section 6.1 or 6.2, as applicable, then the Company
shall, subject to Sections 6.6 and 6.7, pay the Executive an amount (which shall
also be deemed a Gross-up Payment) equal to the product of:
(a) the sum of (1) such additional Excise Taxes and (2)
any interest, fines, penalties, expenses or other
costs incurred by the Executive as a result of having
taken a position in accordance with determination
made pursuant to Section 6.1 or 6.2, as applicable,
multiplied by
(b) the Gross-up Multiple.
6.4 Gross-up Multiple. The Gross-up Multiple shall equal a
fraction, the numerator of which is one (1.0), and the denominator of which is
one (1.0) minus the lesser of (i) the sum, expressed as a decimal fraction, of
the effective marginal tax rates of all federal, state, local and other income
and other taxes and any Excise Taxes applicable to the Gross-up Payment; or (ii)
0.80, it being intended that the Gross-up Multiple shall in no event exceed five
(5.0). (If different rates of tax are applicable to various portions of a
Gross-up Payment, the weighted average of such rates shall be used.)
6.5 Opinion of Counsel. "Executive Counsel Opinion" means an
opinion of nationally-recognized executive compensation counsel to the effect
(i) that the amount of the Gross-Up Payment determined by the Executive pursuant
to Section 6.2 is the amount that a court of competent jurisdiction, based on a
final judgment not subject to further appeal, is most likely to decide to have
been calculated in accordance with this Article and applicable law and (ii) if
the Company has previously delivered a Company Certificate to the Executive,
that there is no reasonable basis or no substantial authority for the
calculation of the Gross-Up Payment set forth in the Company Certificate.
"Company Counsel Opinion" means an opinion of nationally-recognized executive
compensation counsel to the effect that (i) the amount of the Gross-Up Payment
set forth in the Company Certificate is the amount that a court of competent
jurisdiction, based on a final judgment not subject to further appeal, is most
likely to decide to have been calculated in accordance with this Article and
applicable law and (ii) for purposes of Section 6662 of the Code, the Executive
has substantial authority to report on his federal income tax return the amount
of Excise Taxes set forth in the Company Certificate.
18
6.6 Amount Increased or Contested.
6.6.1 The Executive shall notify the Company in writing (an
"Executive's Notice") of any claim by the IRS or other taxing authority
(an "IRS Claim") that, if successful, would require the payment by the
Executive of Excise Taxes in respect of Potential Parachute Payments in
an amount in excess of the amount of such Excise Taxes determined in
accordance with Section 6.1 or 6.2, as applicable. Such Executive's
Notice shall include the nature and amount of such IRS Claim, the date
on which such IRS Claim is due to be paid (the "IRS Claim Deadline"),
and a copy of all notices and other documents or correspondence
received by the Executive in respect of such IRS Claim. The Executive
shall give the Executive's Notice as soon as practicable, but no later
than the earlier of (i) 10 business days after the Executive first
obtains actual knowledge of such IRS Claim or (ii) five business days
after the IRS Claim Deadline; provided, however, that the Executive's
failure to give such notice shall affect the Company's obligations
under this Article only to the extent that the Company is actually
prejudiced by such failure. If at least one business day before the IRS
Claim Deadline the Company shall:
6.6.1.1 deliver to the Executive a Company
Certificate to the effect that the IRS Claim has been reviewed
by the Company's independent auditors and, notwithstanding the
IRS Claim, the amount of Excise Taxes, interest and penalties
payable by the Executive is either zero or an amount less than
the amount specified in the IRS Claim,
6.6.1.2 pay to the Executive an amount (which shall
also be deemed a Gross-Up Payment) equal to the positive
difference between (x) the product of the amount of Excise
Taxes, interest and penalties specified in the Company
Certificate, if any, multiplied by the Gross-Up Multiple, and
(y) the portion of such product, if any, previously paid to
the Executive by the Company, and
6.6.1.3 direct the Executive pursuant to Section
6.6.4 to contest the balance of the IRS Claim, then the
Executive shall pay only the amount, if any, of Excise Taxes,
interest and penalties specified in the Company Certificate.
In no event shall the Executive pay an IRS Claim earlier than
30 days after having given an Executive's Notice to the
Company (or, if sooner, the IRS Claim Deadline).
6.6.2 At any time after the payment by the Executive of any
amount of Excise Taxes or related interest or penalties in respect of
Potential Parachute Payments (whether or not such amount was based upon
a Company Certificate or an Executive's Determination), the Company may
in its discretion require the Executive to pursue a claim for a refund
("Refund Claim") of all or any portion of such Excise Taxes, interest
or penalties as the Company may specify by written notice to the
Executive.
19
6.6.3 If the Company notifies the Executive in writing that
the Company desires the Executive to contest an IRS Claim or to pursue
a Refund Claim, the Executive shall:
6.6.3.1 give the Company all information that it
reasonably requests in writing from time to time relating to
such IRS Claim or Refund Claim, as applicable,
6.6.3.2 take such action in connection with such IRS
Claim or Refund Claim (as applicable) as the Company
reasonably requests in writing from time to time, including
accepting legal representation with respect thereto by an
attorney selected by the Company, subject to the approval of
the Executive (which approval shall not be unreasonably
withheld or delayed),
6.6.3.3 cooperate with the Company in good faith to
contest such IRS Claim or pursue such Refund Claim, as
applicable,
6.6.3.4 permit the Company to participate in any
proceedings relating to such IRS Claim or Refund Claim, as
applicable, and
6.6.3.5 contest such IRS Claim or prosecute such
Refund Claim (as applicable) to a determination before any
administrative tribunal, in a court of initial jurisdiction
and in one or more appellate courts, as the Company may from
time to time determine in its discretion.
The Company shall control all proceedings in connection with
such IRS Claim or Refund Claim (as applicable) and in its
discretion may cause the Executive to pursue or forego any and
all administrative appeals, proceedings, hearings and
conferences with the IRS or other taxing authority in respect
of such IRS Claim or Refund Claim (as applicable); provided
that (i) any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive
relating to the IRS Claim is limited solely to such IRS Claim,
(ii) the Company's control of the IRS Claim or Refund Claim
(as applicable) shall be limited to issues with respect to
which a Gross-Up Payment would be payable, and (iii) the
Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the IRS or other taxing
authority.
6.6.4 The Company may at any time in its discretion direct
the Executive to (i) contest the IRS Claim in any lawful manner or (ii)
pay the amount specified in an IRS Claim and pursue a Refund Claim;
provided, however, that if the Company directs the Executive to pay an
IRS Claim and pursue a Refund Claim, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and
shall indemnify the Executive, on an after-tax basis, for any income or
other applicable taxes or Excise Tax, and any related interest or
penalties imposed with respect to such advance.
20
6.6.5 The Company shall pay directly all legal, accounting
and other costs and expenses (including additional interest and
penalties) incurred by the Company or the Executive in connection with
any IRS Claim or Refund Claim, as applicable, and shall indemnify the
Executive, on an after-tax basis, for any income or other applicable
taxes, Excise Tax and related interest and penalties imposed on the
Executive as a result of such payment of costs and expenses.
6.7 Refunds. If, after the receipt by the Executive of any payment
or advance of Excise Taxes advanced by the Company pursuant to Section 6.6, the
Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 6.6)
promptly pay the Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section 6.6, a
determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such determination within 30 days after the
Company receives written notice of such determination, then such advance shall
be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-up Payment
required to be paid. Any contest of a denial of refund shall be controlled by
Section 6.6.
ARTICLE VII
EXPENSES AND INTEREST
7.1 Legal Fees and Other Expenses.
7.1.1 If the Executive incurs legal fees or other expenses
in an effort to secure, preserve, establish entitlement to, or obtain
benefits under this Agreement (including, without limitation, the fees
and other expenses of the Executive's legal counsel in connection with
the delivery of the Executive Counsel opinion referred to in Section
6.5), the Company shall, regardless of the outcome of such effort,
promptly reimburse the Executive on a current basis for such fees and
expenses following the Executive's written submission of a request for
reimbursement together with evidence that such fees and expenses were
incurred.
7.1.2 If the Executive does not prevail (after exhaustion
of all available judicial remedies) in respect of a claim by the
Executive or by the Company hereunder, and the Company establishes
before a court of competent jurisdiction, by clear and convincing
evidence, that the Executive had no reasonable basis for his claim
hereunder, or for his response to the Company's claim hereunder, and
acted in bad faith, no further reimbursement for legal fees and
expenses shall be due to the Executive in respect of such claim and the
Executive shall refund any amounts previously reimbursed hereunder with
respect to such claim.
21
7.2 Interest. If the Company and Nicor Gas, as applicable, does
not pay any amount due to the Executive under this Agreement within three days
after such amount became due and owing, interest shall accrue on such amount
from the date it became due and owing until the date of payment at an annual
rate equal to 200 basis points above the base commercial lending rate published
in The Wall Street Journal in effect from time to time during the period of such
nonpayment.
ARTICLE VIII
NO SET-OFF OR MITIGATION
8.1 No Set-off by Company. The Executive's right to receive when
due the payments and other benefits provided for under this Agreement is
absolute, unconditional and subject to no set-off, counterclaim or legal or
equitable defense. Any claim which the Company may have against the Executive,
whether for a breach of this Agreement or otherwise, shall be brought in a
separate action or proceeding and not as part of any action or proceeding
brought by the Executive to enforce any rights against the Company under this
Agreement.
8.2 No Mitigation. The Executive shall not have any duty to
mitigate the amounts payable by the Company and Nicor Gas, as applicable, under
this Agreement by seeking new employment following termination. Except as
specifically otherwise provided in this Agreement, all amounts payable pursuant
to this Agreement shall be paid without reduction regardless of any amounts of
salary, compensation or other amounts which may be paid or payable to the
Executive as the result of the Executive's employment by another employer.
ARTICLE IX
NON-EXCLUSIVITY OF RIGHTS
9.1 Waiver of Other Severance Rights. Except as may be otherwise
specifically provided in an amendment of this Section 9.1 adopted in accordance
with Section 11.7 of this Agreement, the Executive's rights under Section 5.1 of
this Agreement shall be in lieu of any benefits that may be otherwise payable to
or on behalf of the Executive pursuant to the terms of any severance pay
arrangement of the Company or any Subsidiary or any other, similar arrangement
of the Company or any Subsidiary providing benefits upon involuntary termination
of employment and shall also be in lieu of any benefits under the Nicor Inc.
Executive/Key Employee Severance Benefits Program (notwithstanding any provision
of that program to the contrary); provided, however, that this Section 9.1 shall
not affect the Executive's rights to receive any benefits with respect to a
termination of employment that occurs outside of the Employment Period.
9.2 Other Rights. Except as provided in Section 9.1, this
Agreement shall not prevent or limit the Executive's continuing or future
participation in any benefit, bonus, incentive or other plans provided by the
Company or any of its Subsidiaries and for which the Executive may qualify, nor
shall this Agreement limit or otherwise affect such rights as the Executive may
have under any other agreements with the Company or any of its Subsidiaries.
Amounts which are
22
vested benefits or which the Executive is otherwise entitled to receive under
any plan of the Company or any of its Subsidiaries and any other payment or
benefit required by law at or after the Termination Date shall be payable in
accordance with such Plan or applicable law except as expressly modified by this
Agreement.
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ARTICLE X
CONFIDENTIALITY
10.1 Confidentiality. The Executive acknowledges that it is the
policy of the Company and its Subsidiaries to maintain as secret and
confidential all valuable and unique information and techniques acquired,
developed or used by the Company and its Subsidiaries relating to their
business, operations, employees and customers, which gives the Company and its
Subsidiaries a competitive advantage in the transmission, distribution,
marketing, or sale of natural gas or in the energy services industry and other
businesses in which the Company and its Subsidiaries are engaged ("Confidential
Information"). The Executive recognizes that all such Confidential Information
is the sole and exclusive property of the Company and its Subsidiaries, and that
disclosure of Confidential Information would cause damage to the Company and its
Subsidiaries. The Executive agrees that, except as required by the duties of his
employment with the Company or its Subsidiaries and except in connection with
enforcing the Executive's rights under this Agreement or if compelled by a court
or governmental agency, he will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information obtained during
his employment with the Company or its Subsidiaries until such time as such
information has been disclosed publicly by the Company or one of its
Subsidiaries, or with its consent, or is otherwise a matter of public knowledge
(unless the Executive has reason to know that such information became a matter
of public knowledge through an unauthorized disclosure).
10.2 Remedy. The Executive and the Company specifically agree that,
in the event that the Executive shall breach his obligations under this Article
X, the Company and its Subsidiaries will suffer irreparable injury and shall be
entitled to injunctive relief therefor, and shall not be precluded from pursuing
any and all remedies it may have at law or in equity for breach of such
obligations; provided, however, that such breach shall not in any manner or
degree whatsoever limit, reduce or otherwise affect the obligations of the
Company or Nicor Gas, as applicable, under this Agreement, and in no event shall
an asserted breach of the Executive's obligations under this Article X
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 No Assignability. This Agreement is personal to the Executive
and without the prior written consent of the Company shall not be assignable by
the Executive otherwise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal representatives.
11.2 Successors. Before or upon the consummation of any Change in
Control, the Company shall obtain from each individual, group or entity, if any,
that becomes a successor of the Company by reason of the Change in Control, the
unconditional written agreement of such
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individual, group or entity to assume this Agreement and to perform all of the
obligations of the Company hereunder.
11.3 Payments to Beneficiary. If the Executive dies before
receiving amounts to which the Executive is entitled under this Agreement, such
amounts shall be paid in a lump sum to the beneficiary designated in writing by
the Executive, or if none is so designated, to the Executive's estate.
11.4 Nonalienation of Benefits. Benefits payable under this
Agreement shall not be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
levy of any kind, either voluntary or involuntary, before actually being
received by the Executive, and any such attempt to dispose of any right to
benefits payable under this Agreement shall be void.
11.5 Severability. If any one or more articles, sections or other
portions of this Agreement are declared by any court or governmental authority
to be unlawful or invalid, such unlawfulness or invalidity shall not serve to
invalidate any article, section or other portion not so declared to be unlawful
or invalid. Any article, section or other portion so declared to be unlawful or
invalid shall be construed so as to effectuate the terms of such article,
section or other portion to the fullest extent possible while remaining lawful
and valid.
11.6 Arbitration. Any and all disputes between the parties hereto
arising out of this Agreement (other than disputes related to Article VI or to
an alleged breach of the covenant contained in Article X) shall be settled by
arbitration before an impartial arbitrator pursuant to the rules and regulations
of the American Arbitration Association (AAA) pertaining to the arbitration of
commercial disputes. Either party may invoke the right to arbitration. The
arbitrator shall be selected by means of the parties striking alternatively from
a panel of seven arbitrators supplied by the Chicago office of AAA. The
Arbitrator shall have the authority to interpret and apply the provisions of
this Agreement, consistent with Section 11.10 below. The decision of the
arbitrator shall be final and binding upon the parties. Judgment may be entered
on the award in any court of competent jurisdiction. The arbitrator's fees and
expenses shall be borne by the Company.
11.7 Amendments. This Agreement shall not be altered, amended or
modified except by written instrument executed by the Company and the Executive.
11.8 Notices. All notices and other communications under this
Agreement shall be in writing and delivered by hand, by a nationally-recognized
commercial delivery service, or by first-class registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:
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If to the Executive:
Xxxx X. Xxxxxx, Xx.
0000 Xxxxx Xxxxx
Xxxxxxx, XX 00000
If to the Company:
Nicor Inc.
0000 Xxxxx Xxxx
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attn: Xxxxxxx X. Xxxxxxxxx
or to such other address as either party shall have furnished to the other in
writing. Notice and communications shall be effective when actually received by
the addressee.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
11.10 Governing Law. This Agreement is intended to be interpreted
and construed in accordance with the laws of the State of Illinois, without
regard to its choice of law principles.
11.11 Captions. The captions of this Agreement are not a part of the
provisions hereof and shall have no force or effect.
11.12 Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or plural shall include the
singular and the plural, and pronouns stated in either the masculine, the
feminine or the neuter gender shall include the masculine, feminine and neuter
genders.
11.13 Tax Withholding. The Company or Nicor Gas, as applicable, may
withhold from any amounts payable under this Agreement any federal, state or
local taxes that are required to be withheld pursuant to any applicable law or
regulation.
11.14 No Waiver. A waiver of any provision of this Agreement shall
not be deemed a waiver of any other provision, and any waiver of any default as
to any such provision shall not be deemed a waiver of any later default as to
that or any other provision.
11.15 Entire Agreement. This Agreement contains the entire
understanding of the Company, Nicor Gas and the Executive with respect to its
subject matter.
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IN WITNESS WHEREOF, the Executive and the Company have executed this
Agreement as of the date first above written.
/s/ XXXX X. XXXXXX, XX.
-----------------------------
Xxxx X. Xxxxxx, Xx.
Nicor Inc.
By: /s/ XXXXXX X. XXXXXX
-------------------------
Chairman and CEO
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