SEVERANCE AGREEMENT
Exhibit 10.2
THIS SEVERANCE AGREEMENT, dated September 4, 2007, is made by and between PIEDMONT NATURAL GAS
COMPANY, INC., a North Carolina corporation (the “Company”), and Xxxxxx X. Xxxxxx (the
“Executive”).
WHEREAS, the Company considers it essential to the best interests of its shareholders to
xxxxxx the continued employment of key management personnel; and
WHEREAS, the Board of the Company recognizes that, as is the case with many publicly held
corporations, the possibility of a Change in Control exists and that such possibility, and the
uncertainty and questions which it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company and its shareholders; and
WHEREAS, the Board has determined that appropriate steps should be taken to reinforce and
encourage the continued attention and dedication of members of the Company’s management, including
the Executive, to their assigned duties without distraction in the face of potentially disturbing
circumstances arising from the possibility of a Change in Control.
NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained,
the Company and the Executive hereby agree as follows:
1. Defined Terms. The definitions of capitalized terms used in this Agreement are
provided in the last Section hereof.
2. Term of Agreement. The Term of this Agreement shall commence on the date hereof
and shall continue in effect through December 31, 2007; provided, however, that commencing on
January 1, 2008 and each January 1 thereafter, the Term shall automatically be extended for one
additional year unless, not later than fifteen (15) months prior to the applicable January 1, the
Company or the Executive shall have given notice not to extend the Term; and further provided,
however, that if a Change in Control shall have occurred during the Term, the Term shall expire at
the end of the thirty-sixth (36th) calendar month after the calendar month in which such Change in
Control occurred. For example, if a Change in Control were to occur on July 1, 2008, the Term of
this Agreement would expire on July 31, 2011, and if a Change in Control were to occur on July 1,
2010, the Term of this Agreement would expire on August 31, 2013 (regardless of whether either
party had given notice before the Change in Control to the other party not to extend the Term as
provided above).
3. Company’s Covenants Summarized. In order to induce the Executive to remain in the
employ of the Company and in consideration of the Executive’s covenants set forth in Section 4
hereof, the Company agrees, under the conditions described herein, to pay the Executive the
Severance Payments and the other payments and benefits described herein. Except as provided in
Section 10.1 hereof, no Severance Payments shall be payable under this Agreement unless there shall
have been (or, under the terms of the second sentence of
Section 6.1 hereof, there shall be deemed to have been) a termination of the Executive’s employment
with the Company following a Change in Control and during the Term. This Agreement shall not be
construed as creating an express or implied contract of employment and, except as otherwise agreed
in writing between the Executive and the Company, the Executive shall not have any right to be
retained in the employ of the Company.
4. The Executive’s Covenants. The Executive agrees that, subject to the terms and
conditions of this Agreement, in the event of a Potential Change in Control during the Term, the
Executive will remain in the employ of the Company until the earliest of (i) a date which is twelve
(12) months from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive’s employment for Good
Reason or by reason of death, Disability or Retirement, or (iv) the termination by the Company of
the Executive’s employment for any reason. Should the Executive fail to comply with the provisions
of this Section 4, the Company’s sole remedy shall be to deny the payment of any Severance Payments
to the Executive.
5. Compensation Other Than Severance Payments.
5.1. Following a Change in Control and during the Term, during any period that the Executive
fails to perform the Executive’s full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the Executive’s full salary to the Executive at
the rate in effect at the commencement of any such period, together with all compensation and
benefits payable to the Executive under the terms of any compensation, benefit or incentive plan,
program or arrangement maintained by the Company during such period, until the Executive’s
employment is terminated by the Company for Disability.
5.2 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay the Executive’s full salary to the Executive
through the Date of Termination at the rate in effect immediately prior to the Date of Termination
or, if higher, the rate in effect immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, together with all compensation and benefits payable to the
Executive through the Date of Termination under the terms of the Company’s executive compensation,
benefit and incentive plans, programs or arrangements as in effect immediately prior to the Date of
Termination or, if more favorable to the Executive, as in effect immediately prior to the first
occurrence of an event or circumstance constituting Good Reason.
5.3 If the Executive’s employment shall be terminated for any reason following a Change in
Control and during the Term, the Company shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become due, including in a lump sum in
cash that portion of the Executive’s vacation pay vested and accrued but not paid. Such
post-termination compensation and benefits shall be determined under, and paid in accordance with,
the Company’s long-term incentive stock plan, pension, supplemental retirement, insurance and other
executive compensation, benefit or incentive plans, programs and arrangements as in effect
immediately prior to the Date of Termination or, if more favorable to
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the Executive, as in effect immediately prior to the occurrence of the first event or
circumstance constituting Good Reason.
6. Severance Payments.
6.1 Subject to Section 6.2 hereof, upon the Executive’s Date of Termination following a Change
in Control and during the Term, other than (A) by the Company for Cause, (B) by reason of the
Executive’s death or Disability, or (C) by the Executive without Good Reason (including Retirement
by the Executive), then the Company shall pay the Executive the amounts, and provide the Executive
the benefits, described in this Section 6.1 (“Severance Payments”), in addition to any payments and
benefits to which the Executive is entitled under Section 5 hereof. For purposes of this
Agreement, the Executive’s employment shall be deemed to have been terminated following a Change in
Control by the Company without Cause or by the Executive with Good Reason, if (i) the Executive’s
employment is terminated by the Company without Cause prior to a Change in Control (whether or not
a Change in Control ever occurs) and such termination was at the request or direction of a Person
who has entered into an agreement with the Company the consummation of which would constitute a
Change in Control, (ii) the Executive terminates his employment for Good Reason prior to a Change
in Control (whether or not a Change in Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such Person, or (iii) the Executive’s
employment is terminated by the Company without Cause or by the Executive for Good Reason and such
termination or the circumstance or event which constitutes Good Reason is otherwise in connection
with or in anticipation of a Change in Control (whether or not a Change in Control ever occurs).
For purposes of any determination regarding the applicability of the immediately preceding
sentence, any position taken by the Executive shall be presumed to be correct unless the Company
establishes by clear and convincing evidence that such position is not correct.
(A) In lieu of any further salary payments to the Executive for periods subsequent to the Date
of Termination and in lieu of any severance benefit otherwise payable to the Executive, the Company
shall pay to the Executive a lump sum severance payment, in cash, equal to 3.00 times the sum of
(i) the Executive’s annual base salary as in effect immediately prior to the Date of Termination
or, if higher, in effect immediately prior to the first occurrence of an event or circumstance
constituting Good Reason and (ii) the Executive’s target annual bonus (MVP and STI) immediately
prior to the Date of termination or, if higher, the Executive’s target annual bonus immediately
prior to the first occurrence of an event or circumstance constituting Good Reason.
(B) For the 36-month period immediately following the Date of Termination, the Company shall
arrange to provide the Executive and his dependents life, disability, accident and health insurance
benefits substantially similar to those provided to the Executive and his dependents immediately
prior to the Date of Termination or, if more favorable to the Executive, those provided to the
Executive and his dependents immediately prior to the first occurrence of an event or circumstance
constituting Good Reason, at no greater cost to the Executive than the cost to the Executive
immediately prior to such date or occurrence; provided, however, that, unless the Executive
consents to a different method (after taking into account the effect of such method on the
calculation of “parachute payments” pursuant to Section 6.2
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hereof), such health insurance benefits shall be provided through a third-party insurer.
Benefits otherwise receivable by the Executive pursuant to this Section 6.1(B) shall be reduced to
the extent benefits of the same type are received by or made available to the Executive during the
36-month period following the Executive’s termination of employment (and any such benefits received
by or made available to the Executive shall be reported to the Company by the Executive); provided,
however, that the Company shall reimburse the Executive for the excess, if any, of the cost of such
benefits to the Executive over such cost immediately prior to the Date of Termination or, if more
favorable to the Executive, the first occurrence of an event or circumstance constituting Good
Reason. If the Severance Payments shall be reduced pursuant to Section 6.2 hereof, and the Section
6.1(B) benefits which remain payable after the application of Section 6.2 hereof are thereafter
reduced pursuant to the immediately preceding sentence, the Company shall, no later than five (5)
business days following such reduction, pay to the Executive the lesser of (a) the amount of the
reduction made in the Severance Payments pursuant to Section 6.2 hereof, or (b) the amount of the
subsequent reduction in the Section 6.1(B) benefits made pursuant to the immediately preceding
sentence.
6.2 (A) Notwithstanding any other provisions of this Agreement, in the event that any payment
or benefit received or to be received by the Executive in connection with a Change in Control or
the termination of the Executive’s employment (whether pursuant to the terms of this Agreement or
any other plan, arrangement or agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such Person) (all such payments and
benefits, including the Severance Payments, being hereinafter called “Total Payments”) would not be
deductible (in whole or part), by the Company, an affiliate or Person making such payment or
providing such benefit as a result of section 280G of the Code, then the Total Payments shall be
reduced if, and only if, such reduction results in the Executive’s receipt, on an after-tax basis,
of a greater amount of the Total Payments after taking into account all applicable federal, state
and local employment taxes, income taxes and the Excise Tax (all computed at the highest applicable
marginal rate). Any reduction in the Total Payments required by this Section 6.2(A) shall first
reduce the cash Severance Payments (if necessary, to zero), and all other Severance Payments shall
thereafter be reduced (if necessary, to zero); provided, however, that the Executive may elect to
have the noncash Severance Payments reduced (or eliminated) prior to any reduction of the cash
Severance Payments.
(B) For purposes of this Section 6.2, (i) no portion of the Total Payments the receipt or
enjoyment of which the Executive shall have waived at such time and in such manner as not to
constitute a “payment” within the meaning of section 280G(b) of the Code shall be taken into
account, (ii) no portion of the Total Payments shall be taken into account which, in the opinion of
tax counsel (“Tax Counsel”) reasonably acceptable to the Executive and selected by the accounting
firm which was, immediately prior to the Change in Control, the Company’s independent auditor (the
“Auditor”), does not constitute a “parachute payment” within the meaning of section 280G(b)(2) of
the Code, including by reason of section 280G(b)(4)(A) of the Code, and (iii) the value of any
noncash benefit or any deferred payment or benefit included in the Total Payments shall be
determined by the Auditor in accordance with the principles of sections 280G(d)(3) and (4) of the
Code.
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6.3 The payments provided in Section 6.1(A) hereof shall be made not later than the fifth day
following the Date of Termination; provided, however, that if the amounts of such payments, and any
reduction in such payments required by Section 6.2 hereof, cannot be finally determined on or
before such day, the Company shall pay to the Executive on such day an estimate, as determined in
good faith by the Company of the minimum amount of such payments to which the Executive is clearly
entitled and shall pay the remainder of such payments (together with interest on the unpaid
remainder (or on all such payments to the extent the Company fails to make such payments when due)
at 120% of the rate provided in section 1274(b)(2)(B) of the Code) as soon as the amount thereof
can be determined but in no event later than the thirtieth (30th) day after the Date of
Termination. In the event that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section 1274(b)(2)(B) of the Code). At the time that
payments are made under this Agreement, the Company shall provide the Executive with a written
statement setting forth the manner in which such payments were calculated and the basis for such
calculations including, without limitation, any opinions or other advice the Company has received
from Tax Counsel, the Auditor or other advisors or consultants (and any such opinions or advice
which are in writing shall be attached to the statement).
7. Termination Procedures and Compensation During Dispute.
7.1 Notice of Termination. After a Change in Control and during the Term, any
purported termination of the Executive’s employment (other than by reason of death) shall be
communicated by written Notice of Termination from one party hereto to the other party hereto in
accordance with Section 11 hereof. For purposes of this Agreement, a “Notice of Termination” shall
mean a notice which shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated. Further, a Notice of
Termination for Cause is required to include a copy of a resolution duly adopted by the affirmative
vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of
the Board that was called and held for the purpose of considering such termination (after
reasonable notice to the Executive and an opportunity for the Executive, together with the
Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the
Board, the Executive was guilty of conduct set forth in clause (i) or (ii) of the definition of
Cause herein, and specifying the particulars thereof in detail.
7.2 Date of Termination. “Date of Termination” with respect to any purported
termination of the Executive’s employment after a Change in Control and during the Term, shall mean
(i) if the Executive separates from service for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the full-time
performance of the Executive’s duties during such thirty (30) day period), and (ii) if the
Executive separates from service for any other reason, the date specified in the Notice of
Termination (which, in the case of a termination by the Company, shall not be less than thirty (30)
days (except in the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively,
from the date such Notice of Termination is given).
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7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of
Termination is given, or, if later, prior to the Date of Termination (as determined without regard
to this Section 7.3), the party receiving such Notice of Termination notifies the other party that
a dispute exists concerning the termination, the Date of Termination shall be extended until the
earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally
resolved, either by mutual written agreement of the parties or by a final judgment, order or decree
of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been perfected); provided,
however, that the Date of Termination shall be extended by a notice of dispute given by the
Executive only if such notice is given in good faith and the Executive pursues the resolution of
such dispute with reasonable diligence.
7.4 Compensation During Dispute. If a purported termination occurs following a Change
in Control and during the Term and the Date of Termination is extended in accordance with Section
7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when
the notice giving rise to the dispute was given (including, but not limited to, salary) and
continue the Executive as a participant in all compensation, benefit and insurance plans in which
the Executive was participating when the notice giving rise to the dispute was given, until the
Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this
Section 7.4 are in addition to all other amounts due under this Agreement (other than those due
under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to
the contrary, if any amount or benefit that the Company determines would constitute non-exempt
“deferred compensation” for purposes of section 409A of the Code would otherwise be payable or
distributable under this Agreement by reason of the Executive’s separation from service during a
period in which the Executive is a Specified Employee, then to the extent necessary to comply with
Code Section 409A: (i) if the payment or distribution is payable in a lump sum, the Executive’s
right to receive payment or distribution of such non-exempt deferred compensation will be delayed
until the earlier of the Executive’s death or the first day of the seventh month following the
Executive’s separation from service, and (ii) if the payment, distribution or benefit is payable or
provided over time, the amount of such non-exempt deferred compensation or benefit that would
otherwise be payable or provided during the six-month period immediately following the Executive’s
separation from service will be accumulated, and the Executive’s right to receive payment or
distribution of such accumulated amount or benefit will be delayed until the earlier of the
Executive’s death or the first day of the seventh month following the Executive’s separation from
service and paid or provided on the earlier of such dates, without interest, and the normal payment
or distribution schedule for any remaining payments, distributions or benefits will commence.
9. No Mitigation. The Company agrees that, if the Executive’s employment with the
Company terminates during the Term, the Executive is not required to seek other employment or to
attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to
Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit provided for
in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by any
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compensation earned by the Executive as the result of employment by another employer, by
retirement benefits, by offset against any amount claimed to be owed by the Executive to the
Company, or otherwise.
10. Successors; Binding Agreement.
10.1 In addition to any obligations imposed by law upon any successor to the Company, the
Company will require any successor (whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/or assets of the Company to expressly
assume and agree to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of any such succession
shall be a breach of this Agreement and shall entitle the Executive to compensation from the
Company in the same amount and on the same terms as the Executive would be entitled to hereunder if
the Executive were to terminate the Executive’s employment for Good Reason after a Change in
Control, except that, for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination.
10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s
personal or legal representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees. If the Executive shall die while any amount would still be payable to the
Executive hereunder (other than amounts which, by their terms, terminate upon the death of the
Executive) if the Executive had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the executors, personal
representatives or administrators of the Executive’s estate.
11. Notices. For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have been duly given when
delivered or mailed by United States registered mail, return receipt requested, postage prepaid,
addressed, if to the Executive, to the address inserted below the Executive’s signature on the
final page hereof and, if to the Company, to the address set forth below, or to such other address
as either party may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon actual receipt:
To the Company:
Piedmont Natural Gas Company, Inc.
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
X.X. Xxx 00000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Vice President and General Counsel
12. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing and signed by the
Executive and such officer as may be specifically designated by the Board. No waiver by
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either party hereto at any time of any breach by the other party hereto of, or of any lack of
compliance with, any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. This Agreement supersedes any other agreements or representations, oral
or otherwise, express or implied, with respect to the subject matter hereof which have been made by
either party (including, without limitation, that certain Severance Agreement between the Executive
and the Company dated December 1, 1999); provided, however, that this Agreement shall supersede any
agreement setting forth the terms and conditions of the Executive’s employment with the Company
only in the event that the Executive’s employment with the Company is terminated on or following a
Change in Control (i) by the Company other than for Cause or (ii) by the Executive for Good Reason.
The validity, interpretation, construction and performance of this Agreement shall be governed by
the laws of the State of North Carolina. All references to sections of the Exchange Act or the
Code shall be deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required under federal,
state or local law and any additional withholding to which the Executive has agreed. The
obligations of the Company and the Executive under this Agreement which by their nature may require
either partial or total performance after the expiration of the Term (including, without
limitation, those under Sections 6 and 7 hereof) shall survive such expiration.
13. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, which
shall remain in full force and effect.
14. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
instrument.
15. Settlement of Disputes; Arbitration.
15.1 All claims by the Executive for benefits under this Agreement shall be directed to and
determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall set forth the
specific reasons for the denial and the specific provisions of this Agreement relied upon. The
Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of the Board within
sixty (60) days after notification by the Board that the Executive’s claim has been denied.
15.2 Any further dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in Charlotte, North Carolina in accordance with the
rules of the American Arbitration Association then in effect; provided, however, that the
evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the
arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this
Agreement to the contrary, the Executive shall be entitled to seek specific performance of the
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Executive’s right to be paid until the Date of Termination during the pendency of any dispute
or controversy arising under or in connection with this Agreement.
16. Definitions. For purposes of this Agreement, the following terms shall have the
meanings indicated below:
(A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.
(B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.
(C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.
(D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.
(E) “Board” shall mean the Board of Directors of the Company.
(F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the
willful and continued failure by the Executive to substantially perform the Executive’s duties with
the Company (other than any such failure resulting from the Executive’s incapacity due to physical
or mental illness or any such actual or anticipated failure after the issuance of a Notice of
Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) which failure shall
continue unabated for thirty (30) days after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies the manner in which
the Board believes that the Executive has not substantially performed the Executive’s duties, or
(ii) the willful engaging by the Executive in conduct which is demonstrably and materially
injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i)
and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed
“willful” unless done, or omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive’s act, or failure to act, was in the best interest of the
Company and (y) in the event of a dispute concerning the application of this provision, no claim by
the Company that Cause exists shall be given effect unless the Company establishes by clear and
convincing evidence that Cause exists.
(G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one
of the following paragraphs shall have occurred:
(I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of
the Company (not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 20% or more of the combined
voting power of the Company’s then outstanding securities, excluding any Person who becomes such a
Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below;
or
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(II) the following individuals cease for any reason to constitute a majority of the number of
directors then serving: individuals who, on the date hereof, constitute the Board and any new
director (other than a director whose initial assumption of office is in connection with an actual
or threatened election contest, including but not limited to a consent solicitation, relating to
the election of directors of the Company) whose appointment or election by the Board or nomination
for election by the Company’s shareholders was approved or recommended by a vote of at least
two-thirds (2/3) of the directors then still in office who either were directors on the date hereof
or whose appointment, election or nomination for election was previously so approved or
recommended; or
(III) there is consummated a merger or consolidation of the Company or any direct or indirect
subsidiary of the Company with any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding immediately prior to such
merger or consolidation continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity or any parent thereof), in combination
with the ownership of any trustee or other fiduciary holding securities under an employee benefit
plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of
the securities of the Company or such surviving entity or any parent thereof outstanding
immediately after such merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of the Company (or similar transaction) in which no Person is or
becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including
in the securities Beneficially owned by such Person any securities acquired directly from the
Company or its Affiliates other than in connection with the acquisition by the Company or its
Affiliates of a business) representing 20% or more of the combined voting power of the Company’s
then outstanding securities; or
(IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of
the Company or there is consummated an agreement for the sale or disposition by the Company of all
or substantially all of the Company’s assets, other than a sale or disposition by the Company of
all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting
power of the voting securities of which are owned by shareholders of the Company in substantially
the same proportions as their ownership of the Company immediately prior to such sale.
(H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
(I) “Company” shall mean Piedmont Natural Gas Company, Inc. and, except in determining under
Section 16(G) hereof whether or not any Change in Control of the Company has occurred, shall
include any successor to its business and/or assets which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(J) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.
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(K) “Disability” shall be deemed the reason for the termination by the Company of the
Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental
illness, the Executive shall have been absent from the full-time performance of the Executive’s
duties with the Company for a period of six (6) consecutive months, the Company shall have given
the Executive a Notice of Termination for Disability, and, within thirty (30) days after such
Notice of Termination is given, the Executive shall not have returned to the full-time performance
of the Executive’s duties.
(L) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to
time.
(M) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code.
(N) “Executive” shall mean the individual named in the first paragraph of this Agreement.
(O) “Good Reason” for termination by the Executive of the Executive’s employment shall mean
the occurrence (without the Executive’s express written consent) after any Change in Control, or
prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the
second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII)
below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the
following acts by the Company, or failures by the Company to act, unless, in the case of any act or
failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of Termination given in respect
thereof:
(I) the assignment to the Executive of any duties inconsistent with the Executive’s status as
a senior executive officer of the Company, a change in the Executive’s reporting responsibilities,
titles or offices, or a substantial adverse alteration in the nature or status of the Executive’s
responsibilities from those in effect immediately prior to the Change in Control other than any
such alteration primarily attributable to the fact that the Company may no longer be a public
company;
(II) a reduction by the Company in the Executive’s annual base salary as in effect on the date
hereof or as the same may be increased from time to time except for across-the-board salary
reductions (not to exceed 10%) similarly affecting all senior executives of the Company and all
senior executives of any Person in control of the Company including the Chief Executive Officer;
(III) the relocation of the principal executive offices to a location more than 35 miles from
the Company’s principal executive offices immediately prior to the Change in Control or the
Company’s requiring the Executive to be based anywhere other than the location of the Company’s
executive offices except for required travel on the Company’s business to an extent substantially
consistent with the Executive’s present business travel obligations;
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(IV) the failure by the Company to pay to the Executive any portion of the Executive’s current
compensation or benefits except pursuant to an across-the-board compensation or benefit deferral
(not to exceed 10%) similarly affecting all senior executives of the Company and all senior
executives of any Person in control of the Company including the Chief Executive Officer, or to pay
to the Executive any portion of an installment of deferred compensation under any deferred
compensation program of the Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any compensation plan in which the
Executive participates immediately prior to the Change in Control which is material to the
Executive’s total compensation, including but not limited to the Company’s long-term incentive
plans or any substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to
such plan, or the failure by the Company to continue the Executive’s participation therein (or in
such substitute or alternative plan) on a basis not less favorable, both in terms of the amount or
timing of payment of benefits provided and the level of the Executive’s participation relative to
other participants, as existed immediately prior to the Change in Control;
(VI) the failure by the Company to continue to provide the Executive with benefits
substantially similar to those enjoyed by the Executive under any of the Company’s pension,
supplement retirement, savings, life insurance, supplemental life insurance, medical, health and
accident, or disability plans in which the Executive was participating immediately prior to the
Change in Control (except for across-the-board changes similarly affecting all senior executives of
the Company and all senior executives of any Person in control of the Company, including the Chief
Executive Officer, not to exceed 10%), the taking of any other action by the Company which would
directly or indirectly materially reduce any of such benefits or deprive the Executive of any
material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the
failure by the Company to provide the Executive with the number of paid vacation days to which the
Executive is entitled either by prior written agreements or on the basis of years of service with
the Company in accordance with the Company’s normal vacation policy in effect at the time of the
Change in Control; or
(VII) any purported termination of the Executive’s employment which is not effected pursuant
to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this
Agreement, no such purported termination shall be effective.
The Executive’s right to terminate the Executive’s employment for Good Reason shall not be
affected by the Executive’s incapacity due to physical or mental illness. The Executive’s
continued employment shall not constitute consent to, or a waiver of rights with respect to, any
act or failure to act constituting Good Reason hereunder.
For purposes of any determination regarding the existence of Good Reason, any claim by the
Executive that Good Reason exists shall be presumed to be correct unless the Company establishes by
clear and convincing evidence that Good Reason does not exist.
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(P) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.
(Q) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified
and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the
Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily
holding securities pursuant to an offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the same proportions as
their ownership of stock of the Company.
(R) “Potential Change in Control” shall be deemed to have occurred if the event set forth in
any one of the following paragraphs shall have occurred:
(I) the Company enters into an agreement, the consummation of which would result in the
occurrence of a Change in Control;
(II) the Company or any Person publicly announces an intention to take or to consider taking
actions which, if consummated, would constitute a Change in Control;
(III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the
Company representing 15% or more of either the then outstanding shares of common stock of the
Company or the combined voting power of the Company’s then outstanding securities (not including in
the securities beneficially owned by such Person any securities acquired directly from the Company
or its affiliates); or
(IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control has occurred.
(S) “Retirement” shall be deemed the reason for the termination by the Executive of the
Executive’s employment if such employment is terminated voluntarily by the Executive in accordance
with the Company’s retirement policy, including early retirement, generally applicable to its
salaried employees.
(T) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.
(U) “Specified Employee” shall have the meaning given such term in Code Section 409A and the
final regulations thereunder.
(V) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.
(W) “Term” shall mean the period of time described in Section 2 hereof (including any
extension, continuation or termination described therein).
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(X) “Total Payments” shall mean those payments so described in Section 6.2 hereof.
| PIEDMONT NATURAL GAS COMPANY, INC. |
||||
| By: | /s/ Xxxxxxx X. Xxxxxxx III | |||
| Xxxxxxx X. Xxxxxxx III | ||||
| Board of Directors | ||||
| /s/ Xxxxxx X. Xxxxxx | ||||
| Xxxxxx X. Xxxxxx | ||||
| 0000 Xxxxxxxxx Xxxx Xxxxxxxxx, XX 00000 |
||||
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