Exhibit 10.2
SEVERANCE AGREEMENT
THIS SEVERANCE AGREEMENT, dated
September 4, 2007, is made by and between PIEDMONT NATURAL GAS
COMPANY, INC., a North Carolina corporation (the
“Company”), and Thomas E. Skains (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, 2007; provided,
however, that commencing on January 1, 2008 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, 2008, the Term of this
Agreement would expire on July 31, 2011, and if a Change in
Control were to occur on July 1, 2010, the Term of this
Agreement would expire on August 31, 2013 (regardless of
whether either party had given notice before the Change in Control
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 10.1 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 Section 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 immediately prior to the
Date of Termination or, if more favorable to
2
the
Executive, as in effect immediately prior to the occurrence of the
first event or circumstance constituting Good Reason.
6. Severance Payments
.
6.1
Subject to Section 6.2 hereof, upon the Executive’s Date
of Termination 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) the Executive’s target annual bonus (MVP and STI)
immediately prior to the Date of termination or, if higher, the
Executive’s target annual bonus immediately prior to the
first occurrence of an event or circumstance constituting Good
Reason.
(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
3
hereof),
such health insurance benefits shall be 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 reduced 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 lesser of (a) the
amount of the reduction made in the Severance Payments pursuant to
Section 6.2 hereof, or (b) the amount of the subsequent
reduction in the Section 6.1(B) benefits made pursuant to the
immediately preceding sentence.
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 the Total Payments
shall be reduced if, and only if, such reduction results in the
Executive’s receipt, on an after-tax basis, of a greater
amount of the Total Payments after taking into account all
applicable federal, state and local employment taxes, income taxes
and the Excise Tax (all computed at the highest applicable marginal
rate). Any reduction in the Total Payments required by this
Section 6.2(A) shall first reduce the cash Severance Payments
(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 Section 6.2, (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, and (iii) the value of any noncash
benefit or any deferred payment or benefit included in the Total
Payments shall be determined by the Auditor in accordance with the
principles of sections 280G(d)(3) and (4) of the Code.
4
6.3 The
payments provided in Section 6.1(A) 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 any
reduction in such payments required by 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 11 hereof. For
purposes of this Agreement, a “Notice of Termination”
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive’s employment under the
provision so indicated. Further, a Notice of Termination for Cause
is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the
entire membership of the Board at a meeting of the Board that was
called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for
the Executive, together with the Executive’s counsel, to be
heard before the Board) finding that, in the good faith opinion of
the Board, the Executive was guilty of conduct set forth in clause
(i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.2
Date of Termination . “Date of Termination” with
respect to any purported termination of the Executive’s
employment after a Change in Control and during the Term, shall
mean (i) if the Executive separates from service for
Disability, thirty (30) days after Notice of Termination is
given (provided that the Executive shall not have returned to the
full-time performance
|
