CHANGE IN CONTROL AND TERMINATION AGREEMENT
EXHIBIT 10.6
NiSource Inc., a Delaware corporation (“Employer”) and __________ (“Executive”) hereby enter
into a Change in Control and Termination Agreement as of __ __________, __________
(“Agreement”), which Agreement is hereinafter set forth.
WITNESSETH:
WHEREAS, Executive is currently employed by Employer as its __________;
WHEREAS, Employer desires to provide security to Executive in connection with Executive’s
employment with Employer in the event of a Change in Control affecting Employer; 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 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:
(1) The acquisition by an entity, person or group (including all Affiliates or
Associates of such entity, person or group) of beneficial ownership, as that term is
defined in Rule 13d-3 under the Securities Exchange Act of 1934, of capital stock of
Employer entitled to exercise more than 30% of the outstanding voting power of all
capital stock of Employer entitled to vote in elections of directors (“Voting
Power”);
(2) The effective time of (i) a merger or consolidation of Employer with one or
more other corporations as a result of which the holders of the outstanding Voting
Power of Employer 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 (ii) a
transfer of 30% of the Voting Power, or a Substantial Portion of the Property, of
Employer other than to an entity of which Employer owns at least 50% of the Voting
Power; or
(3) The election to the Board of Directors of Employer of candidates who were
not recommended for election by the Board of Directors of Employer 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
Employer and, after such acquisition, Executive holds an equity interest in the entity that has
acquired Employer.
(f) “Good Cause” shall be deemed to exist if, and only if:
(1) Executive engages in acts or omissions constituting dishonesty,
intentional breach of fiduciary obligation or intentional wrongdoing or
malfeasance, in each case that results in substantial harm to Employer or
any Affiliate; or
(2) Executive is convicted of a criminal violation involving fraud or
dishonesty.
(g) “Good Reason” shall be deemed to exist if, and only if:
(1) there is a significant change in the nature or the scope of Executive’s
authorities or duties;
(2) there is a significant reduction in Executive’s monthly rate of Base
Salary, his opportunity to earn a bonus under an incentive bonus
compensation plan maintained by Employer or his benefits; or
(3) 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 Employer” shall mean 50% of the aggregate
book value of the assets of Employer and its Affiliates and Associates as set forth on the
most recent balance sheet of Employer, prepared on a consolidated basis, by its regularly
employed, independent, certified public accountants.
(l) “Welfare Plan” shall mean any health and dental plan, disability plan, survivor
income plan or life insurance plan, as defined in Section 3(1) of ERISA, currently or
hereafter made available by Employer in which Executive is eligible to participate.
3. Benefits Upon Termination of Employment. (a) The following provisions will apply
if a Change in Control occurs during the Term, and (i) 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 (ii) 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:
(1) Employer shall pay Executive an amount equal to 36 times the sum of (a) Executive’s
Base Salary plus (b) one-twelfth of his Bonus. Such amount shall be paid to Executive in a
lump sum within 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 (i) the date 10 days
after the date of termination, and (ii) the date 10 days after receipt of such notice.
(2) Employer shall pay Executive an amount equal to the pro rata portion of Executive’s
target annual incentive bonus compensation for the calendar year in which the date of
termination 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 (i) the date 10 days after the date of
termination, and (ii) the date 10 days after receipt of such notice.
(3) 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 shall be made at the earliest date permitted under any such Plan or other
plan or program that is not funded with a trust agreement.
(4) (A) Employer shall pay to Executive a monthly Supplemental Pension Benefit in an
amount equal to the amount determined pursuant to clause (i) below less the amount
determined pursuant to clause (ii) below:
(i) 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
(A) by treating the Severance Period as service for all purposes of the Pension
Plans and (B) 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;
(ii) the aggregate monthly amount of any Pension actually paid to Executive
under all Pension Plans.
(B) 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 Plans; and (ii) in the same form as is applicable
to the Pension payable to Executive under the Pension Plans.
(C) 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 (i) below less the amount
determined pursuant to clause (ii) below:
(i) 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 (A) by treating the Severance Period as
service for all purposes of the Pension Plans and (B) 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;
(ii) the aggregate monthly amount of any death benefit actually paid to the
surviving spouse or other beneficiary of Executive under the Pension Plans.
(D) 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.
(E) 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 (3)(A) and (C) shall not exceed the maximum number
of years of service, if any, that can be considered pursuant to the terms of such Pension
Plan.
(F) 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 based upon the same
actuarial assumptions as those specified in the Pension Plans.
(5) 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.
(6) 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.
(7) During the Severance Period, Executive shall not be entitled to reimbursement for
fringe benefits, including without limitation, dues and expenses related to club
memberships, automobile expenses, expenses for professional services and other similar
perquisites.
(b) If the employment of Executive with Employer is terminated by Employer or Executive other
than under circumstances set forth in subsection 3(a), Executive’s Base Salary
shall be paid through the date of his termination, and Employer shall have no further
obligation to Executive or any other person under this Agreement. Such termination shall have no
effect upon 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 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, state and local taxes. The Gross-Up Payment
shall be made at the same time as the payments described in subsections 3(a)(1) and (2) 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 (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)(6).
6. Death. If Executive’s employment with Employer terminates under circumstances
described in subsections 3(a) or (b), then upon Executive’s subsequent death, all unpaid amounts
payable to Executive under subsections 3(a)(1), (2) or (3) or 3(b), or Section 4, if any, shall be
paid to his Beneficiary, all amounts payable under subsection 3(a)(4) 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)(6).
7. No Solicitation of Representatives and Employees. Executive agrees that he shall
not, during the Term or the Severance Period, directly or indirectly, in his individual capacity or
otherwise, induce, cause, persuade, or attempt to do any of the foregoing in order to cause, any
representative, agent or employee of Employer or any of its Affiliates to terminate such person’s
employment relationship with Employer or any of its Affiliates, or to violate the terms of any
agreement between said representative, agent or employee and Employer or any of its Affiliates.
8. Confidentiality. Executive acknowledges that preservation of a continuing business
relationship between Employer or its Affiliates and their respective customers, representatives,
and employees is of critical importance to the continued business success of Employer and its
Affiliates and that it is the active policy of Employer and its Affiliates to guard as confidential
certain information not available to the public and relating to the business affairs of Employer
and its Affiliates. 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 or any of its Affiliates. 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.
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 trustee of the NIPSCO
Industries, 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.
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 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:
|
NIPSCO Industries, Inc. | |||
| 0000 Xxxxxx Xxxxxx | ||||
| Xxxxxxx, Xxxxxxx 00000 | ||||
| Attention: Xxxx X. Xxxxx | ||||
If to Executive:
|
||||
IN WITNESS WHEREOF, Executive has hereunto set his hand, and Employer has caused these
presents to be executed in its name on its behalf, all on the ___ day of __________,
___, effective _______ ___, __________.
| NiSource Inc. | ||||
| By: | ||||
| Title: | ||||
| , Executive | ||||
Schedule of Parties to Change of Control Agreements
As of December 31, 2005, the following NiSource officers have Change in Control and Termination
Agreements with NiSource: Xxxxxx X. Xxxxxx, Xx., Xxxxxxx X. X’Xxxxxxx and Xxxxxxx X. Xxxxxxxx.
The contracts are substantially identical in all material respects except as to the parties, the
execution dates, the amount of time following a change of control that the termination provisions
of the agreement apply (from 7-24 months), the monthly base payout (24 to 36 months), and the
extent to which the executive’s payout is grossed up for taxes.
