EX-10 4 continuityagreementmadden.htm KEVIN P. MADDEN CONTINUITY AGREEMENT Tier 1 CONTINUITY AGREEMENT
Tier 1
This Continuity Agreement ("Agreement") is entered into as of the 1st day of December, 2003, by and between AGL RESOURCES INC. (the "Company"), on behalf of itself and AGL Services Company (its wholly owned subsidiary and the Executive's employer), and Xxxxx X. Xxxxxx (the "Executive").
WHEREAS, the Company's Board of Directors has authorized the Company to enter into continuity agreements with those key executives of the Company and its subsidiaries designated by the Compensation Committee of the Company's Board of Directors (the "Committee"); and
WHEREAS, the Executive is a key executive of the Company or one of its subsidiaries and has been designated by the Committee as an executive to be offered such a continuity agreement with the Company.
1.1.
"Accrued Benefits" shall mean the Executive's earned but unpaid base salary, Earned and Unused Vacation Pay, unreimbursed business expenses and all other amounts earned by (but not paid to) or owed to Executive through and including the date of the Qualifying Termination.
1.2.
"Announcement" shall mean a press release issued by the Company announcing the intention to engage in a transaction or event that is expected to result in a Change in Control of the Company as defined hereunder.
1.3.
"Annual Bonus Amount" shall mean the product of (a) times (b), where (a) is a percentage equal to the greatest percentage of the Executive's annual rate of base salary upon which an annual incentive payment was paid to the Executive under the Company's annual incentive program during the three calendar years prior to the calendar year of the Qualifying Termination (by way of example, if the highest annual incentive payment, expressed as a percentage of Executive's base salary, paid to Executive during said three year period was 100% of Executive's base salary, then (a) would equal 100%), and (b) is the greater of the Executive's annual rate of base salary in effect upon the date of the Qualifying Termination, or the Executive's annual rate of base salary in effect as of the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction.
1.4.
"Board" shall mean the Board of Directors of the Company.
1.5.
"Cause" shall mean:
(a)
willful fraud, dishonesty or malfeasance by the Executive in connection with the Executive's employment with the Company or one of its subsidiaries which results in material harm to the Company or one of its subsidiaries;
(b)
the Executive's continued failure to substantially perform the duties and responsibilities of the Executive's position after written notice from the Company setting forth the particulars of such failure and a reasonable opportunity of not less than thirty (30) business days to cure such failure; or
(c)
the Executive's plea of guilty or nolo contendere to, or conviction of, a felony.
Cause shall be determined by two-thirds of the members of the Board (excluding for this purpose the Executive if a member of the Board) at a meeting at which the Executive may appear and present his or her position. No act or failure to act on the part of the Executive shall be considered "willful" unless it is 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 one of its subsidiaries. Any act or failure to act that is based upon authority given pursuant to a resolution duly adopted by the Board, or the advice of counsel for the Company or one of its subsidiaries, 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.
1.6.
"Change in Control" shall be deemed to have occurred when:
(a)
any "person" as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof, but excluding the Company and any subsidiary and any employee benefit plan sponsored or maintained by the Company or any subsidiary (including any trustee of such plan acting as trustee), directly or indirectly, becomes the "beneficial owner" (as determined pursuant to Rule 13d-3 under the Exchange Act), of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities (unless the event causing the 20% threshold to be crossed is an acquisition of securities directly from the Company); or
(b)
the shareholders of the Company shall approve (i) any merger, share exchange, reorganization, or other business combination of the Company, (ii) any sale of 50% or more of the Company's assets, or (iii) any combination of the foregoing transactions (the "Transactions"), other than a Transaction immediately following which the shareholders of the Company and any trustee or fiduciary of any Company employee benefit plan immediately prior to the Transaction own at least 80% of the voting power, directly or indirectly, of (A) the surviving corporation to any such merger, share exchange, reorganization, or other business combination, (B) the purchaser of the Company's assets, (C) both the surviving corporation and the purchaser in the event of any combination of Transactions, or (D) the parent company owning 100% of such surviving corporation, purchaser or both the surviving corporation and the purchaser, as the case may be; or
(c)
within any twenty-four month period, the persons who were directors of the Board immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board. For this purpose, any director who was not a director at the beginning of such period shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors (so long as such director was not nominated by a person who has entered into an agreement to effect a Change in Control or expressed an interest to cause such a Change in Control).
1.7.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
1.8.
"Company" shall mean AGL Resources Inc., or a successor.
1.9.
"Consummation of a Change in Control Transaction" shall mean the earlier of the date on which a person first becomes the beneficial owner of the requisite number of securities of the Company described in Section 1.6(a), the date on which a transaction described in Section 1.6(b) is actually closed (not the date on which the shareholders' approval is obtained), or the date on which the Incumbent Directors cease to constitute a majority of the Board as described in Section 1.6(c).
1.10.
"Coverage Period" shall mean the period beginning on the earlier of (a) the date of an Announcement, (b) the date of a Change in Control, or (c) the date of the Consummation of a Change in Control Transaction, and ending on the earlier of (i) the second anniversary of the date of the Consummation of a Change in Control Transaction, (ii) if applicable, the date the Company publicly announces it is abandoning the transaction or event that was the subject of an Announcement or (iii) if applicable, the date the Company publicly announces it is abandoning the transaction that constituted a Change in Control pursuant to Section 1.6(b).
1.11.
"Disability" shall mean, for purposes of this Agreement, the Executive's absence from the full-time performance of the Executive's duties pursuant to a determination made in accordance with the procedures established by the Company in connection with the Company's long-term disability benefits plan (as in effect as of the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction) that the Executive is disabled as a result of incapacity due to physical or mental illness.
1.12.
"Earned and Unused Vacation" shall mean the difference between (a) Earned Vacation (as hereinafter defined) and (b) the actual number of hours of vacation taken by the Executive from January 1 of the calendar year in which the Qualifying Termination occurs through and including the date of the Qualifying Termination; provided that if the difference between (a) and (b) is a negative number, then Executive's Earned and Unused Vacation shall be deemed to be zero.
1.13.
"Earned and Unused Vacation Pay" shall mean the product of (a) the Executive's annual rate of base salary in effect on the date of the Qualifying Termination divided by 2080, and (b) the hours of Executive's Earned and Unused Vacation.
1.14.
"Earned Vacation" shall mean the product of (a) the aggregate number of hours of vacation which Executive is entitled to take during the calendar year in which the Qualifying Termination occurs, and (b) the quotient obtained by dividing (i) the number of calendar days from January 1 of the year in which the Qualifying Termination occurs through and including the date of the Qualifying Termination, by (ii) 365.
1.15.
"Effective Date" shall mean December 1, 2003.
1.16.
"Good Reason" shall mean the occurrence of one or more of the following without the Executive's express written consent:
(a)
any material diminution in the Executive's position, duties or responsibilities with the Company or one of its subsidiaries or any change that would constitute a material adverse alteration in the Executive's duties, responsibilities or other conditions of employment, from those in effect as of the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction; provided, that, for this purpose, it shall be a material diminution of Executive's position if all distribution and pipeline operations (intrastate and interstate) do not report to the Executive; provided, further, that, for this purpose, it shall be a material diminution of Executive's position if the Executive does not report directly to the Company's Chief Executive Officer;
(b)
any adverse change in the Executive's rate of annual base salary or incentive compensation opportunity from the rate of annual base salary and incentive compensation opportunity in effect as of the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction;
(c)
any failure by the Company either to continue in effect, or to provide in the aggregate, reasonably similar retirement and welfare benefit plans or coverages and any other similar benefits, policies or programs in which the Executive was a participant as of the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction (unless such failure or discontinuance of benefits is applicable to all senior executives of the Company and its subsidiaries); or
(d)
any failure of the Company to obtain from any successor to the Company an agreement reasonably satisfactory to the Executive to assume this Agreement and to agree to perform the Company's obligations hereunder.
1.17.
"Prorated Annual Bonus" shall mean a payment equal to the product of (a) times (b), where (a) is the Annual Bonus Amount and (b) is a fraction, the numerator of which is the number of days in the calendar year in which the Qualifying Termination occurs that the Executive was employed by the Company or one of its subsidiaries, and the denominator of which is 365.
1.18.
"Qualifying Termination" shall mean the occurrence of any one or more of the following events:
(a)
the termination of Executive's employment by the Company or its subsidiary, as applicable, without Cause; or
(b)
Executive's termination of his or her employment with the Company or its subsidiary, as applicable, for Good Reason.
A Qualifying Termination shall not include a termination of Executive's employment by reason of the Executive's death, the Executive's Disability, the Executive's termination of his or her employment without Good Reason, or the termination of the Executive's employment for Cause.
2.1.
2.2.
2.3.
SECTION 3 Change in Control Benefits
3.1.
(a)
(b)
(c)
(i)
the excess of (A) the present value (determined as of the date of the Qualifying Termination) of the lump-sum actuarial equivalent of the benefit the Executive would have received, giving the Executive credit for three (3) additional years of age and service (for all purposes, including, but not limited to, vesting and accrual of benefits) (such three (3) additional years, referred to hereinafter as the "Severance Period"), under (1) the AGL Resources Inc. Retirement Plan, as amended (the "Retirement Plan") and (2) the AGL Resources Inc. Excess Benefit Plan (the "Excess Plan"), in each case utilizing actuarial assumptions (including the discount rate used in the present value calculation) no less favorable to the Executive than those in effect under the Retirement Plan immediately prior to the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction, and assuming that, for purposes of determining benefits under the Retirement Plan and the Excess Plan, the benefits would have commenced at the end of the Severance Period (or, if later, the earliest date distribution of the Executive's benefits could commence under the plans) and the Executive's covered annual compensation ("Covered Compensation") during the Severance Period would have been equal to the Executive's annual rate of Covered Compensation at the time of the Qualifying Termination or, if greater, at the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction, over (B) the present value (determined as of the date of the Qualifying Termination) of the lump-sum actuarial equivalent of the Executive's actual benefits accrued as of the date of the Qualifying Termination, if any, under the Retirement Plan and the Excess Plan (assuming the benefits would have commenced at the end of the Severance Period (or, if later, the earliest date distribution of the Executive's benefits could commence under the plans), and utilizing the same actuarial assumptions as used above in subsection (A) of this Section 3.1(c)(i)); and
(ii)
an amount equal to the sum of the additional contributions (other than before tax and after tax contributions by the Executive) that would have been made or credited (but, due to the Qualifying Termination, will not otherwise be made or credited) during the Severance Period (as defined in Section 3.1(c)(i) above) by the Company or a subsidiary to the Executive's account(s) under the AGL Resources Inc. Retirement Savings Plus Plan, as amended (the "Savings Plan"), and/or the AGL Resources Inc. Nonqualified Savings Plan, as amended, determined by assuming that,
(A)
the Executive's employment had continued through the Severance Period;
(B)
the Executive's compensation recognized by each such plan (with respect to the Savings Plan, subject to any Code limitations on covered compensation under qualified plans) would, during the Severance Period, have been equal to (1) the Executive's annual rate of base salary at the time of the Qualifying Termination or, if greater, at the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction, and (2) the Annual Bonus Amount; and
(C)
with respect to matching and/or discretionary contributions, the Executive's amount of pre-tax deferral contributions and the Company's matching contribution, in each year during the Severance Period, would have been equal to the maximum amount allowed under the applicable plan at the time of the Qualifying Termination or, if greater, at the earliest of the date of the Announcement, the date of a Change in Control or the date of the Consummation of a Change in Control Transaction.
(d)
(e)
(f)
SECTION 4 Limitations on Payments and Excise Tax
4.1.
Limitation on Payments and Benefits.
(a)
If any of the payments and benefits provided under this Agreement and/or under any other agreement with, or plan of, the Company or one of its subsidiaries (the "Total Payment") (a) constitute a "parachute payment" as defined in Code Section 280G and exceed three (3) times the Executive's "base amount" as defined under Code Section 280G(b)(3) by less than ten percent (10%) of three (3) times the Executive's base amount, and (b) would, but for this Section 4.1, be subject to the excise tax imposed by Code Section 4999, then the Executive's payments and benefits under this Agreement shall be reduced and payable only as to the maximum amount which would result in no portion of such Total Payment being subject to excise tax under Code Section 4999.
(b)
If a reduction of the Total Payment is necessary under this section, the Executive shall be entitled to select which payments and/or benefits will be reduced and the manner and method of any such reduction. Within ten (10) days after the amount of any required reduction in payments and benefits is finally determined under Section 4.3, the Executive shall notify the Company in writing regarding which payments and benefits are to be reduced. If no notification is given by the Executive, the Company will determine which payments and/or benefits to reduce. If the Company is required to determine which payments and/or benefits to reduce, it shall make such determination as soon as practicable, but no later than the fifteenth (15th) day after the amount of any required reduction in payments and benefits is finally determined under Section 4.3. If, as a result of any reduction required by this section, amounts previously paid or benefits previously provided to the Executive exceed the amount to which the Executive is entitled, the Executive will promptly return the excess amount to the Company.
4.2.
4.3.
4.4.
SECTION 5 Successors and Assignment
5.1.
5.2.
SECTION 6 Confidentiality; Non-Disparagement; Non-Solicitation; Trade Secrets
Without the prior written consent of the Company, Executive agrees hereby not to disclose or use, directly or indirectly (except as may be required for the performance of duties assigned by the Company or one of its subsidiaries or as may be required by a court of competent jurisdiction), any trade secret or other confidential information pertaining to the conduct of the Company's business, unless and until such trade secret or confidential information is in the public domain. The Company's business, as that term is used herein, includes, but is not limited to, the Company's and any of its subsidiaries' records, processes, methods, data, reports, information, documents, equipment, training manuals, customer lists and business secrets. Executive further agrees that, during the twenty-four (24) month period following a Qualifying Termination, Executive shall not initiate contact with employees of the Company or any of its subsidiaries for employment outside the Company or one of its subsidiaries, including those employees who were employed by the Company or one of its subsidiaries up to and including the date of the Qualifying Termination; provided, however, that nothing contained herein shall prevent Executive from responding to contacts initiated by such employees. Except as may be compelled by a court of competent jurisdiction or as may otherwise be required by law, Executive shall take no action (including without limitation the making of any oral or written statement) which damages the reputation of the Company or any of its subsidiaries.
7.1.
7.2.
7.3.
7.4.
7.5.
AGL Resources Inc.
Attn: General Counsel
00 Xxxxxxxxx Xxxxx, 00xx Xxxxx
Xxxxxxx, XX 00000
Any notice required to be delivered to Executive by the Company or the Committee hereunder shall be properly delivered to Executive when personally delivered to, or actually received through the U.S. mail, postage prepaid, by, Executive.
7.6.
7.7.
7.8.
Entire Agreement. Except as expressly provided herein, no agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party. This Agreement represents the entire agreement between the parties with respect to the subject matter hereof, and supersedes all prior discussions, negotiations, and agreements concerning the subject matter hereof, including, but not limited to, the Continuity Agreement entered into by and between the Executive and the Company dated September 1, 2001, together with any amendments thereto, and any prior severance agreement made between Executive and the Company or any of its subsidiaries; provided, however, that nothing contained herein shall prevent the Executive from receiving any severance benefits to which he or she is entitled under the terms of a Company or subsidiary provided severance plan if the Executive's termination of employment does not qualify as a Qualifying Termination within the Coverage Period; provided, further, that nothing contained herein shall prevent the Executive from receiving benefits to which he or she may be entitled under any employee or retiree benefit or incentive plan maintained or contributed to by the Company or one of its subsidiaries, including, without limitation, the AGL Resources Inc. Executive Post Employment Medical Benefit Plan or the AGL Resources Inc. retiree medical plan.
7.9.
7.10.
7.11.
7.12.
COMPANY:
AGL RESOURCES INC.
By: /s/ Xxxxx X. Rosput
Title: Chairman, President and Chief
Executive Officer
EXECUTIVE:
/s/ Xxxxx X. Xxxxxx
Signature
[THIS DOCUMENT HAS BEEN EXECUTED IN DUPLICATE.]
JK 209403.8