THIS AGREEMENT,
dated May 1, 2006, is made by and between PIEDMONT NATURAL GAS
COMPANY, INC., a North Carolina corporation (the
“Company”), and JANE LEWIS-RAYMOND (the
“Executive”).
WHEREAS, the
Company considers it essential to the best interests of its
shareholders to foster the continued employment of key management
personnel; and
WHEREAS, the Board
of the Company recognizes that, as is the case with many publicly
held corporations, the possibility of a Change in Control exists
and that such possibility, and the uncertainty and questions which
it may raise among management, may result in the departure or
distraction of management personnel to the detriment of the Company
and its shareholders; and
WHEREAS, the Board
has determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of members of
the Company’s management, including the Executive, to their
assigned duties without distraction in the face of potentially
disturbing circumstances arising from the possibility of a Change
in Control.
NOW, THEREFORE, in
consideration of the premises and the mutual covenants herein
contained, the Company and the Executive hereby agree as
follows:
1.
Defined Terms . The definitions of capitalized terms used in
this Agreement are provided in the last Section hereof.
2. Term
of Agreement . The Term of this Agreement shall commence on the
date hereof and shall continue in effect through December 31,
2006; provided, however, that commencing on January 1, 2007
and each January 1 thereafter, the Term shall automatically be
extended for one additional year unless, not later than fifteen
(15) months prior to the applicable January 1, the
Company or the Executive shall have given notice not to extend the
Term; and further provided, however, that if a Change in Control
shall have occurred during the Term, the Term shall expire at the
end of the thirty-sixth (36th) calendar month after the calendar
month in which such Change in Control occurred. For example, if a
Change in Control were to occur on July 1, 2006, the Term of
this Agreement would expire on June 30, 2009, and if a Change
in Control were to occur on July 1, 2009, the Term of this
Agreement would expire on June 30, 2012 (regardless of whether
on or before September 30, 2006 either party had given notice
to the other party not to extend the Term as provided
above).
3.
Company ’
s Covenants Summarized
. In order to induce the Executive
to remain in the employ of the Company and in consideration of the
Executive’s covenants set forth in Section 4 hereof, the
Company agrees, under the conditions described herein, to pay the
Executive the Severance Payments and the other payments and
benefits described herein. Except as provided in
Section 9.1
hereof, no
Severance Payments shall be payable under this Agreement unless
there shall have been (or, under the terms of the second sentence
of Section 6.1 hereof, there shall be deemed to have been) a
termination of the Executive’s employment with the Company
following a Change in Control and during the Term. This Agreement
shall not be construed as creating an express or implied contract
of employment and, except as otherwise agreed in writing between
the Executive and the Company, the Executive shall not have any
right to be retained in the employ of the Company.
4. The
Executive’s Covenants . The Executive agrees that,
subject to the terms and conditions of this Agreement, in the event
of a Potential Change in Control during the Term, the Executive
will remain in the employ of the Company until the earliest of
(i) a date which is twelve (12) months from the date of
such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the
Executive’s employment for Good Reason or by reason of death,
Disability or Retirement, or (iv) the termination by the
Company of the Executive’s employment for any reason. Should
the Executive fail to comply with the provisions of this paragraph
4, the Company’s sole remedy shall be to deny the payment of
any Severance Payments to the Executive.
5.
Compensation Other Than Severance Payments .
5.1
Following a Change in Control and during the Term, during any
period that the Executive fails to perform the Executive’s
full-time duties with the Company as a result of incapacity due to
physical or mental illness, the Company shall pay the
Executive’s full salary to the Executive at the rate in
effect at the commencement of any such period, together with all
compensation and benefits payable to the Executive under the terms
of any compensation, benefit or incentive plan, program or
arrangement maintained by the Company during such period, until the
Executive’s employment is terminated by the Company for
Disability.
5.2
If the Executive’s employment shall be terminated for any
reason following a Change in Control and during the Term, the
Company shall pay the Executive’s full salary to the
Executive through the Date of Termination at the rate in effect
immediately prior to the Date of Termination or, if higher, the
rate in effect immediately prior to the first occurrence of an
event or circumstance constituting Good Reason, together with all
compensation and benefits payable to the Executive through the Date
of Termination under the terms of the Company’s executive
compensation, benefit and incentive plans, programs or arrangements
as in effect immediately prior to the Date of Termination or, if
more favorable to the Executive, as in effect immediately prior to
the first occurrence of an event or circumstance constituting Good
Reason.
5.3
If the Executive’s employment shall be terminated for any
reason following a Change in Control and during the Term, the
Company shall pay to the Executive the Executive’s normal
post-termination compensation and benefits as such payments become
due, including in a lump sum in cash that portion of the
Executive’s vacation pay vested and accrued but not paid.
Such post-termination compensation and benefits shall be determined
under, and paid in accordance with, the Company’s long-term
incentive stock plan, pension, supplemental retirement, insurance
and other executive compensation, benefit or incentive plans,
programs and arrangements as in effect
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immediately
prior to the Date of Termination or, if more favorable to the
Executive, as in effect immediately prior to the occurrence of the
first event or circumstance constituting Good Reason.
6.1
Subject to Section 6.2 hereof, if the Executive’s
employment is terminated following a Change in Control and during
the Term, other than (A) by the Company for Cause, (B) by
reason of the Executive’s death or Disability, or (C) by
the Executive without Good Reason (including Retirement by the
Executive), then the Company shall pay the Executive the amounts,
and provide the Executive the benefits, described in this
Section 6.1 (“Severance Payments”), in addition to
any payments and benefits to which the Executive is entitled under
Section 5 hereof. For purposes of this Agreement, the
Executive’s employment shall be deemed to have been
terminated following a Change in Control by the Company without
Cause or by the Executive with Good Reason, if (i) the
Executive’s employment is terminated by the Company without
Cause prior to a Change in Control (whether or not a Change in
Control ever occurs) and such termination was at the request or
direction of a Person who has entered into an agreement with the
Company the consummation of which would constitute a Change in
Control, (ii) the Executive terminates his employment for Good
Reason prior to a Change in Control (whether or not a Change in
Control ever occurs) and the circumstance or event which
constitutes Good Reason occurs at the request or direction of such
Person, or (iii) the Executive’s employment is terminated by
the Company without Cause or by the Executive for Good Reason and
such termination or the circumstance or event which constitutes
Good Reason is otherwise in connection with or in anticipation of a
Change in Control (whether or not a Change in Control ever occurs).
For purposes of any determination regarding the applicability of
the immediately preceding sentence, any position taken by the
Executive shall be presumed to be correct unless the Company
establishes by clear and convincing evidence that such position is
not correct.
(A) In
lieu of any further salary payments to the Executive for periods
subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay
to the Executive a lump sum severance payment, in cash, equal to
3.00 times the sum of (i) the Executive’s annual base
salary as in effect immediately prior to the Date of Termination
or, if higher, in effect immediately prior to the first occurrence
of an event or circumstance constituting Good Reason and
(ii) an amount equal to the average of the Executive’s
annual W-2 Compensation for the three years ending on the last day
of the month prior to the Date of Termination.
(B) For
the 36-month period immediately following the Date of Termination,
the Company shall arrange to provide the Executive and his
dependents life, disability, accident and health insurance benefits
substantially similar to those provided to the Executive and his
dependents immediately prior to the Date of Termination or, if more
favorable to the Executive, those provided to the Executive and his
dependents immediately prior to the first occurrence of an event or
circumstance constituting Good Reason, at no greater cost to the
Executive than the cost to the Executive immediately prior to such
date or occurrence; provided, however, that, unless the Executive
consents to a different method (after taking into account the
effect of such method on the calculation of “parachute
payments” pursuant to Section 6.2 hereof), such health
insurance benefits shall be
3
provided
through a third-party insurer. Benefits otherwise receivable by the
Executive pursuant to this Section 6.1(B) shall be reduced to the
extent benefits of the same type are received by or made available
to the Executive during the 36-month period following the
Executive’s termination of employment (and any such benefits
received by or made available to the Executive shall be reported to
the Company by the Executive); provided, however, that the Company
shall reimburse the Executive for the excess, if any, of the cost
of such benefits to the Executive over such cost immediately prior
to the Date of Termination or, if more favorable to the Executive,
the first occurrence of an event or circumstance constituting Good
Reason. If the Severance Payments shall be decreased pursuant to
Section 6.2 hereof, and the Section 6.1(B) benefits which
remain payable after the application of Section 6.2 hereof are
thereafter reduced pursuant to the immediately preceding sentence,
the Company shall, no later than five (5) business days
following such reduction, pay to the Executive the least of
(a) the amount of the decrease made in the Severance Payments
pursuant to Section 6.2 hereof, (b) the amount of the
subsequent reduction in these Section 6.1(B) benefits, or
(c) the maximum amount which can be paid to the Executive
without being, or causing any other payment to be, nondeductible by
reason of section 280G of the Code.
6.2
(A) Notwithstanding any other provisions of this Agreement, in
the event that any payment or benefit received or to be received by
the Executive in connection with a Change in Control or the
termination of the Executive’s employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a
Change in Control or any Person affiliated with the Company or such
Person) (all such payments and benefits, including the Severance
Payments, being hereinafter called “Total Payments”)
would not be deductible (in whole or part), by the Company, an
affiliate or Person making such payment or providing such benefit
as a result of section 280G of the Code, then, to the extent
necessary to make such portion of the Total Payments deductible
(and after taking into account any reduction in the Total Payments
provided by reason of section 280G of the Code in such other plan,
arrangement or agreement), the cash Severance Payments shall first
be reduced (if necessary, to zero), and all other Severance
Payments shall thereafter be reduced (if necessary, to zero);
provided, however, that the Executive may elect to have the noncash
Severance Payments reduced (or eliminated) prior to any reduction
of the cash Severance Payments.
(B) For
purposes of this limitation, (i) no portion of the Total
Payments the receipt or enjoyment of which the Executive shall have
waived at such time and in such manner as not to constitute a
“payment” within the meaning of section 280G(b) of the
Code shall be taken into account, (ii) no portion of the Total
Payments shall be taken into account which, in the opinion of tax
counsel (“Tax Counsel”) reasonably acceptable to the
Executive and selected by the accounting firm which was,
immediately prior to the Change in Control, the Company’s
independent auditor (the “Auditor”), does not
constitute a “parachute payment” within the meaning of
section 280G(b)(2) of the Code, including by reason of section
280G(b)(4)(A) of the Code, (iii) the Severance Payments shall
be reduced only to the extent necessary so that the Total Payments
(other than those referred to in clauses (i) or (ii)) in their
entirety constitute reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4)(B) of the Code or
are otherwise not subject to disallowance as deductions by reason
of section 280G of the Code, in the opinion of Tax Counsel, and
(iv) the value of any noncash benefit or any deferred payment
or benefit included in the Total Payments shall be
4
determined by
the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code.
(C) If
it is established pursuant to a final determination of a court or
an Internal Revenue Service proceeding that, notwithstanding the
good faith of the Executive and the Company in applying the terms
of this Section 6.2, the Total Payments paid to or for the
Executive’s benefit are in an amount that would result in any
portion of such Total Payments being subject to the Excise Tax
under section 4999 of the Code, then, if such repayment would
result in (i) no portion of the remaining Total Payments being
subject to the Excise Tax and (ii) a dollar-for-dollar
reduction in the Executive’s taxable income and wages for
purposes of federal, state and local income and employment taxes,
the Executive shall have an obligation to pay the Company upon
demand an amount equal to the sum of (i) the excess of the
Total Payments paid to or for the Executive’s benefit over
the Total Payments that could have been paid to or for the
Executive’s benefit without any portion of such Total
Payments being subject to the Excise Tax; and (ii) interest on
the amount set forth in clause (i) of this sentence at the
rate provided in section 1274(b)(2)(B) of the Code from the date of
the Executive’s receipt of such excess until the date of such
payment.
6.3
The payments provided in subsection (A) of Section 6.1
hereof shall be made not later than the fifth day following the
Date of Termination; provided, however, that if the amounts of such
payments, and the limitation on such payments set forth in
Section 6.2 hereof, cannot be finally determined on or before
such day, the Company shall pay to the Executive on such day an
estimate, as determined in good faith by the Company of the minimum
amount of such payments to which the Executive is clearly entitled
and shall pay the remainder of such payments (together with
interest on the unpaid remainder (or on all such payments to the
extent the Company fails to make such payments when due) at 120% of
the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the
thirtieth (30th) day after the Date of Termination. In the event
that the amount of the estimated payments exceeds the amount
subsequently determined to have been due, such excess shall
constitute a loan by the Company to the Executive, payable on the
fifth (5th) business day after demand by the Company (together with
interest at 120% of the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Agreement,
the Company shall provide the Executive with a written statement
setting forth the manner in which such payments were calculated and
the basis for such calculations including, without limitation, any
opinions or other advice the Company has received from Tax Counsel,
the Auditor or other advisors or consultants (and any such opinions
or advice which are in writing shall be attached to the
statement).
7.
Termination Procedures and Compensation During Dispute
.
7.1
Notice of Termination . After a Change in Control and during
the Term, any purported termination of the Executive’s
employment (other than by reason of death) shall be communicated by
written Notice of Termination from one party hereto to the other
party hereto in accordance with Section 10 hereof. For
purposes of this Agreement, a “Notice of Termination”
shall mean a notice which shall indicate the s
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