Employment Agreement

Severance Agreement

 

EX-10.1 2 d404440dex101.htm AMENDED AND RESTATED EMPLOYMENT AGREEMENT

Exhibit 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) dated as of May 25, 2012 by and between PIEDMONT NATURAL GAS COMPANY, INC., a North Carolina corporation (the “Corporation”), and Thomas E. Skains, (the “Officer”).

WITNESSETH:

WHEREAS, the Officer is an executive employed by the Corporation pursuant to an Employment Agreement dated December 1, 1999 (the “Existing Employment Agreement”); and

WHEREAS, the Board of Directors of the Corporation has determined that the continued retention of the services of the Officer on a long-term basis as described herein is in the best interest of the Corporation in that (a) it promotes the stability of senior management of the Corporation; (b) it enables the Corporation to obtain and retain the services of a well-qualified executive officer with extensive contacts in the natural gas industry; and (c) it secures the continued services of the Officer notwithstanding any change in control of the Corporation; and

WHEREAS, the services of the Officer, his experience and knowledge of the Corporation’s industry, and his reputation and contacts in the Corporation’s industry are valuable to the Corporation; and

WHEREAS, the Corporation considers the establishment and maintenance of a sound and vital management to be part of its overall corporate strategy and to be essential to protecting and enhancing the best interests of the Corporation and its stockholders; and

WHEREAS, the Corporation and the Officer desire to amend and restate the terms and conditions of the Existing Employment Agreement to meet current needs; and

WHEREAS, in addition to this Agreement, the parties have entered into a Severance Agreement (the “Severance Agreement”), which sets forth certain rights and obligations of the Officer and certain rights and obligations of the Corporation in the event of a “Potential Change of Control” (as defined in the Severance Agreement) or following a “Change in Control” (as defined in the Severance Agreement). Use of the phrases “Potential Change of Control” and “Change in Control” herein shall have the meanings ascribed to those phrases in the Severance Agreement.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereby agree as follows:

1. Employment. The Corporation will continue to employ the Officer and the Officer hereby accepts such continued employment, upon the terms and conditions stated herein, as President & Chief Executive Officer of the Corporation. The Officer shall continue to render such administrative and management services to the Corporation as are customarily performed by persons

 

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situated in a similar executive capacity. The Officer shall promote the business of the Corporation and perform such other duties as shall from time to time be reasonably prescribed by the Directors or the Chief Executive Officer of the Corporation. It is understood that the Officer’s continued election as an officer of the Corporation is dependent upon action by the Board of Directors of the Corporation from time to time and that, subject to the provisions of Section 7 of this Agreement, the Officer’s title and/or duties may change from time to time; provided that following a Change in Control and during the term of the Severance Agreement any action affecting a change in title and/or duties shall be subject to the Severance Agreement.

2. Base Salary. The Corporation shall pay the Officer during the term of this Agreement as compensation for all services rendered by him to the Corporation a base salary in such amounts and at such intervals as shall be commensurate with his duties and responsibilities hereunder. Initially such base salary shall be the current base salary in effect for the Officer. The Officer’s base salary may be increased from time to time to reflect the duties required of the Officer. In reviewing the Officer’s base salary, the Board of Directors of the Corporation shall consider the overall performance of the Corporation, the overall performance of the Officer and the service of the Officer rendered to the Corporation and its subsidiaries and changes in the cost of living. The Board of Directors may also provide for performance or merit increases. Participation by the Officer in any incentive, deferred compensation, stock option, stock purchase, bonus, pension, life insurance or other employee benefit plans which may be offered by the Corporation from time to time and participation in any fringe benefits provided by the Corporation shall not cause a reduction of the base salary payable to the Officer. The Officer will be entitled to such customary fringe benefits, vacation and sick leave as are consistent with the normal practices and established policies of the Corporation.

3. Participation in Incentive, Retirement and Employee Benefit Plans; Fringe Benefits. The Officer shall be entitled to participate in any plan relating to incentive compensation, stock options, stock purchase, pension, thrift, profit sharing, group life insurance, medical coverage, disability coverage, education, or other retirement or employee benefits that the Corporation has adopted, or may from time to time adopt, for the benefit of its executive employees and for employees generally, subject to the eligibility rules of such plans.

The Officer shall also be entitled to participate in any other fringe benefits which are now or may be or become applicable to the Corporation’s executive employees, including the payment of reasonable expenses for attending annual and periodic meetings of trade associations, and any other benefits which are commensurate with the duties and responsibilities to be performed by the Officer under this Agreement. Additionally, the Officer shall be entitled to such vacation and sick leave as shall be established under uniform employee policies promulgated by the Board of Directors. The Corporation shall reimburse the Officer for all out-of-pocket reasonable and necessary business expenses which the Officer may incur in connection with his service on behalf of the Corporation.

4. Term. The initial term of employment under this Agreement shall be for a one-year period commencing on the date hereof; provided that this Agreement shall automatically be extended to a full one-year period on each successive day during the term of this Agreement. The effect hereof shall be that the Agreement shall at all times remain subject to a term of one year,

 

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unless (i) written notice has been given that the Agreement shall not be extended as provided in this Section 4, or (ii) the Agreement is terminated pursuant to Section 7. If written notice from the Corporation or the Officer is delivered to the other party advising the other party that this Agreement is not to be further extended, then upon such notice, the Agreement shall terminate on the second anniversary of the date of notice. Notwithstanding the foregoing, no extension shall cause this Agreement to extend beyond the date of the annual shareholder meeting following the date the Officer attains age sixty-five (65), or such later retirement date as may be approved pursuant to the Corporation’s Senior Officer Mandatory Retirement Policy as in effect from time to time. Upon any extension, the base salary of the extended agreement shall be the base salary in effect on the effective date of such extension.

5. Loyalty; Noncompetition

(a) The Officer shall devote his best efforts to the performance of his duties and responsibilities under this Agreement.

(b) During the term of this Agreement, or any renewals hereof, the Officer agrees he will not own, manage, operate, join, control or participate in the management, operation or control of, or be employed by or connected in any manner with any business which competes with the Corporation or any of its subsidiary corporations without the prior written consent of the Corporation. Notwithstanding the foregoing, the Officer shall be free, without such consent, to purchase or hold as an investment or otherwise, up to five percent (5%) of the outstanding stock or other securities of any corporation which has its securities publicly traded on any recognized securities exchange or in any established over-the-counter market.

The Officer shall hold in confidence all knowledge or information of a confidential nature with respect to the business of the Corporation or any subsidiary of the Corporation received by him during the term of this Agreement and will not disclose or make use of such information without the prior written consent of the Corporation.

The Officer acknowledges that it would not be possible to ascertain the amount of monetary damages in the event of a breach by the Officer under the provisions of this Section 5 and agrees that, in the event of a breach of this Section, injunctive relief enforcing the terms of this Section is an appropriate remedy.

6. Standards. The Officer shall perform his duties and responsibilities under this Agreement in accordance with such reasonable standards expected of employees with comparable positions in comparable organizations and as may be established from time to time by the Board of Directors. The Corporation will provide the Officer with the working facilities and staff customary for similar executives and necessary for him to perform his duties.

7. Termination and Termination Pay.

(a) Change of Control. Following a Change in Control and during the term of the Severance Agreement, this Agreement shall become null and void except with respect to any rights

 

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or obligations accruing prior to the Change in Control and the rights and obligations of the Officer and the Company, including any termination of the Officer, shall be subject to the provisions of the Severance Agreement.

(b) By Death. The Officer’s employment under this Agreement shall be terminated upon the death of the Officer during the term of this Agreement, in which event the Officer’s estate shall be entitled to receive all compensation due the Officer through the last day of the calendar month in which his death shall have occurred.

(c) By Total Disability. Except for that period of time following a Change in Control and during the term of the Severance Agreement, the Officer’s employment under this Agreement shall be terminated upon the total permanent disability of the Officer during the term of this Agreement, in which event the Officer shall receive all compensation, including bonuses, through the date of determination of such disability and for a period of 90 days thereafter. For purposes of this Section, the Officer shall be deemed to have suffered permanent disability upon the determination of such status by the United States Social Security Administration or a certification to such effect by the Officer’s regular physician.

(d) By Officer. Except as provided in Section 4 of the Severance Agreement, the Officer’s employment under this Agreement may be terminated at any time by the Officer upon 60 days’ written notice to the Board of Directors. Upon such termination, the Officer shall be entitled to receive all compensation, including bonuses, through the effective date of such termination.

(e) By Corporation. Except for that period of time following a Change of Control and during the term of the Severance Agreement, the Board of Directors may terminate the Officer’s employment at any time, but any such termination by the Board of Directors, other than termination for cause, shall not prejudice the Officer’s right to continue to receive payment of all compensation and the continuance of benefits for a period of 12 months from the effective date of termination or until such time as the Officer reaches 65 years of age (whichever is less). The Officer shall have no right to receive compensation or other benefits (other than vested benefits) for any period after “termination for cause.” Termination for cause shall mean termination because of the Officer’s personal dishonesty, incompetence, willful material misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful material violation of a law, rule or regulation (other than traffic or traffic-related violations or similar offenses) or final cease-and-desist order, or material breach of any provisions of this Agreement.

(f) Costs and Expenses. In the event any dispute shall arise between the Officer and the Corporation as to the terms or interpretation of this Agreement, including this Section 7, whether instituted by formal legal proceedings or otherwise, including any action taken by Officer to enforce the terms of this Section 7 or in defending against any action taken by the Corporation, the Corporation shall reimburse the Officer for all costs and expenses, proceedings or actions in the event the Officer prevails in any such action.

 

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8. Successors and Assigns.

(a) This Agreement shall inure to the benefit of and be binding upon any corporate or other successor of the Corporation that shall acquire, directly or indirectly, by conversion, merger, consolidation, purchase or otherwise, all or substantially all of the assets of the Corporation.

(b) Since the Corporation is contracting for the unique and personal skills of the Officer, the Officer shall be precluded from assigning or delegating his rights or duties hereunder without first obtaining the written consent of the Corporation.

9. Code Section 409A.

(a) Delay of Certain Payments. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that the Corporation determines would constitute non-exempt “deferred compensation” for purposes of Section 409A of the Internal Revenue Code of 1986 (the “Code”) would otherwise be payable or distributable under this Agreement by reason of the Officer’s termination of employment, then to the extent necessary to comply with Code Section 409A:

(i) if the payment or distribution is payable in a lump sum, the Officer’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Officer’s death or the seventh month following the Officer’s termination of employment; and

(ii) if the payment or distribution is payable over time, the amount of such non-exempt deferred compensation that would otherwise be payable during the six (6) month period immediately following the Officer’s termination of employment will be accumulated and the Officer’s right to receive payment or distribution of such accumulated amount will be delayed until the earlier of the Officer’s death or the seventh month following the Officer’s termination of employment and paid on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments or distributions will commence.

(b) Expense Reimbursements. To the extent any expense reimbursement or in-kind benefit to which the Officer is or may be entitled to receive under this Agreement constitutes non-exempt “deferred compensation” for purposes of Section 409A of the Code, then (i) such reimbursement shall be paid to the Officer as soon as administratively practicable after the Officer submits a valid claim for reimbursement, but in no event later than the last day of the Officer’s taxable year following the taxable year in which the expense was incurred, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during any taxable year of the Officer shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year of the Officer, and (iii) the Officer’s right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

 

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10. Modification; Waiver; Amendments. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing, signed by the Officer and on behalf of the Corporation by such officer as may be specifically designated by the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No amendments or additions to this Agreement shall be binding unless in writing and signed by both parties, except as herein otherwise provided. Any modification, waiver or amendment shall be made consistent with the terms and conditions of the Severance Agreement.

11. Applicable Law. This Agreement shall be governed in all respects whether as to validity, construction, capacity, performance or otherwise, by the laws of North Carolina.

12. Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof.

13. Effect on Existing Employment Agreement. This Agreement contains the entire understanding between the parties hereto with respect to the Officer’s continued employment by the Corporation and supersedes in all respects the Existing Employment Agreement.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first hereinabove written.

 

  

CORPORATION:

ATTEST:

  

Piedmont Natural Gas Company, Inc.

/s/ Judy Z. Mayo

  

  

Asst Secretary

  

  

  

By:

  

/s/ Kevin M. O’Hara

  

  

Kevin M. O’Hara

  

  

Senior Vice President & Chief Administrative Officer

  

OFFICER:

  

By:

  

/s/ Thomas E. Skains

 

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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

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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

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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.

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          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 of the Executive’s duties during such thirty (30) day period), and (ii) if the Executive separates from service for any other reason, the date specified in the Notice of Termination (which, in the case of a termination by the Company, shall not be less than thirty (30) days (except in the case of a termination for Cause) and, in the case of a termination by the Executive, shall not be less than fifteen (15) days nor more than sixty (60) days, respectively, from the date such Notice of Termination is given).

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          7.3 Dispute Concerning Termination. If within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this Section 7.3), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, the Date of Termination shall be extended until the earlier of (i) the date on which the Term ends or (ii) the date on which the dispute is finally resolved, either by mutual written agreement of the parties or by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); provided, however, that the Date of Termination shall be extended by a notice of dispute given by the Executive only if such notice is given in good faith and the Executive pursues the resolution of such dispute with reasonable diligence.

          7.4 Compensation During Dispute. If a purported termination occurs following a Change in Control and during the Term and the Date of Termination is extended in accordance with Section 7.3 hereof, the Company shall continue to pay the Executive the full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, salary) and continue the Executive as a participant in all compensation, benefit and insurance plans in which the Executive was participating when the notice giving rise to the dispute was given, until the Date of Termination, as determined in accordance with Section 7.3 hereof. Amounts paid under this Section 7.4 are in addition to all other amounts due under this Agreement (other than those due under Section 5.2 hereof) and shall not be offset against or reduce any other amounts due under this Agreement.

          8. Compliance with Code Section 409A. Notwithstanding anything in this Agreement to the contrary, if any amount or benefit that the Company determines would constitute non-exempt “deferred compensation” for purposes of section 409A of the Code would otherwise be payable or distributable under this Agreement by reason of the Executive’s separation from service during a period in which the Executive is a Specified Employee, then to the extent necessary to comply with Code Section 409A: (i) if the payment or distribution is payable in a lump sum, the Executive’s right to receive payment or distribution of such non-exempt deferred compensation will be delayed until the earlier of the Executive’s death or the first day of the seventh month following the Executive’s separation from service, and (ii) if the payment, distribution or benefit is payable or provided over time, the amount of such non-exempt deferred compensation or benefit that would otherwise be payable or provided during the six-month period immediately following the Executive’s separation from service will be accumulated, and the Executive’s right to receive payment or distribution of such accumulated amount or benefit will be delayed until the earlier of the Executive’s death or the first day of the seventh month following the Executive’s separation from service and paid or provided on the earlier of such dates, without interest, and the normal payment or distribution schedule for any remaining payments, distributions or benefits will commence.

          9. No Mitigation. The Company agrees that, if the Executive’s employment with the Company terminates during the Term, the Executive is not required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Company pursuant to Section 6 hereof or Section 7.4 hereof. Further, the amount of any payment or benefit provided for in this Agreement (other than Section 6.1(B) hereof) shall not be reduced by any

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compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

     10. Successors; Binding Agreement.

          10.1 In addition to any obligations imposed by law upon any successor to the Company, the Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled to hereunder if the Executive were to terminate the Executive’s employment for Good Reason after a Change in Control, except that, for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination.

          10.2 This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amount would still be payable to the Executive hereunder (other than amounts which, by their terms, terminate upon the death of the Executive) if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive’s estate.

     11. Notices. For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered mail, return receipt requested, postage prepaid, addressed, if to the Executive, to the address inserted below the Executive’s signature on the final page hereof and, if to the Company, to the address set forth below, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon actual receipt:

               To the Company:

               Piedmont Natural Gas Company, Inc.
               P.O. Box 33068
               Charlotte, North Carolina 28233

               Attention: Vice President and General Counsel

     12. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board. No waiver by

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either party hereto at any time of any breach by the other party hereto of, or of any lack of compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement supersedes any other agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof which have been made by either party (including, without limitation, that certain Severance Agreement between the Executive and the Company dated December 1, 1999); provided, however, that this Agreement shall supersede any agreement setting forth the terms and conditions of the Executive’s employment with the Company only in the event that the Executive’s employment with the Company is terminated on or following a Change in Control (i) by the Company other than for Cause or (ii) by the Executive for Good Reason. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of North Carolina. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law and any additional withholding to which the Executive has agreed. The obligations of the Company and the Executive under this Agreement which by their nature may require either partial or total performance after the expiration of the Term (including, without limitation, those under Sections 6 and 7 hereof) shall survive such expiration.

     13. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect.

     14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

     15. Settlement of Disputes; Arbitration.

          15.1 All claims by the Executive for benefits under this Agreement shall be directed to and determined by the Board and shall be in writing. Any denial by the Board of a claim for benefits under this Agreement shall be delivered to the Executive in writing and shall set forth the specific reasons for the denial and the specific provisions of this Agreement relied upon. The Board shall afford a reasonable opportunity to the Executive for a review of the decision denying a claim and shall further allow the Executive to appeal to the Board a decision of the Board within sixty (60) days after notification by the Board that the Executive’s claim has been denied.

          15.2 Any further dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Charlotte, North Carolina in accordance with the rules of the American Arbitration Association then in effect; provided, however, that the evidentiary standards set forth in this Agreement shall apply. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Notwithstanding any provision of this Agreement to the contrary, the Executive shall be entitled to seek specific performance of the

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Executive’s right to be paid until the Date of Termination during the pendency of any dispute or controversy arising under or in connection with this Agreement.

     16. Definitions. For purposes of this Agreement, the following terms shall have the meanings indicated below:

          (A) “Affiliate” shall have the meaning set forth in Rule 12b-2 promulgated under Section 12 of the Exchange Act.

          (B) “Auditor” shall have the meaning set forth in Section 6.2 hereof.

          (C) “Base Amount” shall have the meaning set forth in section 280G(b)(3) of the Code.

          (D) “Beneficial Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act.

          (E) “Board” shall mean the Board of Directors of the Company.

          (F) “Cause” for termination by the Company of the Executive’s employment shall mean (i) the willful and continued failure by the Executive to substantially perform the Executive’s duties with the Company (other than any such failure resulting from the Executive’s incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination for Good Reason by the Executive pursuant to Section 7.1 hereof) which failure shall continue unabated for thirty (30) days after a written demand for substantial performance is delivered to the Executive by the Board, which demand specifically identifies the manner in which the Board believes that the Executive has not substantially performed the Executive’s duties, or (ii) the willful engaging by the Executive in conduct which is demonstrably and materially injurious to the Company or its subsidiaries, monetarily or otherwise. For purposes of clauses (i) and (ii) of this definition, (x) no act, or failure to act, on the Executive’s part shall be deemed “willful” unless done, or omitted to be done, by the Executive not in good faith and without reasonable belief that the Executive’s act, or failure to act, was in the best interest of the Company and (y) in the event of a dispute concerning the application of this provision, no claim by the Company that Cause exists shall be given effect unless the Company establishes by clear and convincing evidence that Cause exists.

          (G) A “Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

               (I) any Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates) representing 20% or more of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (i) of paragraph (III) below; or

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               (II) the following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on the date hereof, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

               (III) there is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation, other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any subsidiary of the Company, at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially owned by such Person any securities acquired directly from the Company or its Affiliates other than in connection with the acquisition by the Company or its Affiliates of a business) representing 20% or more of the combined voting power of the Company’s then outstanding securities; or

               (IV) the shareholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than a sale or disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale.

          (H) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

          (I) “Company” shall mean Piedmont Natural Gas Company, Inc. and, except in determining under Section 16(G) hereof whether or not any Change in Control of the Company has occurred, shall include any successor to its business and/or assets which assumes and agrees to perform this Agreement by operation of law, or otherwise.

          (J) “Date of Termination” shall have the meaning set forth in Section 7.2 hereof.

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          (K) “Disability” shall be deemed the reason for the termination by the Company of the Executive’s employment, if, as a result of the Executive’s incapacity due to physical or mental illness, the Executive shall have been absent from the full-time performance of the Executive’s duties with the Company for a period of six (6) consecutive months, the Company shall have given the Executive a Notice of Termination for Disability, and, within thirty (30) days after such Notice of Termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.

          (L) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

          (M) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code.

          (N) “Executive” shall mean the individual named in the first paragraph of this Agreement.

          (O) “Good Reason” for termination by the Executive of the Executive’s employment shall mean the occurrence (without the Executive’s express written consent) after any Change in Control, or prior to a Change in Control under the circumstances described in clauses (ii) and (iii) of the second sentence of Section 6.1 hereof (treating all references in paragraphs (I) through (VII) below to a “Change in Control” as references to a “Potential Change in Control”), of any one of the following acts by the Company, or failures by the Company to act, unless, in the case of any act or failure to act described in paragraph (I), (V), (VI) or (VII) below, such act or failure to act is corrected prior to the Date of Termination specified in the Notice of Termination given in respect thereof:

               (I) the assignment to the Executive of any duties inconsistent with the Executive’s status as a senior executive officer of the Company, a change in the Executive’s reporting responsibilities, titles or offices, or a substantial adverse alteration in the nature or status of the Executive’s responsibilities from those in effect immediately prior to the Change in Control other than any such alteration primarily attributable to the fact that the Company may no longer be a public company;

               (II) a reduction by the Company in the Executive’s annual base salary as in effect on the date hereof or as the same may be increased from time to time except for across-the-board salary reductions (not to exceed 10%) similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company including the Chief Executive Officer;

               (III) the relocation of the principal executive offices to a location more than 35 miles from the Company’s principal executive offices immediately prior to the Change in Control or the Company’s requiring the Executive to be based anywhere other than the location of the Company’s executive offices except for required travel on the Company’s business to an extent substantially consistent with the Executive’s present business travel obligations;

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               (IV) the failure by the Company to pay to the Executive any portion of the Executive’s current compensation or benefits except pursuant to an across-the-board compensation or benefit deferral (not to exceed 10%) similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company including the Chief Executive Officer, or to pay to the Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company, within seven (7) days of the date such compensation is due;

               (V) the failure by the Company to continue in effect any compensation plan in which the Executive participates immediately prior to the Change in Control which is material to the Executive’s total compensation, including but not limited to the Company’s long-term incentive plans or any substitute plans adopted prior to the Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue the Executive’s participation therein (or in such substitute or alternative plan) on a basis not less favorable, both in terms of the amount or timing of payment of benefits provided and the level of the Executive’s participation relative to other participants, as existed immediately prior to the Change in Control;

               (VI) the failure by the Company to continue to provide the Executive with benefits substantially similar to those enjoyed by the Executive under any of the Company’s pension, supplement retirement, savings, life insurance, supplemental life insurance, medical, health and accident, or disability plans in which the Executive was participating immediately prior to the Change in Control (except for across-the-board changes similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company, including the Chief Executive Officer, not to exceed 10%), the taking of any other action by the Company which would directly or indirectly materially reduce any of such benefits or deprive the Executive of any material fringe benefit enjoyed by the Executive at the time of the Change in Control, or the failure by the Company to provide the Executive with the number of paid vacation days to which the Executive is entitled either by prior written agreements or on the basis of years of service with the Company in accordance with the Company’s normal vacation policy in effect at the time of the Change in Control; or

               (VII) any purported termination of the Executive’s employment which is not effected pursuant to a Notice of Termination satisfying the requirements of Section 7.1 hereof; for purposes of this Agreement, no such purported termination shall be effective.

     The Executive’s right to terminate the Executive’s employment for Good Reason shall not be affected by the Executive’s incapacity due to physical or mental illness. The Executive’s continued employment shall not constitute consent to, or a waiver of rights with respect to, any act or failure to act constituting Good Reason hereunder.

     For purposes of any determination regarding the existence of Good Reason, any claim by the Executive that Good Reason exists shall be presumed to be correct unless the Company establishes by clear and convincing evidence that Good Reason does not exist.

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          (P) “Notice of Termination” shall have the meaning set forth in Section 7.1 hereof.

          (Q) “Person” shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company.

          (R) “Potential Change in Control” shall be deemed to have occurred if the event set forth in any one of the following paragraphs shall have occurred:

               (I) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

               (II) the Company or any Person publicly announces an intention to take or to consider taking actions which, if consummated, would constitute a Change in Control;

               (III) any Person becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing 15% or more of either the then outstanding shares of common stock of the Company or the combined voting power of the Company’s then outstanding securities (not including in the securities beneficially owned by such Person any securities acquired directly from the Company or its affiliates); or

               (IV) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

          (S) “Retirement” shall be deemed the reason for the termination by the Executive of the Executive’s employment if such employment is terminated voluntarily by the Executive in accordance with the Company’s retirement policy, including early retirement, generally applicable to its salaried employees.

          (T) “Severance Payments” shall have the meaning set forth in Section 6.1 hereof.

          (U) “Specified Employee” shall have the meaning given such term in Code Section 409A and the final regulations thereunder.

          (V) “Tax Counsel” shall have the meaning set forth in Section 6.2 hereof.

          (W) “Term” shall mean the period of time described in Section 2 hereof (including any extension, continuation or termination described therein).

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          (X) “Total Payments” shall mean those payments so described in Section 6.2 hereof.

 

 

 

 

 

 

PIEDMONT NATURAL GAS COMPANY, INC.
 

 

 

By:  

/s/ Malcolm E. Everett III  

 

 

 

Malcolm E. Everett III 

 

 

 

Board of Directors 

 

 

 

 

 

 

  

/s/ Thomas E. Skains  

 

 

 

Thomas E. Skains 

 

 

 

7714 Baltusrol Lane
Charlotte, NC 28210 

 

 

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