CHANGE-IN-CONTROL AGREEMENT
THIS
AGREEMENT dated as of December 28, 2006 (the “Agreement Date”) is made
by and among Nicor Inc. (the “Company”), an Illinois corporation, and Xxxx X.
Xxxxxx, Xx. the “Executive”). This Agreement replaces and superceded in its
entirety that Agreement entered into by and between the Company and the
Executive dated November 22, 2002, (the “Prior Agreement”).
ARTICLE
I
PURPOSES
The
Board
of Directors of the Company (the “Board”) has determined that it is in the best
interests of the Company and its shareholders to assure that the Company and
Nicor Gas will have the continued services of the Executive, despite the
possibility or occurrence of a Change in Control of the Company. The Board
believes it is imperative to reduce the distraction of the Executive that would
result from the personal uncertainties caused by a pending or threatened Change
in Control, to encourage the Executive’s full attention and dedication to the
Company and Nicor Gas, and to provide the Executive with compensation and
benefits arrangements upon a Change in Control which are competitive with those
of similarly-situated corporations. This Agreement is intended to accomplish
these objectives.
ARTICLE
II
CERTAIN
DEFINITIONS
When
used
in this Agreement, the terms specified below shall have the following
meanings:
2.1 The
“Agreement Term” shall begin on the Agreement Date and shall continue through
December 31, 2006. As of December 31, 2006, and on each
December 31 thereafter, the Agreement Term shall automatically be extended
for one additional year unless, not later than the preceding June 30,
either party shall have given notice that such party does not wish to extend
the
Agreement Term. If a Change in Control shall have occurred during the Agreement
Term (as it may be extended from time to time), the Agreement Term shall
continue for a period ending on the two-year anniversary of the date of the
Change in Control, but if the Termination Date (as defined below) occurs during
that two-year period, then the Agreement Term shall continue until the end
of
the Severance Period (as defined below). Unless the Termination Date occurs
during the two-year period after a Change in Control so that the Agreement
Term
is extended to include the Severance Period, as provided in the immediately
preceding sentence, the Agreement Term shall not extend beyond the two-year
anniversary of the Change in Control.
2.2 “Effective
Date” means the first date during the Agreement Term on which a Change in
Control occurs.
2.3 “Change
in Control” means:
2.3.1 The
acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the
“Exchange
Act”) (a “Person”) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of any shares of Common
Stock of the Company or any voting securities of the Company entitled to vote
generally in the election of directors if, as a result of such acquisition,
such
person owns 20% or more of either (i) the outstanding shares of common
stock of the Company (the “Outstanding Company Common Stock”), or (ii) the
combined voting power of the outstanding voting securities of the Company
entitled to vote generally in the election of directors (the “Outstanding
Company Voting Securities”); provided, however, that for purposes of this
subsection 2.3.1, the following acquisitions shall not constitute a Change
in
Control: (A) any acquisition by the Company, (B) any acquisition by an
employee benefit plan (or related trust) sponsored or maintained by the Company
or any corporation controlled by the Company (a “Company Plan”), or (C) any
acquisition by any corporation pursuant to a transaction which complies with
subsections 2.3.3.1, 2.3.3.2 and 2.3.3.3 of this definition; provided further,
that for purposes of clause (A), if any Person (other than the Company or
any Company Plan) shall become the beneficial owner of 20% or more of the
Outstanding Company Common Stock or 20% or more of the Outstanding Company
Voting Securities by reason of an acquisition by the Company, and such Person
shall, after such acquisition by the Company, become the beneficial owner of
any
additional shares of the Outstanding Company Common Stock or any additional
Outstanding Company Voting Securities (other than pursuant to any dividend
reinvestment plan or arrangement maintained by the Company) and such beneficial
ownership is publicly announced, such additional beneficial ownership shall
constitute a Change in Control; or
2.3.2 Individuals
who, as of the date hereof, constitute the Board of Directors of the Company
(for purposes of this Section 2.3, the “Incumbent Board”) cease for any
reason to constitute at least a majority of the Incumbent Board; provided,
however, that any individual becoming a director subsequent to the date hereof
whose election, or nomination for election by the Company shareholders, was
approved by a vote of at least a majority of the directors then comprising
the
Incumbent Board shall be considered as though such individual were a member
of
the Incumbent Board, but excluding, for this purpose, any such individual whose
initial assumption of office occurs as a result of an actual or publicly
threatened election contest (as such terms are used in Rule 14a-11
promulgated under the Exchange Act) or other actual or publicly threatened
solicitation of proxies or consents by or on behalf of a Person other than
the
Board of Directors of the Company; or
2.3.3 Consummation,
including receipt of any necessary regulatory approval, of (i) a reorganization,
merger, consolidation or other business combination involving the Company or
(ii) the sale or other disposition of more than 50% of the operating assets
of the Company (determined on a consolidated basis), other than in connection
with a sale-leaseback or other arrangement resulting in the continued
utilization of such assets (or the operating products of such assets) by the
Company (any transaction described in part (i) or (ii) being referred to as
a
“Corporate Transaction”); excluding, however, a Corporate Transaction pursuant
to which:
2.3.3.1 all
or
substantially all of the individuals and entities who are the beneficial owners,
respectively, of the Outstanding Company Common Stock and Outstanding Company
Voting Securities immediately prior to such Corporate
2
Transaction
beneficially own, directly or indirectly, more than 60% of, respectively, the
then outstanding shares of common stock and the combined voting power of the
then outstanding voting securities entitled to vote generally in the election
of
directors, as the case may be, of the ultimate parent entity resulting from
such
Corporate Transaction (including, without limitation, an entity which, as a
result of such transaction, owns the Company or all or substantially all of
the
assets of the Company either directly or through one or more subsidiaries)
in
substantially the same proportions as their ownership, immediately prior to
such
Corporate Transaction of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be;
2.3.3.2 no
Person
(other than the Company, any Company Plan or related trust, the corporation
resulting from such Corporate Transaction, and any Person which beneficially
owned, immediately prior to such Corporate Transaction, directly or indirectly,
20% or more of the Outstanding Company Common Stock or the Outstanding
Company Voting Securities, as the case may be) will beneficially own, directly
or indirectly, 20% or more of, respectively, the then outstanding common
stock of the ultimate parent entity resulting from such Corporate Transaction
or
the combined voting power of the then outstanding voting securities of such
entity; and
2.3.3.3 individuals
who were members of the Incumbent Board will constitute at least a majority
of
the members of the board of directors of the ultimate parent entity resulting
from such Corporate Transaction; or
2.3.4 A
tender
offer (for which a filing has been made with the Securities and Exchange
Commission (the “SEC”) which purports to comply with the requirements of
Section 14(d) of the Exchange Act and the corresponding SEC rules) is made
for the stock of the Company, which has not been negotiated and approved by
the
Board, provided that in case of a tender offer described in this subsection
2.3.4, the Change in Control will be deemed to have occurred at the first time
during the offer period when the Person (as defined in subsection 2.3.1, above)
making the offer beneficially owns or has accepted for payment stock of the
Company with 20% or more of the combined voting power of the then Outstanding
Company Voting Securities; or
2.3.5 Approval
by the shareholders of the Company of a plan of complete liquidation or
dissolution of the Company.
2.3.6 For
purposes of this Section 2.3, (i) the term “Company” shall mean Nicor
Inc. and shall include any Successor to Nicor Inc.; and (ii) the term
“Successor to Nicor Inc.” shall mean any corporation, partnership, joint venture
or other entity that succeeds to the interests of Nicor Inc. by means of a
merger, consolidation, or other restructuring that does not constitute a Change
in Control under paragraphs 2.3.1, 2.3.3 or 2.3.4 above.
2.3.7 By
entering into this Agreement, the Executive irrevocably consents to the
modification of the definition of “Change in Control” (including “change in
control”) in all
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Employee
Benefit Arrangements (as defined below), by substituting for such definition
in
each such Employee Benefit Arrangement the definition of “Change in Control” set
forth above, with such substitution to be effective on the first date this
Agreement has been signed by both the Company and the Executive. For purposes
of
the preceding sentence, the term “Employee Benefit Arrangement” shall mean each
agreement with the Executive to which the Company or any Subsidiary is a party,
and each plan or arrangement maintained by the Company or any Subsidiary, and
including any awards outstanding under any such agreement, plan, or arrangement,
to the extent that such award, agreement, plan, or arrangement contains a
definition of “Change in Control.” However, to the extent that the Employee
Benefit Arrangement provides for an award based on common stock of the Company
(including, without limitation, an award of stock options or shares of
restricted stock), and such Employee Benefit Arrangement provides that vesting
or exercisability of such award will occur at the time of the Change in Control
(rather than the occurrence of a subsequent event, such as termination of
employment), the definition of “Change in Control” that is substituted for the
definition in such Employee Benefit Arrangement shall be the definition of
“Change in Control” set forth above, except that Section 2.3.4 shall be
modified by adding, at the end of such Section, immediately prior to the word
“or,” the following: “provided, however, that the Change in Control shall occur
three (3) business days before such tender offer is to terminate, unless the
offer is withdrawn first, if the Person making the offer could own, by the
terms
of the offer plus any shares beneficially owned by that Person, stock with
50%
or more of the combined voting power of the then Outstanding Company Voting
Securities when the offer (and any subsequent offering period)
terminates;”
2.3.8 By
entering into this Agreement, the Executive irrevocably consents to the
amendment of the Nicor Inc. Stock Deferral Plan to provide for distribution,
as
soon as practicable following a Change in Control, of any amounts which may
then
be deferred for the Executive under such plan.
2.4 “Code”
means the Internal Revenue Code of 1986, as amended.
2.5 “Employment
Period” means the period commencing on the Effective Date and ending on the
two-year anniversary of that date.
2.6 “Incentive
Plan” shall have the meaning set forth in Section 3.2.2.
2.7 “Notice
of Termination” means a written notice given in accordance with
Section 11.9 which sets forth (a) the specific termination provision
in this Agreement relied upon by the party giving such notice, (b) in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under such termination provision, and
(c) if the Termination Date is other than the date of receipt of such
Notice of Termination, the Termination Date.
2.8 “Plans”
shall have the meaning set forth in Section 3.2.3.
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2.9 A
“Potential Change in Control” shall exist during any period in which the
circumstances described in Sections 2.9.1, 2.9.2, or 2.9.3 exist (provided,
however, that a Potential Change in Control shall cease to exist not later
than
the occurrence of a Change in Control):
2.9.1 The
Company enters into an agreement, the consummation of which would result in
the
occurrence of a Change in Control, provided that a Potential Change in Control
described in this Section 2.9.1 shall cease to exist upon the expiration or
other termination of all such agreements.
2.9.2 Any
person (including the Company) publicly announces an intention to take or to
consider taking actions the consummation of which would constitute a Change
in
Control; provided that a Potential Change in Control described in this
Section 2.9.2 shall cease to exist upon the withdrawal of such intention,
or upon a reasonable determination by the Board that there is no reasonable
chance that such actions would be consummated.
2.9.3 The
Board
adopts a resolution to the effect that, for purposes of this Agreement, a
Potential Change in Control exists; provided that a Potential Change in Control
described in this Section 2.9.3 shall cease to exist upon a reasonable
determination by the Board that the reasons that gave rise to the resolution
providing for the existence of a Potential Change in Control have expired or
no
longer exist.
2.10 “Severance
Incentive” means the greater of (i) the target annual incentive under an
Incentive Plan applicable to the Executive for the Performance Period in which
the Termination Date occurs, or (ii) the average of the actual annual
incentives paid (or payable, to the extent not previously paid) to the Executive
under the applicable Incentive Plan for each of the two calendar years preceding
the calendar year in which the Termination Date occurs.
2.11 “Severance
Period” means the period beginning on the Executive’s Termination Date and
ending on the third anniversary thereof; provided, however, that no Severance
Period will occur unless the Executive’s Termination Date occurs under
circumstances described in Section 5.1 (relating to termination by the
Executive for Good Reason or by the Company and Nicor Gas other than for Cause
or Permanent Disability).
2.12 “Subsidiary”
shall mean any corporation, partnership, joint venture or other entity during
any period in which at least a fifty percent interest in such entity is owned,
directly or indirectly, by the Company (or a successor to the
Company).
2.13 “Termination
Date” means the first day on or after which the Executive is not employed by the
Company or Nicor Gas; provided, however, that (a) if the Company and Nicor
Gas terminate the Executive’s employment other than for Cause or Disability (as
defined in Section 4.1.2), then the Termination Date shall be the date of
receipt of the Notice of Termination and (b) if the Executive’s employment
is terminated by reason of death or Disability, then the Termination Date shall
be the date of death of the Executive or the Disability Effective Date (as
defined in Section 4.1.1), as the case may be.
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2.14 “Welfare
Plans” shall have the meaning set forth in Section 3.2.4.
ARTICLE
III
TERMS
OF
EMPLOYMENT
3.1 Position
and Duties.
3.1.1 The
Company hereby agrees to cause the Company and/or Nicor Gas to continue the
Executive’s employment during the Employment Period and, subject to
Article IV of this Agreement, the Executive agrees to remain in the employ
of the Company and Nicor Gas, as applicable, subject to the terms and conditions
hereof. During the Employment Period, (i) the Executive’s position
(including status, offices, titles and reporting requirements), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned to
the
Executive at any time during the 90-day period immediately preceding the
Effective Date, and (ii) the Executive’s services shall be performed at the
location where the Executive was employed immediately preceding the Effective
Date or any office or location less than 25 miles from such
location.
3.1.2 During
the Employment Period, and excluding any periods of vacation and sick leave
to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours to the business and affairs
of
the Company and Nicor Gas, as applicable, and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder, to use
the
Executive’s reasonable best efforts to perform faithfully and efficiently such
responsibilities. During the Employment Period it shall not be a violation
of
this Agreement for the Executive (i) to serve on corporate, civic or
charitable boards or committees, (ii) to deliver lectures, fulfill speaking
engagements or teach at educational institutions and (iii) to manage
personal investments, to the extent that such other activities do not, in the
reasonable judgment of the Chief Executive Officer of the Company (the “CEO”),
inhibit or prohibit the performance of the Executive’s duties under this
Agreement, or conflict in any material way with the business of the Company
or
any Subsidiary; provided, however, that the Executive shall not serve on the
board of any business, or hold any other position with any business, without
the
consent of the CEO.
3.2 Compensation.
3.2.1 Base
Salary.
During
the Employment Period, the Executive shall receive an annual base salary
(“Annual Base Salary”), which shall be paid at an annual rate at least equal to
twelve times the highest monthly base salary paid or payable, including any
base
salary which has been earned but deferred, to the Executive by the Company
in
respect of the twelve-month period immediately preceding the month in which
the
Effective Date occurs. During the Employment Period, the Annual Base Salary
shall be reviewed no more than twelve months after the last salary increase
awarded to the Executive prior to the Effective Date and, thereafter, at least
annually, and shall be increased at any time and from time to time as shall
be
substantially consistent with increases in base salary awarded to other senior
6
executives
of the Company. Annual Base Salary shall not be reduced after any such increase
unless such reduction is part of a policy, program or arrangement applicable
to
senior executives of the Company and of any successor entity, and the term
Annual Base Salary as used in this Agreement shall refer to Annual Base Salary
as so increased. Any increase in Annual Base Salary shall not limit or reduce
any other obligation of the Company to the Executive under this
Agreement.
3.2.2 Annual
Incentive.
In
addition to Annual Base Salary, the Company shall pay or cause to be paid to
the
Executive an incentive award (the “Annual Incentive”) for each Performance
Period or portion thereof which falls within the Employment Period. “Performance
Period” means each period of time designated in accordance with any annual
incentive award arrangement (“Incentive Plan”) which is based upon performance
and approved by the Board or any committee of the Board, or in the absence
of
any Incentive Plan or any such designated period of time, Performance Period
shall mean each calendar year. The Executive’s target and maximum Annual
Incentive with respect to any Performance Period shall not be less than the
target and maximum annual incentive award payable with respect to the Executive
under the Company’s annual incentive program as in effect immediately preceding
the Effective Date.
3.2.3 Incentive,
Savings and Retirement Plans.
During
the Employment Period, the Executive shall be entitled to participate in all
incentive, savings and retirement plans, practices, policies and programs
(“Plans”) applicable generally to other senior executives of the Company, but in
no event shall such Plans provide the Executive with incentive opportunities
(measured with respect to long-term and special incentives, to the extent,
if
any, that such distinctions are applicable) or savings and retirement benefits
which are less favorable, in the aggregate, than the greater of (i) those
provided by the Company for the Executive under such Plans as in effect at
any
time during the 90-day period immediately preceding the Effective Date, or
(ii) those provided generally at any time after the Effective Date to other
senior executives of the Company.
3.2.4 Welfare
Benefit Plans.
During
the Employment Period, the Executive and/or the Executive’s family, as the case
may be, shall be eligible for participation in and shall receive all benefits
under welfare benefit plans, practices, policies and programs (Welfare Plans”)
provided by the Company (including, without limitation, medical, prescription,
dental, disability, salary continuance, employee life, group life, accidental
death and travel accident insurance benefits), but in no event shall such
Welfare Plans provide the Executive with benefits which are less favorable,
in
the aggregate, than the greater of (i) those provided by the Company for
the Executive under such Welfare Plans as were in effect at any time during
the
90-day period immediately preceding the Effective Date, or (ii) those
provided generally at any time after the Effective Date to other senior
executives of the Company.
3.2.5 Other
Employee Benefits.
During
the Employment Period, the Executive shall be entitled to other employee
benefits and perquisites in accordance with the most favorable plans, practices,
programs and policies of the Company, as in effect with respect to the Executive
at any time during the 90-day period immediately preceding the Effective Date,
or
7
if
more
favorable, as in effect generally with respect to other senior executives of
the
Company.
3.2.6 Expenses.
During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable expenses incurred by the Executive in
accordance with the policies, practices and procedures of the Company as in
effect with respect to the Executive at any time during the 90-day period
immediately preceding the Effective Date, or if more favorable, as in effect
generally with respect to other senior executives of the Company.
3.2.7 Office
and Support Staff.
During
the Employment Period, the Executive shall be entitled to an office or offices
of a size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, as in effect with respect to the Executive
at
any time during the 90-day period immediately preceding the Effective Date,
or
if more favorable, as provided generally with respect to other senior executives
of the Company.
3.2.8 Paid
Time Off.
During
the Employment Period, the Executive shall be entitled to paid time off in
accordance with the plans, policies, programs and practices of the Company
as in
effect with respect to the Executive at any time during the 90-day period
immediately preceding the Effective Date, or if more favorable, as provided
generally with respect to other senior executives of the Company.
3.2.9 Subsidiaries.
To the
extent that immediately prior to the Effective Date, the Executive has been
on
the payroll of, and participated in the incentive or employee benefit plans
of,
a Subsidiary of the Company, the references to the Company contained in
Sections 3.2.1 through 3.2.8 and the other sections of this Agreement
referring to benefits to which the Executive may be entitled shall be read
to
refer to such Subsidiary.
ARTICLE
IV
TERMINATION
OF EMPLOYMENT
4.1
Disability.
4.1.1 During
the Agreement Term, the Company and Nicor Gas may terminate the Executive’s
employment upon the Executive’s Permanent Disability (as defined in
Section 4.1.2) by giving the Executive or his legal representative, as
applicable, (1) written notice in accordance with Section 11.9 of the
Company’s or Nicor Gas’, as applicable, intention to terminate the Executive’s
employment pursuant to this section, and (2) a certification of the
Executive’s Permanent Disability by a physician selected by the Company or Nicor
Gas or its insurers and reasonably acceptable to the Executive or the
Executive’s legal representative. The Executive’s employment shall terminate
effective on the 30th day (the “Permanent Disability Effective Date”) after the
Executive’s receipt of such notice unless, before the Permanent Disability
Effective Date, the Executive shall have resumed the full-time performance
of
the Executive’s duties. During the period in which the Executive
8
has
a
Disability, the Company or Nicor Gas, as applicable, may appoint a temporary
replacement to assume the Executive’s responsibilities.
4.1.2 The
Executive shall be considered to have a “Permanent Disability” during any period
in which he has a Disability (as defined below); provided, however, that the
Executive shall not be considered to have “Permanent Disability” until (i) for a
period of 180 consecutive days, the Executive, as a result of a Disability,
is
incapable, after reasonable accommodation, of performing his duties under this
Agreement on a full-time basis; (ii) such Disability is reasonably expected
to
continue for at least another 90 days; and (iii) at the Executive’s
Termination Date, he is eligible for income replacement benefits under the
Company’s or Nicor Gas’ long-term disability plan. The Executive shall be
considered to have a “Disability” during any period in which he has a physical
or mental disability which renders him incapable, after reasonable
accommodation, of performing his duties under this Agreement.
4.2 Death.
The
Executive’s employment shall terminate automatically upon the Executive’s death
during the Agreement Term.
4.3
Cause.
The
Company or Nicor Gas, as applicable, may terminate the Executive’s employment
during the Employment Period for Cause. For purposes of this Agreement, “Cause”
means:
4.3.1 the
Executive’s willful commission of acts or omissions which have, have had, or are
likely to have a material adverse effect on the business, operations, financial
condition or reputation of the Company or Nicor Gas;
4.3.2 the
Executive’s conviction (including a plea of guilty or nolo contendere) of a
felony or any crime of fraud, theft, dishonesty or moral turpitude;
or
4.3.3 the
Executive’s material violation of any statutory or common law duty of loyalty to
the Company or Nicor Gas.
For
purposes of this Agreement, no act, or failure to act, on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive’s action or omission was in the best interests of the Company or Nicor
Gas. Any act, or failure to act, pursuant to direction provided by the person
to
whom the Executive reports, or provided by a resolution duly adopted by the
Board, or pursuant to advice of counsel for the Company or Nicor Gas, shall
be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company or Nicor Gas.
4.4
Good
Reason.
During
the Employment Period, the Executive’s employment may be terminated by the
Executive for Good Reason. For purposes of this Agreement, “Good Reason” means
any material breach of this Agreement by the Company or Nicor Gas,
including:
9
4.4.1 the
failure to maintain the Executive in the office or position, or in a
substantially equivalent office or position, held by the Executive immediately
prior to the Change in Control;
4.4.2 a
material adverse alteration in the nature or scope of the Executive’s position,
duties, functions, responsibilities or authority;
4.4.3 a
material reduction of the Executive’s salary, incentive compensation or
benefits;
4.4.4 the
failure of any successor to the Company to assume this Agreement, or a material
breach of the Agreement by the Company or its successor;
4.4.5 a
relocation of more than 25 miles of (i) the Executive’s principal
workplace, or (ii) the principal offices of the Company or Nicor Gas, as
applicable, (if such offices are the Executive’s principal workplace), in each
case without the consent of the Executive;
4.4.6 the
Company or Nicor Gas, as applicable, requiring the Executive to engage in travel
that is materially greater than the Executive’s travel obligations during the
one-year period immediately prior to the Change in Control; or
4.4.7 any
failure by the Company or Nicor Gas, as applicable, to comply with any of the
provisions of Section 3.2 of this Agreement, other than an isolated,
insubstantial and inadvertent failure not occurring in bad faith and which
is
remedied by the Company or Nicor Gas, as applicable, promptly after receipt
of
notice thereof given by the Executive;
provided,
however, that an act or omission of the Company or Nicor Gas, as applicable,
shall not constitute Good Reason: (i) unless the Executive gives the
Company or Nicor Gas, as applicable, written notice of such act or omission
and
the Company or Nicor Gas, as applicable, fails to cure such act or omission
within the 30-day period after such notice, or (ii) if the Executive first
acquired knowledge of such act or omission more than 6 months before the
Executive gives the Company or Nicor Gas, as applicable, such notice, or (iii)
if the Executive has consented in writing to such act or omission in a document
that makes specific reference to this Section 4.4.
4.5
Without
Cause During a Potential Change in Control.
If the
Executive’s employment is terminated by the Company and Nicor Gas, as
applicable, without Cause during a Potential Change in Control, and such date
of
termination occurs not more than 180 days prior to the occurrence of a
Change in Control and the Executive establishes by reasonable evidence that
such
termination of employment was materially connected with and in anticipation
of
the Change in Control, then the Executive shall be entitled to receive the
benefits that would have been provided under Section 5.1, determined as
though:
4.5.1 the
Executive were rehired by the Company and Nicor Gas, as applicable, immediately
prior to the Change in Control at the salary rate equal to the Executive’s
highest salary rate during the one-year period prior to the date of the Change
in Control, and with
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other
Company and Nicor Gas compensation and benefit arrangements comparable to those
provided to comparable executives of the Company and Nicor Gas;
4.5.2 the
Executive’s employment were terminated by the Company and Nicor Gas without
Cause immediately after the Change in Control; and
4.5.3 this
Agreement were in full force and effect at the time of the Change in Control,
and at the time of the Executive’s deemed termination of
employment.
4.6
Right
of Resignation and Termination.
This
Agreement does not constitute a guarantee of continued employment at any time,
but instead provides for certain rights and benefits for the Executive during
his employment following the occurrence of a Change in Control, and in the
event
his employment with the Company and Nicor Gas, as applicable, terminates under
the circumstances described herein. The Company and Nicor Gas, as applicable,
may terminate the employment of the Executive at any time for any reason,
without breach of this Agreement, subject to its obligations set forth in
Article V and elsewhere in this Agreement. The Executive may resign from the
Company and Nicor Gas, as applicable, for Good Reason, or for any other reason,
without breach of this Agreement, subject to the Executive’s obligations set
forth in this Agreement; provided that, in the event of a resignation without
Good Reason, the Executive shall provide at least four weeks advance notice
of
such resignation to the Company and Nicor Gas, as applicable. Notwithstanding
the foregoing provisions in this Section 4.6, the Company and Nicor Gas, as
applicable, may suspend the Executive from performing his duties under this
Agreement following the delivery of a Notice of Termination by the Executive
without Good Reason; provided, however, that during the period of suspension
(which shall end on the Termination Date), the Executive shall continue to
be
treated as employed by the Company and Nicor Gas, as applicable, for other
purposes, and his rights to compensation or benefits shall not be reduced by
reason of the suspension.
ARTICLE
V
OBLIGATIONS
OF THE COMPANY UPON TERMINATION
5.1 If
by
the Executive for Good Reason or by the Company and Nicor Gas, as Applicable,
Other Than for Cause or Permanent Disability.
If,
during the Employment Period, the Company and Nicor Gas, as applicable, shall
terminate the Executive’s employment other than for Cause or Permanent
Disability, or if the Executive shall terminate employment for Good Reason,
the
Company’s and Nicor Gas’ obligations to the Executive shall be as set forth in
this Section 5.1. As a precondition to fulfilling such obligations, the
Company shall require the Executive to execute and deliver a release prepared
by
the Company and providing for the Executive’s release of any and all claims
against the Company and its Subsidiaries (and those acting on behalf of them)
that may have arisen on or before the date of the release, which release shall
contain such other reasonable and customary terms as are specified by the
Company. Notwithstanding any other provision of this section to the contrary,
to
the extent any portion of such release is subject to the seven-day revocation
period prescribed by the Age Discrimination in Employment Act, as amended,
or to
any similar revocation period in effect on the Termination Date, no payment
shall be due under this Section 5.1 until such revocation period has
expired without such revocation occurring.
11
5.1.1 The
Company shall, within five business days of such termination of employment,
pay
the Executive a cash payment equal to the sum of the following
amounts:
5.1.1.1 to
the
extent not previously paid, the Annual Base Salary and any accrued paid time
off
through the Termination Date;
5.1.1.2 an
amount
equal to the product of (i) the Annual Incentive (as defined in
Section 3.2.2) at target for any Performance Period in which the
Termination Date occurs multiplied by (ii) a fraction, the numerator of
which is the number of days the Executive was actually employed by the Company
during such Performance Period, and the denominator of which is the number
of days in the Performance Period; or, if greater, the amount of any Annual
Incentive otherwise payable to the Executive with respect to a Performance
Period in which the Termination Date occurs, which payment shall be in full
settlement of Annual Incentive amounts due with respect to any such Performance
Period; and
5.1.1.3 all
amounts previously deferred by or accrued to the benefit of the Executive under
any nonqualified deferred compensation plan sponsored by the Company (including,
without limitation, any vested amounts deferred under incentive plans), together
with any accrued earnings thereon, and not yet paid by the Company;
and
5.1.1.4 an
amount
equal to the product of (A) three (3) multiplied by (B) the sum
of (i) the Executive’s Annual Base Salary, and (ii) the Severance
Incentive.
5.1.2 For
purposes of each of the Executive’s stock options granted under the Company’s
Long Term Incentive Plan (the “LTIP”), any successor plan, or otherwise, that is
or becomes exercisable on the Termination Date, the Executive’s termination of
employment shall be disregarded, and each such option shall continue to be
exercisable as though the Executive’s employment had continued through the last
day on which such option would be exercisable in the absence of such employment
termination (such earlier date being referred to herein as the “Applicable
Expiration Date”). This Section 5.1.2 shall be applicable notwithstanding
any term of any plan, arrangement, or agreement providing for early expiration
of the option because of the Executive’s termination of employment, except for
an amendment adopted in accordance with Section 11.7 of this Agreement and
that by its specific terms amends this Agreement.
5.1.3 On
the
Termination Date (i) the Executive shall become fully vested in, and may
thereupon and until the Applicable Expiration Date of such stock incentive
awards exercise in whole or in part, any and all stock incentive awards granted
to the Executive under the LTIP, any successor plan or otherwise which have
not
become exercisable as of the Termination Date; (ii) all performance units
previously awarded to the Executive shall become fully vested, and a prorated
calculation of the target value of all such units shall be done as of the
Termination Date and full payment of such prorated target value shall be made
by
the Company within 30 days after the Termination Date; and (iii) the
Executive shall
12
become
fully vested at the prorated target level in any other cash incentive awards
granted for the performance period in which the Termination Date occurs under
the LTIP, a successor plan or otherwise which have not, as of the Termination
Date, become fully vested.
5.1.4 All
forfeiture conditions that as of the Termination Date are applicable to any
deferred stock unit, restricted stock or restricted share units awarded to
the
Executive by the Company pursuant to the LTIP, a successor plan or otherwise
shall lapse immediately (to the extent such awards are outstanding immediately
prior to the Termination Date).
5.1.5 During
the Severance Period (or until such later date as any Welfare Plan of the
Company may specify), the Company shall continue to provide to the Executive
and
the Executive’s family welfare benefits (including, without limitation, medical,
prescription, dental, disability, individual life and group life insurance
benefits) which are at least as favorable as those provided under the most
favorable Welfare Plans of the Company applicable (i) with respect to the
Executive and his family during the 90-day period immediately preceding the
Termination Date, or (ii) with respect to other senior executives and their
families during the Severance Period. In determining benefits under such Welfare
Plans, the Executive’s annual compensation attributable to base salary and
incentives for any plan year or calendar year, as applicable, shall be deemed
to
be not less than the Executive’s Annual Base Salary and Target Annual Incentive.
The cost of the welfare benefits provided under this Section 5.1.5 shall
not exceed the cost of such benefits to the Executive immediately before the
Termination Date or, if less, the Effective Date. Notwithstanding the foregoing,
if the Executive obtains comparable coverage under any Welfare Plans sponsored
by another employer, then the amount of coverage required to be provided by
the
Company hereunder shall be reduced by the amount of coverage provided by such
other employer’s Welfare Plans. The Executive’s rights under this
Section shall be in addition to and not in lieu of any post-termination
continuation coverage or conversion rights the Executive may have pursuant
to
applicable law, including, without limitation, continuation coverage required
by
Section 4980B of the Code. For purposes of determining eligibility for (but
not the time of commencement of) retiree benefits under any Welfare Plans of
the
Company, the Executive shall be considered (i) to have remained employed
until the last day of the Severance Period and to have retired on the last
day
of such period, and (ii) to have attained the age the Executive would have
attained on the last day of the Severance Period.
5.1.6 If
the
Executive participates in the Company’s nonqualified supplemental executive
retirement plan (“SERP”), the amount payable under subsection 5.1.1.4 of
this Agreement shall be taken into account for purposes of determining the
amount of benefits to which the Executive is entitled under the SERP; provided
that such amount shall be taken into account as though it was earned equally
over the Severance Period, and further provided that the Executive shall be
deemed to have attained the age he or she would have attained as of the last
day
of the Severance Period, and completed the number of years of service he or
she
would have completed as of the last day of the Severance Period. The Severance
Period shall be taken into account for purposes of determining the amount of
and
eligibility to begin to receive benefits under the SERP. If the Executive
participates in the Company's nonqualified Supplemental Senior Officer
Retirement Plan ("SSORP"), on the Termination Date (i) the
13
Executive
shall become fully vested in all contributions (and in any earnings applied
to
such contributions) made by the Company on behalf of the Executive under the
SSORP or any successor plan, if applicable, and (ii) the Company shall
immediately make an additional contribution to the SSORP of an amount equal
to
the product of (x) the Annual Deferral Percentage (as defined in the SSORP)
used
for the most recently completed SSORP Plan Year, times (y) the amount payable
under subsection 5.1.1.4 of this Agreement.
5.1.7 On
the
Termination Date (i) the Executive shall become fully vested in all
contributions made by the Company on behalf of the Executive under the Company’s
Savings Investment Plan (the “SIP”) or any supplemental or successor plan, if
applicable, and (ii) the Company shall immediately make an additional
contribution to the SIP (or, if such contribution is not permitted under the
terms of the SIP, to a non-qualified plan providing benefits comparable to
the
benefits provided under the SIP) or any supplemental or successor plan, if
applicable, equal to the aggregate maximum matching contributions which the
Company would have made on behalf of the Executive to the SIP or any
supplemental or successor plan, if applicable, for the Severance Period,
calculated as if the amount payable under subsection 5.1.1.4 of this Agreement
had been earned equally over the Severance Period and the Executive had made
the
maximum allowable voluntary contributions to the SIP or any supplemental or
successor plan, if applicable. In addition, if the Executive is not eligible
to
participate in the Company’s defined benefit retirement plan, the Company shall
also contribute to the SIP or any supplemental or successor plan, if applicable,
on the Termination Date an amount equal to the aggregate additional “retirement
growth” contributions which the Company would have made on behalf of the
Executive for the Severance Period if the amount payable under subsection
5.1.1.4 of this Agreement had been earned equally over the Severance
Period.
5.1.8 The
Company shall, at its sole expense, as incurred, pay on behalf of Executive
all
fees and costs charged by a nationally recognized outplacement firm selected
by
the Company (subject to approval by the Executive, which shall not be withheld
unreasonably) to provide outplacement service.
5.2
If
by
the Company and Nicor Gas for Cause.
If the
Company and Nicor Gas, as applicable, terminates the Executive’s employment for
Cause during the Employment Period, this Agreement shall terminate without
further obligation by the Company and Nicor Gas, as applicable, to the
Executive, other than the obligation immediately to pay the Executive in cash
the Executive’s Annual Base Salary through the Termination Date, plus any
accrued paid time off, in each case to the extent not previously
paid.
5.3
If
by
the Executive Other Than for Good Reason.
If the
Executive terminates employment during the Employment Period other than for
Good
Reason (including, but not by way of limitation, voluntary retirement other
than
for Good Reason), and other than for Disability or death, this Agreement shall
terminate without further obligation by the Executive or by the Company, other
than the obligation of the Company immediately to pay the Executive in cash
the
Executive’s Annual Base Salary through the Termination Date, plus any accrued
paid time off, in each case to the extent not previously paid.
14
5.4 If
by
the Company and Nicor Gas, as applicable, for Permanent
Disability.
If the
Company and Nicor Gas, as applicable, and Nicor Gas, as applicable, terminates
the Executive’s employment by reason of the Executive’s Permanent Disability
during the Employment Period, this Agreement shall terminate without further
obligation to the Executive, other than:
5.4.1 the
Company’s obligation immediately to pay the Executive in cash all amounts
specified in Sections 5.1.1.1, 5.1.1.2 and 5.1.1.3, in each case, to the extent
unpaid as of the Termination Date (such amounts collectively, the “Accrued
Obligations”), and
5.4.2 the
Executive’s right after the Permanent Disability Effective Date to receive
disability and other benefits at least equal to the greater of (i) those
provided under the most favorable disability Plans applicable to disabled senior
executives of the Company in effect immediately before the Termination Date,
or
(ii) those provided under the most favorable disability Plans of the
Company in effect at any time during the 90-day period immediately before the
Effective Date.
5.5 If
upon Death.
If the
Executive’s employment is terminated by reason of the Executive’s death during
the Employment Period, this Agreement shall terminate without further obligation
to the Executive’s legal representatives under this Agreement, other than the
obligation immediately to pay the Executive’s estate or beneficiary in cash all
Accrued Obligations. Notwithstanding anything in this Agreement to the contrary,
the Executive’s family shall be entitled to receive benefits at least equal to
the most favorable benefits provided under Plans of the Company to the surviving
families of senior executives of the Company, but in no event shall such Plans
provide benefits which in each case are less favorable, in the aggregate, than
the most favorable of those provided by the Company to the Executive under
such
Plans in effect at any time during the 90-day period immediately before the
Effective Date.
ARTICLE
VI
CERTAIN
ADDITIONAL PAYMENTS BY THE COMPANY
6.1
Gross-up
for Certain Taxes.
6.1.1 If
it is
determined by the Company’s independent auditors that any benefit received or
deemed received by the Executive from the Company pursuant to this Agreement
or
otherwise, whether or not in connection with a Change in Control (such monetary
or other benefits collectively, the “Potential Parachute Payments”) is or will
become subject to any excise tax under Section 4999 of the Code or any
similar tax payable under any United States federal, state, local or other
law
(such excise tax and all such similar taxes collectively, “Excise Taxes”), then
the Company shall, subject to Sections 6.6 and 6.7, within five business
days after such determination, pay the Executive an amount (the “Gross-up
Payment”) equal to the product of:
(a) the
amount of such Excise Taxes multiplied by
15
(b)
the
Gross-up Multiple (as defined in Section 6.4). The Gross-up Payment is
intended to compensate the Executive for all Excise Taxes payable by
the Executive with respect to the Potential Parachute Payments and any federal,
state, local or other income or other taxes or Excise Taxes payable by the
Executive with respect to the Gross-up Payment.
6.1.2 The
determination of the Company’s independent auditors described in
Section 6.1.1, including the detailed calculations of the amounts of the
Potential Parachute Payments, Excise Taxes and Gross-Up Payment and the
assumptions relating thereto, shall be set forth in a written certificate of
such auditors (the “Company Certificate”) delivered to the Executive. The
Executive or the Company may at any time request the preparation and delivery
to
the Executive of a Company Certificate. The Company shall cause the Company
Certificate to be delivered to the Executive as soon as reasonably possible
after such request.
6.2
Determination
by the Executive.
6.2.1 If
(i) the Company shall fail to deliver a Company Certificate to the
Executive within 30 days after its receipt of his written request therefor,
or (ii) at any time after the Executive’s receipt of a Company Certificate,
the Executive disputes either (x) the amount of the Gross-Up Payment set
forth therein, or (y) the determination set forth therein to the effect
that no Gross-Up Payment is due (whether by reason of Section 6.7 or
otherwise), then the Executive may elect to require the Company to pay a
Gross-Up Payment in the amount determined by the Executive as set forth in
an
Executive Counsel Opinion (as defined in Section 6.5). Any such demand by
the Executive shall be made by delivery to the Company of a written notice
which
specifies the Gross-Up Payment determined by the Executive (together with the
detailed calculations of the amounts of Potential Parachute Payments, Excise
Taxes and Gross-Up Payment and the assumptions relating thereto) and an
Executive Counsel Opinion regarding such Gross-Up Payment (such written notice
and opinion collectively, the “Executive’s Determination”). Within 30 days
after delivery of an Executive’s Determination to the Company, the Company shall
either (i) pay the Executive the Gross-Up Payment set forth in Executive’s
Determination (less the portion thereof, if any, previously paid to Executive
by
the Company) or (ii) deliver to the Executive a Company Certificate and a
Company Counsel Opinion (as defined in Section 6.5), and pay the Executive
the Gross-Up Payment specified in such Company Certificate. If for any reason
the Company fails to comply with the preceding sentence, the Gross-Up Payment
specified in the Executive’s Determination shall be controlling for all
purposes.
6.2.2 If
the
Executive does not request a Company Certificate, and the Company does not
deliver a Company Certificate to the Executive, then (i) the Company shall,
for purposes of Section 6.7, be deemed to have determined that no Gross-up
Payment is due, and (ii) the Executive shall not pay any Excise Taxes in
respect of Potential Parachute Payments, except in accordance with
Sections 6.6.1 or 6.6.4.
16
6.3
Additional
Gross-up Amounts.
If for
any reason it is later determined (whether pursuant to the subsequently-enacted
provisions of the Code, final regulations or published rulings of the IRS,
a
final judgment of a court of competent jurisdiction, a determination of the
Company’s independent auditors set forth in a Company Certificate or, subject to
the last two sentences of Section 6.2.1, an Executive’s Determination) that
the amount of Excise Taxes payable by the Executive is greater than the amount
determined by the Company or the Executive pursuant to Section 6.1 or 6.2,
as applicable, then the Company shall, subject to Sections 6.6 and 6.7, pay
the Executive an amount (which shall also be deemed a Gross-up Payment) equal
to
the product of:
|
(a)
|
the
sum of (1) such additional Excise Taxes and (2) any interest,
fines, penalties, expenses or other costs incurred by the Executive
as a
result of having taken a position in accordance with determination
made
pursuant to Section 6.1 or 6.2, as applicable,
|
| multiplied by |
| (b) | the Gross-up Multiple. |
6.4
Gross-up
Multiple.
The
Gross-up Multiple shall equal a fraction, the numerator of which is
one (1.0), and the denominator of which is one (1.0) minus the lesser
of (i) the sum, expressed as a decimal fraction, of the effective marginal
tax rates of all federal, state, local and other income and other taxes and
any
Excise Taxes applicable to the Gross-up Payment; or (ii) 0.80, it being
intended that the Gross-up Multiple shall in no event exceed five (5.0).
(If different rates of tax are applicable to various portions of a Gross-up
Payment, the weighted average of such rates shall be used.)
6.5
Opinion
of Counsel.
“Executive Counsel Opinion” means an opinion of nationally-recognized executive
compensation counsel to the effect (i) that the amount of the Gross-Up
Payment determined by the Executive pursuant to Section 6.2 is the amount
that a court of competent jurisdiction, based on a final judgment not subject
to
further appeal, is most likely to decide to have been calculated in accordance
with this Article and applicable law and (ii) if the Company has previously
delivered a Company Certificate to the Executive, that there is no reasonable
basis or no substantial authority for the calculation of the Gross-Up Payment
set forth in the Company Certificate. “Company Counsel Opinion” means an opinion
of nationally-recognized executive compensation counsel to the effect that
(i) the amount of the Gross-Up Payment set forth in the Company Certificate
is the amount that a court of competent jurisdiction, based on a final judgment
not subject to further appeal, is most likely to decide to have been calculated
in accordance with this Article and applicable law and (ii) for purposes of
Section 6662 of the Code, the Executive has substantial authority to report
on his federal income tax return the amount of Excise Taxes set forth in the
Company Certificate.
6.6
Amount
Increased or Contested.
6.6.1 The
Executive shall notify the Company in writing (an “Executive’s Notice”) of any
claim by the IRS or other taxing authority (an “IRS Claim”) that, if successful,
would
17
require
the payment by the Executive of Excise Taxes in respect of Potential Parachute
Payments in an amount in excess of the amount of such Excise Taxes determined
in
accordance with Section 6.1 or 6.2, as applicable. Such Executive’s Notice
shall include the nature and amount of such IRS Claim, the date on which such
IRS Claim is due to be paid (the “IRS Claim Deadline”), and a copy of all
notices and other documents or correspondence received by the Executive in
respect of such IRS Claim. The Executive shall give the Executive’s Notice as
soon as practicable, but no later than the earlier of (i) 10 business
days after the Executive first obtains actual knowledge of such IRS Claim or
(ii) five business days before the IRS Claim Deadline; provided, however,
that the Executive’s failure to give such notice shall affect the Company’s
obligations under this Article only to the extent that the Company is actually
prejudiced by such failure. If at least one business day before the IRS Claim
Deadline the Company shall:
6.6.1.1 deliver
to the Executive a Company Certificate to the effect that the IRS Claim has
been
reviewed by the Company’s independent auditors and, notwithstanding the IRS
Claim, the amount of Excise Taxes, interest and penalties payable by the
Executive is either zero or an amount less than the amount specified in the
IRS
Claim,
6.6.1.2 pay
to
the Executive an amount (which shall also be deemed a Gross-Up Payment) equal
to
the positive difference between (x) the product of the amount of Excise
Taxes, interest and penalties specified in the Company Certificate, if any,
multiplied by the Gross-Up Multiple, and (y) the portion of such product,
if any, previously paid to the Executive by the Company, and
6.6.1.3 direct
the Executive pursuant to Section 6.6.4 to contest the balance of the IRS
Claim, then the Executive shall pay only the amount, if any, of Excise Taxes,
interest and penalties specified in the Company Certificate. In no event shall
the Executive pay an IRS Claim earlier than 30 days after having given an
Executive’s Notice to the Company (or, if sooner, the IRS Claim
Deadline).
6.6.2 At
any
time after the payment by the Executive of any amount of Excise Taxes or related
interest or penalties in respect of Potential Parachute Payments (whether or
not
such amount was based upon a Company Certificate or an Executive’s
Determination), the Company may in its discretion require the Executive to
pursue a claim for a refund (“Refund Claim”) of all or any portion of such
Excise Taxes, interest or penalties as the Company may specify by written notice
to the Executive.
6.6.3 If
the
Company notifies the Executive in writing that the Company desires the Executive
to contest an IRS Claim or to pursue a Refund Claim, the Executive
shall:
6.6.3.1 give
the
Company all information that it reasonably requests in writing from time to
time
relating to such IRS Claim or Refund Claim, as applicable,
18
6.6.3.2 take
such
action in connection with such IRS Claim or Refund Claim (as applicable) as
the
Company reasonably requests in writing from time to time, including accepting
legal representation with respect thereto by an attorney selected by the
Company, subject to the approval of the Executive (which approval shall not
be
unreasonably withheld or delayed),
6.6.3.3 cooperate
with the Company in good faith to contest such IRS Claim or pursue such Refund
Claim, as applicable,
6.6.3.4 permit
the Company to participate in any proceedings relating to such IRS Claim or
Refund Claim, as applicable, and
6.6.3.5 contest
such IRS Claim or prosecute such Refund Claim (as applicable) to a determination
before any administrative tribunal, in a court of initial jurisdiction and
in
one or more appellate courts, as the Company may from time to time determine
in
its discretion.
The
Company shall control all proceedings in connection with such IRS Claim or
Refund Claim (as applicable) and in its discretion may cause the Executive
to
pursue or forego any and all administrative appeals, proceedings, hearings
and
conferences with the IRS or other taxing authority in respect of such IRS Claim
or Refund Claim (as applicable); provided that (i) any extension of the
statute of limitations relating to payment of taxes for the taxable year of
the
Executive relating to the IRS Claim is limited solely to such IRS Claim,
(ii) the Company’s control of the IRS Claim or Refund Claim (as applicable)
shall be limited to issues with respect to which a Gross-Up Payment would be
payable, and (iii) the Executive shall be entitled to settle or contest, as
the case may be, any other issue raised by the IRS or other taxing
authority.
6.6.4 The
Company may at any time in its discretion direct the Executive to
(i) contest the IRS Claim in any lawful manner or (ii) pay the amount
specified in an IRS Claim and pursue a Refund Claim; provided, however, that
if
the Company directs the Executive to pay an IRS Claim and pursue a Refund Claim,
the Company shall advance the amount of such payment to the Executive on an
interest-free basis and shall indemnify the Executive, on an after-tax basis,
for any income or other applicable taxes or Excise Tax, and any related interest
or penalties imposed with respect to such advance.
6.6.5 The
Company shall pay directly all legal, accounting and other costs and expenses
(including additional interest and penalties) incurred by the Company or the
Executive in connection with any IRS Claim or Refund Claim, as applicable,
and
shall indemnify the Executive, on an after-tax basis, for any income or other
applicable taxes, Excise Tax and related interest and penalties imposed on
the
Executive as a result of such payment of costs and expenses.
19
6.7
Refunds.
If,
after the receipt by the Executive of any payment or advance of Excise Taxes
advanced by the Company pursuant to Section 6.6, the Executive receives any
refund with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Section 6.6) promptly pay the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto). If, after the receipt by the Executive of
an
amount advanced by the Company pursuant to Section 6.6, a determination is
made that the Executive shall not be entitled to any refund with respect to
such
claim and the Company does not notify the Executive in writing of its intent
to
contest such determination within 30 days after the Company receives
written notice of such determination, then such advance shall be forgiven and
shall not be required to be repaid and the amount of such advance shall offset,
to the extent thereof, the amount of Gross-up Payment required to be paid.
Any
contest of a denial of refund shall be controlled by
Section 6.6.
ARTICLE
VII
EXPENSES
AND INTEREST
7.1
Legal
Fees and Other Expenses.
7.1.1 If
the
Executive incurs legal fees or other expenses in an effort to secure, preserve,
establish entitlement to, or obtain benefits under this Agreement (including,
without limitation, the fees and other expenses of the Executive’s legal counsel
in connection with the delivery of the Executive Counsel opinion referred to
in
Section 6.5), the Company shall, regardless of the outcome of such effort,
promptly reimburse the Executive on a current basis for such fees and expenses
following the Executive’s written submission of a request for reimbursement
together with evidence that such fees and expenses were incurred.
7.1.2 If
the
Executive does not prevail (after exhaustion of all available judicial remedies)
in respect of a claim by the Executive or by the Company hereunder, and the
Company establishes before a court of competent jurisdiction, by clear and
convincing evidence, that the Executive had no reasonable basis for his claim
hereunder, or for his response to the Company’s claim hereunder, and acted in
bad faith, no further reimbursement for legal fees and expenses shall be due
to
the Executive in respect of such claim and the Executive shall refund any
amounts previously reimbursed hereunder with respect to such claim.
7.2
Interest.
If the
Company and Nicor Gas, as applicable, does not pay any amount due to the
Executive under this Agreement within three days after such amount became due
and owing, interest shall accrue on such amount from the date it became due
and
owing until the date of payment at an annual rate equal to 200 basis points
above the base commercial lending rate published in The Wall Street Journal
in
effect from time to time during the period of such nonpayment.
ARTICLE
VIII
NO
SET-OFF OR MITIGATION
20
8.1
No
Set-off by Company.
The
Executive’s right to receive when due the payments and other benefits provided
for under this Agreement is absolute, unconditional and subject to no set-off,
counterclaim or legal or equitable defense. Any claim which the Company may
have
against the Executive, whether for a breach of this Agreement or otherwise,
shall be brought in a separate action or proceeding and not as part of any
action or proceeding brought by the Executive to enforce any rights against
the
Company under this Agreement.
8.2
No
Mitigation.
The
Executive shall not have any duty to mitigate the amounts payable by the Company
and Nicor Gas, as applicable, under this Agreement by seeking new employment
following termination. Except as specifically otherwise provided in this
Agreement, all amounts payable pursuant to this Agreement shall be paid without
reduction regardless of any amounts of salary, compensation or other amounts
which may be paid or payable to the Executive as the result of the Executive’s
employment by another employer.
ARTICLE
IX
NON-EXCLUSIVITY
OF RIGHTS
9.1
Waiver
of Other Severance Rights.
Except
as may be otherwise specifically provided in an amendment of this
Section 9.1 adopted in accordance with Section 11.7 of this Agreement,
the Executive’s rights under Section 5.1 of this Agreement shall be in lieu
of any benefits that may be otherwise payable to or on behalf of the Executive
pursuant to the terms of any severance pay arrangement of the Company or any
Subsidiary or any other, similar arrangement of the Company or any Subsidiary
providing benefits upon involuntary termination of employment and shall also
be
in lieu of any benefits under the Nicor Inc. Executive/Key Employee Severance
Benefits Program (notwithstanding any provision of that program to the
contrary); provided, however, that this Section 9.1 shall not affect the
Executive’s rights to receive any benefits with respect to a termination of
employment that occurs outside of the Employment Period.
9.2
Other
Rights.
Except
as provided in Section 9.1, this Agreement shall not prevent or limit the
Executive’s continuing or future participation in any benefit, bonus, incentive
or other plans provided by the Company or any of its Subsidiaries and for which
the Executive may qualify, nor shall this Agreement limit or otherwise affect
such rights as the Executive may have under any other agreements with the
Company or any of its Subsidiaries. Amounts which are vested benefits or which
the Executive is otherwise entitled to receive under any plan of the Company
or
any of its Subsidiaries and any other payment or benefit required by law at
or
after the Termination Date shall be payable in accordance with such Plan or
applicable law except as expressly modified by this Agreement.
ARTICLE
X
CONFIDENTIALITY
10.1
Confidentiality.
The
Executive acknowledges that it is the policy of the Company and its Subsidiaries
to maintain as secret and confidential all valuable and unique information
and
techniques acquired, developed or used by the Company and its Subsidiaries
relating to their business, operations, employees and customers, which gives
the
Company and its Subsidiaries a
21
competitive
advantage in the transmission, distribution, marketing, or sale of natural
gas
or in the energy services industry and other businesses in which the Company
and
its Subsidiaries are engaged (“Confidential Information”). The Executive
recognizes that all such Confidential Information is the sole and exclusive
property of the Company and its Subsidiaries, and that disclosure of
Confidential Information would cause damage to the Company and its Subsidiaries.
The Executive agrees that, except as required by the duties of his employment
with the Company or its Subsidiaries and except in connection with enforcing
the
Executive’s rights under this Agreement or if compelled by a court or
governmental agency, he will not, without the consent of the Company,
disseminate or otherwise disclose any Confidential Information obtained during
his employment with the Company or its Subsidiaries until such time as such
information has been disclosed publicly by the Company or one of its
Subsidiaries, or with its consent, or is otherwise a matter of public knowledge
(unless the Executive has reason to know that such information became a matter
of public knowledge through an unauthorized disclosure).
10.2
Remedy.
The
Executive and the Company specifically agree that, in the event that the
Executive shall breach his obligations under this Article X, the Company
and its Subsidiaries will suffer irreparable injury and shall be entitled to
injunctive relief therefor, and shall not be precluded from pursuing any and
all
remedies it may have at law or in equity for breach of such obligations;
provided, however, that such breach shall not in any manner or degree whatsoever
limit, reduce or otherwise affect the obligations of the Company or Nicor Gas,
as applicable, under this Agreement, and in no event shall an asserted breach
of
the Executive’s obligations under this Article X constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
ARTICLE
XI
MISCELLANEOUS
11.1
No
Assignability.
This
Agreement is personal to the Executive and without the prior written consent
of
the Company shall not be assignable by the Executive otherwise than by will
or
the laws of descent and distribution. This Agreement shall inure to the benefit
of and be enforceable by the Executive’s legal representatives.
11.2
Successors.
Before
or upon the consummation of any Change in Control, the Company shall obtain
from
each individual, group or entity, if any, that becomes a successor of the
Company by reason of the Change in Control, the unconditional written agreement
of such individual, group or entity to assume this Agreement and to perform
all
of the obligations of the Company hereunder.
11.3
Payments
to Beneficiary.
If the
Executive dies before receiving amounts to which the Executive is entitled
under
this Agreement, such amounts shall be paid in a lump sum to the beneficiary
designated in writing by the Executive, or if none is so designated, to the
Executive’s estate.
11.4
Nonalienation
of Benefits.
Benefits payable under this Agreement shall not be subject in any manner to
anticipation, alienation, sale, transfer, assignment, pledge, encumbrance,
charge,
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garnishment,
execution or levy of any kind, either voluntary or involuntary, before actually
being received by the Executive, and any such attempt to dispose of any right
to
benefits payable under this Agreement shall be void.
11.5
Severability.
If any
one or more articles, sections or other portions of this Agreement are declared
by any court or governmental authority to be unlawful or invalid, such
unlawfulness or invalidity shall not serve to invalidate any article, section
or
other portion not so declared to be unlawful or invalid. Any article, section
or
other portion so declared to be unlawful or invalid shall be construed so as
to
effectuate the terms of such article, section or other portion to the fullest
extent possible while remaining lawful and valid.
11.6
Arbitration.
Any and
all disputes between the parties hereto arising out of this Agreement (other
than disputes related to Article VI or to an alleged breach of the covenant
contained in Article X) shall be settled by arbitration before an impartial
arbitrator pursuant to the rules and regulations of the American Arbitration
Association (AAA) pertaining to the arbitration of commercial disputes.
Either party may invoke the right to arbitration. The arbitrator shall be
selected by means of the parties striking alternatively from a panel of seven
arbitrators supplied by the Chicago office of AAA. The Arbitrator shall have
the
authority to interpret and apply the provisions of this Agreement, consistent
with Section 11.11 below. The decision of the arbitrator shall be final and
binding upon the parties. Judgment may be entered on the award in any court
of
competent jurisdiction. The arbitrator’s fees and expenses shall be borne by the
Company.
11.7
Amendments.
This
Agreement shall not be altered, amended or modified except by written instrument
executed by the Company and the Executive.
11.8
409A
Amendments.
Notwithstanding anything to the contrary in this Agreement, if and to the extent
the Company shall determine that the terms of the Agreement may result in
the failure of the Agreement or amounts payable under the
Agreement to comply with the requirements of Code Section 409A or any
applicable regulations or guidance promulgated by the Secretary of the Treasury,
the Company shall take such action as it deems necessary or advisable,
including without limitation:
(a) Any
amendment or modification of the Agreement to conform it to the
requirements of Section 409A of the Code (including, without limitation, any
amendment or modification of the terms of any applicable to the timing or form
of any payments)
(b) Pay to
the Executive immediately or in a lump sum any amount
otherwise payable to him or her provided such payment does
not violate Section 409A; and/or
(c) Delay
payment
of any amounts until such amounts would otherwise not violate Section 409A.
Any
such
amendment or modification of the Agreement may adversely affect the
rights of the Executive without his or her consent.
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11.9
Notices.
All
notices and other communications under this Agreement shall be in writing and
delivered by hand, by a nationally-recognized commercial delivery service,
or by
first-class registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If
to the
Executive:
Xxxx
X.
Xxxxxx, Xx.
0000
Xxxxx Xx.
Xxxxxxx,
Xx 00000
If
to the
Company:
0000
Xxxxx Xxxx
Xxxxxxxxxx,
Xxxxxxxx 00000-0000
Attn:
Xxxxxxx X. Xxxxxxxxx
or
to
such other address as either party shall have furnished to the other in writing.
Notice and communications shall be effective when actually received by the
addressee.
11.10
Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed an original, but all of which together shall constitute one and the
same
instrument.
11.11
Governing
Law.
This
Agreement is intended to be interpreted and construed in accordance with the
laws of the State of Illinois, without regard to its choice of law
principles.
11.12
Captions.
The
captions of this Agreement are not a part of the provisions hereof and shall
have no force or effect.
11.13
Number
and Gender.
Wherever from the context it appears appropriate, each term stated in either
the
singular or plural shall include the singular and the plural, and pronouns
stated in either the masculine, the feminine or the neuter gender shall include
the masculine, feminine and neuter genders.
11.14
Tax
Withholding.
The
Company or Nicor Gas, as applicable, may withhold from any amounts payable
under
this Agreement any federal, state or local taxes that are required to be
withheld pursuant to any applicable law or regulation.
11.15
No
Waiver.
A
waiver of any provision of this Agreement shall not be deemed a waiver of any
other provision, and any waiver of any default as to any such provision shall
not be deemed a waiver of any later default as to that or any other
provision.
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11.16
Entire
Agreement.
This
Agreement contains the entire understanding of the Company, Nicor Gas and the
Executive with respect to its subject matter and specifically supercedes and
replaces in its entirety the Prior Agreement.
IN
WITNESS WHEREOF, the Executive and the Company have executed this Agreement
as
of the date first above written.
/s/
XXXX X.
XXXXXX, XX.
Xxxx
X.
Xxxxxx, Xx.
By:
/s/ XXXX X. XXXXXXX
Xxxx X. Xxxxxxx
Chairman,
President and
Chief
Executive Officer
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