Exhibit 10.1
CHANGE IN CONTROL AND TERMINATION AGREEMENT
NiSource Inc., a Delaware corporation ("Employer"), which as used herein
shall mean NiSource Inc. and all of its Affiliates, and Xxxxxx X. Xxxxxx, Xx.
("Executive") hereby enter into a Change in Control and Termination Agreement as
of August 17, 2004 ("Agreement"), which is hereinafter set forth.
WITNESSETH:
WHEREAS, Employer desires to provide security to Executive in connection
with Executive's employment with Employer in the event of a Change in Control;
and
WHEREAS, Executive and Employer desire to enter into this Agreement
pertaining to the terms of the security Employer is providing to Executive with
respect to his employment in the event of a Change in Control;
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:
1. Term. The term of this Agreement shall be the period beginning on the
date hereof and terminating on the date 36 months after such date (the "Term"),
provided that for each day from and after the date hereof the Term will
automatically be extended for an additional day, unless either Employer or
Executive has given written notice to the other party of its or his election to
cease such automatic extension, in which case the Term shall be the 36-month
period beginning on the date such notice is received by such other party.
2. Definitions. For purposes of this Agreement:
(a) "Affiliate" or "Associate" shall have the meaning set forth in
Rule 12b-2 under the Securities Exchange Act of 1934.
(b) "Base Salary" shall mean Executive's monthly base salary at the
rate in effect on the date of a reduction for purposes of paragraph (g) of
this Section, or on the date of a termination of employment under
circumstances described in subsections 3(a) or (b) below, whichever is
higher; provided, however, that such rate shall in no event be less than
the highest rate in effect for Executive at any time during the Term.
(c) "Beneficiary" shall mean the person or entity designated by
Executive, by written instrument delivered to Employer, to receive the
benefits payable under this Agreement in the event of his death. If
Executive fails to designate a Beneficiary, or if no Beneficiary survives
Executive, such death benefits shall be paid:
(i) to his surviving spouse; or
(ii) if there is no surviving spouse, to his living
descendants per stirpes; or
(iii) if there is neither a surviving spouse nor descendants,
to his duly appointed and qualified executor or personal
representative.
(d) "Bonus" shall mean Executive's target annual incentive bonus
compensation for the calendar year in which the date of a termination of
employment under circumstances described in
2
subsection 3(a) below occurs, under the incentive bonus compensation plan
then maintained by Employer; provided, however, that such target annual
incentive bonus compensation shall in no event be less than the highest
target annual incentive bonus compensation of Executive under any such
incentive bonus compensation plan for any calendar year commencing during
the Term.
(e) A "Change in Control" shall be deemed to take place on the
occurrence of any of the following events:
(i) The acquisition by an entity, person or group (including
all Affiliates or Associates of such entity, person or group) of
beneficial ownership, as that term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934, of capital stock of NiSource
Inc. entitled to exercise more than 30% of the outstanding voting
power of all capital stock of NiSource Inc. entitled to vote in
elections of directors ("Voting Power");
(ii) The effective time of (1) a merger or consolidation of
NiSource Inc. with one or more other corporations as a result of
which the holders of the outstanding Voting Power of NiSource Inc.
immediately prior to such merger or consolidation (other than the
surviving or resulting corporation or any Affiliate or Associate
thereof) hold less than 50% of the Voting Power of the surviving or
resulting corporation, or (2) a transfer of 30% of the Voting Power,
or a Substantial Portion of the Property, of NiSource Inc. other
than
3
to an entity of which NiSource Inc. owns at least 50% of the Voting
Power; or
(iii) The election to the Board of Directors of NiSource Inc.
of candidates who were not recommended for election by the Board of
Directors of NiSource Inc. in office immediately prior to the
election, if such candidates constitute a majority of those elected
in that particular election.
Notwithstanding the foregoing, a Change in Control shall not be deemed to take
place by virtue of any transaction in which Executive is a participant in a
group effecting an acquisition of NiSource Inc. and, after such acquisition,
Executive holds an equity interest in the entity that has acquired NiSource Inc.
(f) "Good Cause" shall be deemed to exist if, and only if:
(i) Executive engages in acts or omissions constituting
dishonesty, intentional breach of fiduciary obligation or
intentional wrongdoing or malfeasance, in each case that results in
substantial harm to Employer; or
(ii) Executive is convicted of a criminal violation involving
fraud or dishonesty.
(g) "Good Reason" shall be deemed to exist if, and only if:
(i) there is a significant change in the nature or the scope
of Executive's authorities or duties;
(ii) there is a significant reduction in Executive's monthly
rate of Base Salary, his opportunity to earn a bonus under an
4
incentive bonus compensation plan maintained by Employer or his
benefits; or
(iii) Employer changes by 100 miles or more the principal
location in which Executive is required to perform services.
(h) "Pension Plan" shall mean any Retirement Plan that is a defined
benefit plan as defined in Section 3(35) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA").
(i) "Retirement Plan" shall mean any qualified or supplemental
employee pension benefit plan, as defined in Section 3(2) of ERISA,
currently or hereinafter made available by Employer in which Executive is
eligible to participate.
(j) "Severance Period" shall mean the period beginning on the date
Executive's employment with Employer terminates under circumstances
described in subsection 3(a) and ending on the date 36 months thereafter.
(k) "Substantial Portion of the Property of NiSource Inc." shall
mean 50% of the aggregate book value of the assets of NiSource Inc. and
its Affiliates and Associates as set forth on the most recent balance
sheet of NiSource Inc. prepared on a consolidated basis, by its regularly
employed, independent, certified public accountants.
(l) "Welfare Plan" shall mean any health and dental plan, disability
plan, survivor income plan or life insurance plan, as defined in
5
Section 3(1) of ERISA, currently or hereafter made available by Employer
in which Executive is eligible to participate.
3. Benefits Upon Termination of Employment.
(a) The following provisions will apply if a Change in Control
occurs during the Term, and (1) at any time during the 24 months after the
Change in Control occurs (whether during or after the expiration of the
Term), the employment of Executive with Employer is terminated by Employer
for any reason other than Good Cause, or Executive terminates his
employment with Employer for Good Reason, or (2) at any time during the
thirteenth month after the Change in Control occurs (whether during or
after the expiration of the Term), Executive terminates his employment
with Employer for any reason:
(i) Employer shall pay Executive an amount equal to 36 times
the sum of (1) Executive's Base Salary plus (2) one-twelfth of his
Bonus. Such amount shall be paid to Executive in a lump sum within
180 days after his date of termination of employment; provided,
however, Executive, by written notice to Employer, may elect to
receive such payment on any date that is no earlier than the later
to occur of (1) the date 10 days after the date of termination, and
(2) the date 10 days after receipt of such notice.
(ii) Employer shall pay Executive an amount equal to the pro
rata portion of Executive's target annual incentive bonus
compensation for the calendar year in which the date of termination
6
of employment occurs, under the incentive bonus compensation plan
then maintained by Employer, that is applicable to the period
commencing on the first day of such calendar year and ending on the
date of termination. Such amount shall be paid to Executive in a
lump sum within 180 days after his date of termination of
employment; provided, however, Executive, by written notice to
Employer, may elect to receive such payment on any date that is no
earlier than the later to occur of (1) the date 10 days after the
date of termination, and (2) the date 10 days after receipt of such
notice.
(iii) Executive shall receive any and all benefits accrued
under any Retirement Plan, Welfare Plan or other plan or program in
which he participates at the date of termination of employment, to
the date of termination of employment, the amount, form and time of
payment of such benefits to be determined by the terms of such
Retirement Plan, Welfare Plan and other plan or program, and
Executive's employment shall be deemed to have terminated by reason
of retirement, and without regard to vesting limitations in all such
Plans and other plans or programs not subject to the qualification
requirements of Section 401(a) of the Internal Revenue Code of 1986
as amended ("Code"), under circumstances that have the most
favorable result for Executive thereunder for all purposes of such
Plans and other plans or programs. Payment
7
shall be made at the earliest date permitted under any such Plan or
other plan or program that is not funded with a trust agreement.
(iv) (1) Employer shall pay to Executive a monthly
Supplemental Pension Benefit in an amount equal to the amount
determined pursuant to clause (A) below less the amount
determined pursuant to clause (B) below:
(A) the aggregate monthly amount of the pension
benefit ("Pension") that would have been payable to
Executive under all Pension Plans if that Pension were
computed (1) by treating the Severance Period as service
for all purposes of the Pension Plans and (2) by
considering his compensation during the Severance Period
to be his Base Salary and one-twelfth of his Bonus for
all purposes of the Pension Plans;
(B) the aggregate monthly amount of any Pension
actually paid to Executive under all Pension Plans.
(2) The Supplemental Pension Benefit payable to
Executive hereunder shall be paid (i) commencing at the later
to occur of the last day of the Severance Period or the date
payment of his Pension commences under the Pension
8
Plans; and (ii) in the same form as is applicable to the
Pension payable to Executive under the Pension Plans.
(3) If Executive dies prior to commencement of payment
to him of his Pension under the Pension Plans, under
circumstances in which a death benefit under the Pension Plans
is payable to his surviving spouse or other beneficiary, then
Employer shall pay a monthly Supplemental Death Benefit to
Executive's surviving spouse or other beneficiary entitled to
receive the death benefit payable with respect to Executive
under the Pension Plans in an amount equal to the amount
determined pursuant to clause (A) below less the amount
determined pursuant to clause (B) below:
(A) the aggregate monthly amount of the death
benefit that would have been payable to the surviving
spouse or other beneficiary of Executive under the
Pension Plans if that death benefit were computed (1) by
treating the Severance Period as service for all
purposes of the Pension Plans and (2) by considering his
compensation during the Severance Period to be his Base
Salary and one-twelfth of his Bonus for all purposes of
the Pension Plans;
9
(B) the aggregate monthly amount of any death
benefit actually paid to the surviving spouse or other
beneficiary of Executive under the Pension Plans.
(4) The Supplemental Death Benefit payable with respect
to Executive hereunder shall be payable at the same time, in
the same form, and to the same persons as is applicable to the
death benefit payable with respect to Executive under the
Pension Plans.
(5) Notwithstanding the foregoing provisions, the total
of the actual years of service of Executive for purposes of
each of the Pension Plans and the years of service for which
credit is given pursuant to subparagraphs (iv)(1) and (3)
shall not exceed the maximum number of years of service, if
any, that can be considered pursuant to the terms of such
Pension Plan.
(6) Any actuarial adjustments made under the Pension
Plans with respect to the form or time of payment of a Pension
or death benefit to Executive or his surviving spouse or other
beneficiary under the Pension Plans shall also be applicable
to the Supplemental Pension Benefit or Supplemental Death
Benefit payable hereunder and shall be
10
based upon the same actuarial assumptions as those specified
in the Pension Plans.
(v) If upon the date of termination of Executive's employment
Executive holds any options with respect to stock of Employer, all
such options will immediately become exercisable upon such date and
will be exercisable for 200 days thereafter. Any restrictions on
stock of Employer owned by Executive on the date of termination of
his employment will lapse on such date.
(vi) During the Severance Period Executive and his spouse and
other dependents will continue to be covered by all Welfare Plans
maintained by Employer in which he and his spouse and other
dependents were participating immediately prior to the date of his
termination as if he continued to be an employee of Employer and
Employer will continue to pay the costs of coverage of Executive and
his spouse and other dependents under such Welfare Plans on the same
basis as is applicable to active employees covered thereunder;
provided that, if participation in any one or more of such Welfare
Plans is not possible under the terms thereof, Employer will provide
substantially identical benefits. Coverage under any such Welfare
Plan will cease if and when Executive obtains employment with
another employer during the Severance Period, and becomes eligible
for coverage under any substantially similar Welfare Plan provided
by his new employer.
11
(vii) During the Severance Period, Executive shall not be
entitled to reimbursement for fringe benefits, including without
limitation, dues and expenses related to club memberships,
automobile expenses, expenses for professional services and other
similar perquisites.
(b) If the employment of Executive with Employer is terminated by
Employer or Executive other than under circumstances set forth in
subsection 3(a), Executive's Base Salary shall be paid through the date of
his termination, and Employer shall have no further obligation to
Executive or any other person under this Agreement. Such termination shall
have no effect upon Employee's other rights, including but not limited to,
rights under the Retirement Plans and the Welfare Plans.
(c) Notwithstanding anything herein to the contrary, (1) in the
event Employer shall terminate the employment of Executive for Good Cause
hereunder, Employer shall give Executive at least thirty (30) days prior
written notice specifying in detail the reason or reasons for Executive's
termination, and (2) in the event Executive terminates his employment for
Good Reason hereunder, Executive shall give Employer at least thirty (30)
days prior written notice specifying in detail the reason or reasons for
Executive's termination.
(d) This Agreement shall have no effect, and Employer shall have no
obligations hereunder, if Executive's employment terminates for
12
any reason at any time other than during the 24 months following a Change
in Control.
4. Excise Tax.
(a) In the event that a Change in Control shall occur, and a final
determination is made by legislation, regulation, ruling directed to
Executive or Employer, by court decision, or by independent tax counsel
described in subsection (b) next below, that the aggregate amount of any
payment made to Executive (1) hereunder, and (2) pursuant to any plan,
program or policy of Employer in connection with, on account of, or as a
result of, such Change in Control ("Total Payments") will be subject to
the excise tax provisions of Section 4999 of the Code, or any successor
section thereof, Executive shall be entitled to receive from Employer, in
addition to any other amounts payable hereunder, a lump sum payment (the
"Gross-Up Payment"), sufficient to cover the full cost of such excise
taxes and Executive's federal, state and local income and employment taxes
on this additional payment so that the net amount retained by Executive,
after the payment of all such excise taxes on the Total Payments, and all
federal, state and local income and employment taxes and excise taxes on
the Gross-Up Payment, shall be equal to the Total Payments. The Total
Payments, however, shall be subject to any federal, state and local income
and employment taxes thereon. For this purpose, Executive shall be deemed
to be in the highest marginal rate of federal,
13
state and local taxes. The Gross-Up Payment shall be made at the same time
as the payments described in subsections 3(a)(i) and (ii) above.
(b) Employer and Executive shall mutually and reasonably determine
the amount of the Gross-Up Payment to be made to Executive pursuant to the
preceding subsection. Prior to the making of any such Gross-Up Payment,
either party may request a determination as to the amount of such Gross-Up
Payment. If such a determination is requested, it shall be made promptly,
at Employer's expense, by independent tax counsel selected by Executive
and approved by Employer (which approval shall not unreasonably be
withheld), and such determination shall be conclusive and binding on the
parties. Employer shall provide such information as such counsel may
reasonably request, and such counsel may engage accountants or other
experts at Employer's expense to the extent that they deem necessary or
advisable to enable them to reach a determination. The term "independent
tax counsel," as used herein, shall mean a law firm of recognized
expertise in federal income tax matters that has not previously advised or
represented either party. It is hereby agreed that neither Employer nor
Executive shall engage any such firm as counsel for any purpose, other
than to make the determination provided for herein, for three years
following such firm's announcement of its determination.
(c) In the event the Internal Revenue Service subsequently adjusts
the excise tax computation made pursuant to subsections 4(a) and
14
(b) above, Employer shall pay to Executive, or Executive shall pay to
Employer, as the case may be, the full amount necessary to make either
Executive or Employer whole had the excise tax initially been computed as
subsequently adjusted, including the amount of any underpaid or overpaid
excise tax, and any related interest and/or penalties due to the Internal
Revenue Service.
5. Setoff. No payments or benefits payable to or with respect to Executive
pursuant to this Agreement shall be reduced by any amount Executive or his
spouse or Beneficiary, or any other beneficiary under the Pension Plans, may
earn or receive from employment with another employer or from any other source,
except as expressly provided in subsection 3(a)(vi).
6. Death. If Executive's employment with Employer terminates under
circumstances described in subsections 3(a) or (b), then upon Executive's
subsequent death, all unpaid amounts payable to Executive under subsections
3(a)(i), (ii) or (iii) or 3(b), or Section 4, if any, shall be paid to his
Beneficiary, all amounts payable under subsection 3(a)(iv) shall be paid
pursuant to the terms of said subsection to his spouse or other beneficiary
under the Pension Plans, and if subsection 3(a) applies, his spouse and other
dependents shall continue to be covered under all applicable Welfare Plans
during the remainder of the Severance Period, if any, pursuant to subsection
3(a)(vi).
7. No Solicitation of Representatives and Employees. Executive agrees that
he shall not, during the Term or the Severance Period, directly or indirectly,
in his individual capacity or otherwise, induce, cause, persuade, or
15
attempt to do any of the foregoing in order to cause, any representative, agent
or employee of Employer to terminate such person's employment relationship with
Employer, or to violate the terms of any agreement between said representative,
agent or employee and Employer.
8. Confidentiality. Executive acknowledges that preservation of a
continuing business relationship between Employer and their respective
customers, representatives, and employees is of critical importance to the
continued business success of Employer and that it is the active policy of
Employer to guard as confidential certain information not available to the
public and relating to the business affairs of Employer. In view of the
foregoing, Executive agrees that he shall not during the Term and at any time
thereafter, without the prior written consent of Employer, disclose to any
person or entity any such confidential information that was obtained by
Executive in the course of his employment by Employer. This section shall not be
applicable if and to the extent Executive is required to testify in a
legislative, judicial or regulatory proceeding pursuant to an order of Congress,
any state or local legislature, a judge, or an administrative law judge or is
otherwise required by law to disclose such information.
9. Forfeiture. If Executive shall at any time violate any obligation of
his under Sections 7 or 8 in a manner that results in material damage to the
Employer or its business, he shall immediately forfeit his right to any benefits
under this Agreement, and Employer shall thereafter have no further obligation
hereunder to Executive or his spouse, Beneficiary or any other person.
16
10. Executive Assignment. No interest of Executive, his spouse or any
Beneficiary, or any other beneficiary under the Pension Plans, under this
Agreement, or any right to receive any payment or distribution hereunder, shall
be subject in any manner to sale, transfer, assignment, pledge, attachment,
garnishment, or other alienation or encumbrance of any kind, nor may such
interest or right to receive a payment or distribution be taken, voluntarily or
involuntarily, for the satisfaction of the obligations or debts of, or other
claims against, Executive or his spouse, Beneficiary or other beneficiary,
including claims for alimony, support, separate maintenance, and claims in
bankruptcy proceedings.
11. Benefits Unfunded. Except as otherwise provided in Section 13, all
rights under this Agreement of Executive and his spouse, Beneficiary or other
beneficiary under the Pension Plans, shall at all times be entirely unfunded,
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder. None of Executive,
his spouse, Beneficiary or any other beneficiary under the Pension Plans shall
have any interest in or rights against any specific assets of Employer, and
Executive and his spouse, Beneficiary or other beneficiary shall have only the
rights of a general unsecured creditor of Employer. Except as otherwise provided
in Section 13, and notwithstanding the preceding provisions of this Section, the
Nominating and Compensation Committee of the Board of Directors of Employer, in
its discretion, shall have the right, at any time and from time to time, to
cause amounts payable to Executive or his Beneficiary hereunder to be paid to
the
17
trustee of the NiSource Inc. Umbrella Trust For Management established effective
January 1, 1991, as amended from time to time, or any similar trust at any time
established by Employer ("Trust").
12. Waiver. No waiver by any party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other provisions
or conditions at the same time or at any prior or subsequent time.
13. Litigation Expenses. Employer shall pay Executive's reasonable
attorneys' fees and legal expenses in connection with any judicial proceeding to
enforce this Agreement, or to construe or determine the validity of this
Agreement or otherwise in connection therewith, whether or not Executive is
successful in such litigation. Within 10 days following the occurrence of a
Potential Change in Control (as defined in the Trust described in Section 11),
the Nominating and Compensation Committee of the Board of Directors of Employer
shall cause Employer to contribute the sum of $100,000 to the Trust to be
applied in satisfaction of Employer's obligations under this Section. The
Nominating and Compensation Committee shall cause Employer to contribute
additional amounts to the Trust, at such time or times as the Committee deems
appropriate, to the extent the aggregate of (1) the aforementioned sum of
$100,000, plus Trust earnings thereon, and (2) any additional Employer
contributions to the Trust, plus Trust earnings thereon, is not sufficient to
satisfy in full Employer's obligations under this Section.
18
14. Applicable Law. This Agreement shall be construed and interpreted
pursuant to the laws of Indiana.
15. Entire Agreement. This Agreement contains the entire Agreement between
the Employer and Executive and supersedes any and all previous agreements;
written or oral; between the parties relating to the subject matter hereof. No
amendment or modification of the terms of this Agreement shall be binding upon
the parties hereto unless reduced to writing and signed by Employer and
Executive.
16. No Employment Contract. Nothing contained in this Agreement shall be
construed to be an employment contract between Executive and Employer.
17. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
18. Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
affected thereby.
19. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives and
successors.
20. Employment with an Affiliate. For purposes of this Agreement, (a)
employment or termination of employment of Executive shall mean employment or
termination of employment with Employer and all Affiliates, (b) Base Salary and
Bonus shall include remuneration received by Executive
19
from Employer and all Affiliates, and (c) the terms Pension Plan, Retirement
Plan and Welfare Plan maintained or made available by Employer shall include any
such plans of any Affiliate of Employer.
21. Notice. Notices required under this Agreement shall be in writing and
sent by registered mail, return receipt requested, to the following addresses or
to such other address as the party being notified may have previously furnished
to the other party by written notice:
If to Employer: NiSource Inc.
000 X. 00xx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxx
If to Executive: Xxxxxx X. Xxxxxx, Xx.
______________________________
______________________________
20
IN WITNESS WHEREOF, Executive has hereunto set his hand, and Employer has
caused these presents to be executed in its name on its behalf, all on the 17
day of August, 2004, effective August 14, 2004.
NISOURCE INC.
By: /s/ Xxxx X. Xxxxx
-----------------------------
Title: Chairman & CEO
/s/ Xxxxxx X. Xxxxxx, Xx.
---------------------------------
Xxxxxx X. Xxxxxx, Xx., Executive
21
